Question 1

Using the choices provided below,show the justification for each provision of the tax law listed.Note: In some cases,more than one answer is appropriate.
a. Economic considerations
b. Social considerations
c. Equity considerations

Accepted Answer

A deduction for contributions ...

Question 2

In terms of probability,which of the following taxpayers would be least likely to be audited by the IRS?

Accepted Answer

A)   Taxpayer owns and operates a check-cashing service.
B)   Taxpayer is an employed electrician.
C)   Taxpayer just received a $3 million personal injury award as a result of a lawsuit.
D)   Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.
E)   Taxpayer has been audited several times before.F) B) and D)
G) B) and E)

Question 3

When interest is charged on a deficiency,any part of a month counts as a full month.

Accepted Answer

A) True 
 B)False

Question 4

As it is consistent with the wherewithal to pay concept,the tax law requires a seller to recognize gain in the years the proceeds from the installment sale are collected.

Accepted Answer

A) True 
 B)False

Question 5

Without obtaining an extension,Olivia files her income tax return 65 days after the due date.With her return,she pays an additional tax of $50,000.Disregarding any interest element,what is Olivia's penalty for failure to pay and to file?

Accepted Answer

$7,500.Disregarding ...

Question 6

On occasion,Congress has to enact legislation that clarifies the tax law in order to change a result reached by the U.S.Supreme Court.

Accepted Answer

A) True 
 B)False

Question 7

The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on corporations.

Accepted Answer

A) True 
 B)False

Question 8

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency.Since Tracy disagrees with the result,her next step is to go to court.Do you agree?

Accepted Answer

Tracy might save herself time and expens...

Question 9

A VAT (value added tax) :

Accepted Answer

A)   Is regressive in its effect.
B)   Has not proved popular outside of the U.S.
C)   Is not a tax on consumption.
D)   Is used exclusively by third world (less developed)  countries.
E)   None of the above.F) A) and E)
G) None of the above

Question 10

Briana lives in one state and works in the adjoining state.Both states tax the income she earns from her job.Does Briana have any relief from this apparent double taxation of the same income?

Accepted Answer

Most states allow their residents some f...

Question 11

A lack of compliance in the payment of use taxes can be resolved by several means.In this regard,comment on the following:

Accepted Answer

The answer of A lack of compliance in the payment...

Question 12

Even though a client refuses to correct an error on a past return,it may be possible for a practitioner to continue to prepare returns for the client.

Accepted Answer

A) True 
 B)False

Question 13

A characteristic of the fraud penalties is:

Accepted Answer

A)   When negligence and civil fraud apply to a deficiency, the civil fraud penalty predominates.
B)   Civil fraud can result in a fine and a prison sentence.
C)   The criminal fraud penalty is 75% of the deficiency attributable to the fraud.
D)   The IRS has the same burden of proof in the case of criminal fraud than with civil fraud.
E)   None of the above.F) B) and E)
G) B) and D)

Question 14

State income taxes generally can be characterized by:

Accepted Answer

A)   A different date for filing than the Federal income tax.
B)   No provision for withholding procedures.
C)   Allowance of a deduction for Federal income taxes paid.
D)   Applying only to individuals and not applying to corporations.
E)   None of the above.F) C) and E)
G) B) and E)

Question 15

The civil fraud penalty can entail large fines and possible incarceration.

Accepted Answer

A) True 
 B)False

Question 16

Jason's business warehouse is destroyed by fire.As the insurance proceeds exceed the basis of the property,a gain results.If Jason shortly reinvests the proceeds in a new warehouse,no gain is recognized due to the application of the wherewithal to pay concept.

Accepted Answer

A) True 
 B)False

Question 17

Brayden files his Federal income tax return by April 15,but does not pay the tax.Although he expects to pay interest on the large amount of tax he still owes,he feels that the timely filing has avoided any penalties.Is Brayden's assumption correct?

Accepted Answer

Although Brayden has avoided t...

Question 18

Regarding proper ethical guidelines,which (if any) of the following is correct?

Accepted Answer

A)   The use of client estimates in preparing a return is not acceptable.
B)   Under no circumstances should a question on a tax return be left unanswered.
C)   If a client has made a mistake in a prior year's return and refuses to correct it, you should withdraw from the engagement.
D)   If the exact amount of a deduction is not certain so as to increase the appearance of greater certainty.
E)   None of the above.F) None of the above
G) B) and D)

Question 19

The amount of a taxpayer's itemized deductions will increase the chance of being audited by the IRS.

Accepted Answer

A) True 
 B)False

Question 20

On his 2012 income tax return,Logan omitted income and overstated deductions to the extent that his income tax was understated by $400,000.Disregarding any interest element,what is Logan's penalty if the understatement was due to:

Accepted Answer

The answer of On his 2012 income tax return,Logan omitted...

Exam 1: An Introduction to Taxation and Understanding the Federal Tax Law

Even though a client refuses to correct an error on a past return,it may be possible for a practitioner to continue to prepare returns for the client.

Correct AnswerverifiedShow Answer

On his 2012 income tax return,Logan omitted income and overstated deductions to the extent that his income tax was understated by $400,000.Disregarding any interest element,what is Logan's penalty if the understatement was due to:

Correct AnswerverifiedShow Answer

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency.Since Tracy disagrees with the result,her next step is to go to court.Do you agree?

Correct AnswerverifiedTracy might save herself time and expens...View AnswerShow Answer

Regarding proper ethical guidelines,which (if any) of the following is correct?

Correct AnswerverifiedShow Answer

In terms of probability,which of the following taxpayers would be least likely to be audited by the IRS?

Correct AnswerverifiedShow Answer

When interest is charged on a deficiency,any part of a month counts as a full month.

Correct AnswerverifiedShow Answer

The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on corporations.

Correct AnswerverifiedShow Answer

A VAT (value added tax) :

Correct AnswerverifiedShow Answer

The civil fraud penalty can entail large fines and possible incarceration.

Correct AnswerverifiedShow Answer

On occasion,Congress has to enact legislation that clarifies the tax law in order to change a result reached by the U.S.Supreme Court.

Correct AnswerverifiedShow Answer

State income taxes generally can be characterized by:

Correct AnswerverifiedShow Answer

The amount of a taxpayer's itemized deductions will increase the chance of being audited by the IRS.

Correct AnswerverifiedShow Answer

A lack of compliance in the payment of use taxes can be resolved by several means.In this regard,comment on the following:

Correct AnswerverifiedShow Answer

Brayden files his Federal income tax return by April 15,but does not pay the tax.Although he expects to pay interest on the large amount of tax he still owes,he feels that the timely filing has avoided any penalties.Is Brayden's assumption correct?

Correct AnswerverifiedAlthough Brayden has avoided t...View AnswerShow Answer

Jason's business warehouse is destroyed by fire.As the insurance proceeds exceed the basis of the property,a gain results.If Jason shortly reinvests the proceeds in a new warehouse,no gain is recognized due to the application of the wherewithal to pay concept.

Correct AnswerverifiedShow Answer

Briana lives in one state and works in the adjoining state.Both states tax the income she earns from her job.Does Briana have any relief from this apparent double taxation of the same income?

Correct AnswerverifiedMost states allow their residents some f...View AnswerShow Answer

As it is consistent with the wherewithal to pay concept,the tax law requires a seller to recognize gain in the years the proceeds from the installment sale are collected.

Correct AnswerverifiedShow Answer

Without obtaining an extension,Olivia files her income tax return 65 days after the due date.With her return,she pays an additional tax of $50,000.Disregarding any interest element,what is Olivia's penalty for failure to pay and to file?

Correct Answerverified$7,500.Disregarding ...View AnswerShow Answer

Using the choices provided below,show the justification for each provision of the tax law listed.Note: In some cases,more than one answer is appropriate. a. Economic considerations b. Social considerations c. Equity considerations

Correct AnswerverifiedA deduction for contributions ...View AnswerShow Answer

A characteristic of the fraud penalties is:

Correct AnswerverifiedShow Answer

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Tracy might save herself time and expens...
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Although Brayden has avoided t...
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Most states allow their residents some f...
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$7,500.Disregarding ...
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A deduction for contributions ...
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Correct Answer
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