Question 1

For the negligence penalty to apply,the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

Accepted Answer

A) True 
 B)False

Question 2

If an income tax return is not filed by a taxpayer,there is no statute of limitations on assessments of tax by the IRS.

Accepted Answer

A) True 
 B)False

Question 3

A characteristic of FICA is that:

Accepted Answer

A)  It is imposed only on the employer.
B)  It applies when one spouse works for the other spouse.
C)  It provides a modest source of income in the event of loss of employment.
D)  It is administered by both state and Federal governments.
E)  None of the above.F) D) and E)
G) All of the above

Question 4

The tax law provides various tax credits,deductions,and exclusions that are designed to encourage taxpayers to obtain additional education.These provisions can be justified on both economic and social grounds.

Accepted Answer

A) True 
 B)False

Question 5

On transfers by death,the Federal government relies on an estate tax,while states use only an inheritance tax.

Accepted Answer

A) True 
 B)False

Question 6

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their five children in 2010.What is the maximum amount of the annual exclusion they will be allowed for these gifts?

Accepted Answer

A)  $0.
B)  $13,000.
C)  $26,000.
D)  $65,000.
E)  $130,000.F) B) and C)
G) D) and E)

Question 7

For the tax year 2010,Travis reported gross income of $500,000 on his timely filed Federal income tax return.

Accepted Answer

The answer of For the tax year 2010,Travis reported gross...

Question 8

In an office audit,the audit by the IRS takes place at the taxpayer's office.

Accepted Answer

A) True 
 B)False

Question 9

If a "special agent" becomes involved in the audit of a return,this indicates that the IRS suspects that fraud is involved.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a characteristic of the audit process?

Accepted Answer

A)  The IRS does not reward informants even when the information provided leads to the collection of additional taxes.
B)  Most taxpayer audits involve "special" agents.
C)  Self-employed taxpayers are less likely to be selected for audit than employed taxpayers.
D)  Less important issues are handled by means of a correspondence audit.
E)  If a taxpayer disagrees with the IRS auditor's finding,the only resort is to the courts.F) A) and C)
G) A) and B)

Question 11

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Accepted Answer

A) True 
 B)False

Question 12

The principal objective of the FUTA tax is to provide some measure of retirement security.

Accepted Answer

A) True 
 B)False

Question 13

In spite of legislative changes which phase out the estate tax,considerable motivation continues to exist for making lifetime gifts.Explain this motivation in the light of the following:

Accepted Answer

The answer of In spite of legislative changes which phase...

Question 14

Various tax provisions encourage the creation of certain types of retirement plans.Such provisions can be justified on both economic and equity grounds.

Accepted Answer

A) True 
 B)False

Question 15

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Accepted Answer

A) True 
 B)False

Question 16

Stealth taxes have the effect of generating additional taxes from lower income taxpayers.

Accepted Answer

A) True 
 B)False

Question 17

Which,if any,of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS) ?

Accepted Answer

A)  Penalties are imposed for failure to file a return or pay a tax on time.
B)  Prepaid income is taxed in the year received and not in the year earned.
C)  Annual adjustments for indexation increases the amount of the standard deduction allowed.
D)  Casualty losses must exceed 10% of AGI to be deductible.
E)  A deduction is allowed for charitable contributions.F) D) and E)
G) A) and E)

Question 18

For Federal income tax purposes,there never has been a general amnesty period.

Accepted Answer

A) True 
 B)False

Question 19

Under the Tax Relief Reconciliation Act of 2001,only the Federal estate tax is scheduled to be repealed.

Accepted Answer

A) True 
 B)False

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

For Federal income tax purposes,there never has been a general amnesty period.

Correct Answer
verified

For the tax year 2010,Travis reported gross income of $500,000 on his timely filed Federal income tax return.

Correct Answer
verified

Which,if any,of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS) ?

Correct Answer
verified

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Correct Answer
verified

Stealth taxes have the effect of generating additional taxes from lower income taxpayers.

Correct Answer
verified

Which of the following is a characteristic of the audit process?

Correct Answer
verified

Various tax provisions encourage the creation of certain types of retirement plans.Such provisions can be justified on both economic and equity grounds.

Correct Answer
verified

If an income tax return is not filed by a taxpayer,there is no statute of limitations on assessments of tax by the IRS.

Correct Answer
verified

The principal objective of the FUTA tax is to provide some measure of retirement security.

Correct Answer
verified

A characteristic of FICA is that:

Correct Answer
verified

On transfers by death,the Federal government relies on an estate tax,while states use only an inheritance tax.

Correct Answer
verified

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their five children in 2010.What is the maximum amount of the annual exclusion they will be allowed for these gifts?

Correct Answer
verified

In spite of legislative changes which phase out the estate tax,considerable motivation continues to exist for making lifetime gifts.Explain this motivation in the light of the following:

Correct Answer
verified

For the negligence penalty to apply,the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

Correct Answer
verified

If a "special agent" becomes involved in the audit of a return,this indicates that the IRS suspects that fraud is involved.

Correct Answer
verified

In an office audit,the audit by the IRS takes place at the taxpayer's office.

Correct Answer
verified

Under the Tax Relief Reconciliation Act of 2001,only the Federal estate tax is scheduled to be repealed.

Correct Answer
verified

The tax law provides various tax credits,deductions,and exclusions that are designed to encourage taxpayers to obtain additional education.These provisions can be justified on both economic and social grounds.

Correct Answer
verified

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Correct Answer
verified

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

For Federal income tax purposes,there never has been a general amnesty period.

Correct AnswerverifiedShow Answer

For the tax year 2010,Travis reported gross income of $500,000 on his timely filed Federal income tax return.

Correct AnswerverifiedShow Answer

Which,if any,of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS) ?

Correct AnswerverifiedShow Answer

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Correct AnswerverifiedShow Answer

Stealth taxes have the effect of generating additional taxes from lower income taxpayers.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of the audit process?

Correct AnswerverifiedShow Answer

Various tax provisions encourage the creation of certain types of retirement plans.Such provisions can be justified on both economic and equity grounds.

Correct AnswerverifiedShow Answer

If an income tax return is not filed by a taxpayer,there is no statute of limitations on assessments of tax by the IRS.

Correct AnswerverifiedShow Answer

The principal objective of the FUTA tax is to provide some measure of retirement security.

Correct AnswerverifiedShow Answer

A characteristic of FICA is that:

Correct AnswerverifiedShow Answer

On transfers by death,the Federal government relies on an estate tax,while states use only an inheritance tax.

Correct AnswerverifiedShow Answer

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their five children in 2010.What is the maximum amount of the annual exclusion they will be allowed for these gifts?

Correct AnswerverifiedShow Answer

In spite of legislative changes which phase out the estate tax,considerable motivation continues to exist for making lifetime gifts.Explain this motivation in the light of the following:

Correct AnswerverifiedShow Answer

For the negligence penalty to apply,the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

Correct AnswerverifiedShow Answer

If a "special agent" becomes involved in the audit of a return,this indicates that the IRS suspects that fraud is involved.

Correct AnswerverifiedShow Answer

In an office audit,the audit by the IRS takes place at the taxpayer's office.

Correct AnswerverifiedShow Answer

Under the Tax Relief Reconciliation Act of 2001,only the Federal estate tax is scheduled to be repealed.

Correct AnswerverifiedShow Answer

The tax law provides various tax credits,deductions,and exclusions that are designed to encourage taxpayers to obtain additional education.These provisions can be justified on both economic and social grounds.

Correct AnswerverifiedShow Answer

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Correct AnswerverifiedShow Answer

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