Question 1

Taxes levied by both states and the Federal government include:

Accepted Answer

A)  General sales tax.
B)  Customs duties.
C)  Hotel occupancy tax.
D)  Franchise tax.
E)  None of these.F) B) and C)
G) B) and E)

Question 2

Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Not all of the states that impose a general sales tax also have a use tax.

Accepted Answer

A) True 
 B)False

Question 5

The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

Accepted Answer

A) True 
 B)False

Question 6

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-Import taxes (customs duties)

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) C) and K)
N) F) and K)

Question 7

A landlord leases property upon which the tenant makes improvements.The improvements are significant and are not made in lieu of rent.At the end of the lease, the value of the improvements are not income to the landlord.This rule is an example of:

Accepted Answer

A)  A clear reflection of income result.
B)  The tax benefit rule.
C)  The arm's length concept.
D)  The wherewithal to pay concept.
E)  None of these.F) A) and D)
G) A) and B)

Question 8

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-Contributions to charitable organizations are deductible.

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) A) and J)
N) E) and L)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-A tax credit for amounts spent to furnish care for children while the parent is at work.

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) C) and G)
N) A) and B)

Question 11

Stealth taxes have the effect of generating additional taxes from all taxpayers.

Accepted Answer

A) True 
 B)False

Question 12

Characteristics of the "fair tax" (i.e., national sales tax)  include which, if any, of the following:

Accepted Answer

A)  Abolition of the Federal individual (but not the corporate)  income tax.
B)  Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax) .
C)  Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes.
D)  Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes.
E)  None of these.F) None of the above
G) A) and B)

Question 13

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Accepted Answer

A) True 
 B)False

Question 14

A use tax is imposed by:

Accepted Answer

A)  The Federal government and all states.
B)  The Federal government and a majority of the states.
C)  All states but not the Federal government.
D)  Most of the states but not the Federal government.
E)  None of these.F) B) and E)
G) All of the above

Question 15

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-A Federal deduction for state and local income taxes paid.

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) B) and G)
N) C) and G)

Question 16

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

Accepted Answer

A) True 
 B)False

Question 17

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-A deduction for qualified tuition paid to obtain higher education.

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) A) and I)
N) J) and L)

Question 18

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Accepted Answer

A)  Taxpayer compliance is greater for personal use property than for business use property.
B)  The tax on automobiles sometimes considers the age of the vehicle.
C)  Most states impose a tax on intangibles.
D)  The tax on intangibles generates considerable revenue since it is difficult for taxpayers to avoid.
E)  None of these.F) C) and D)
G) A) and C)

Question 19

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-Employee temporarily working in another state for two months

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) B) and E)
N) A) and L)

Question 20

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 equity grounds.

Accepted Answer

A) True 
 B)False

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

Taxes levied by both states and the Federal government include:

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Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -A tax credit for amounts spent to furnish care for children while the parent is at work.

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The formula for the Federal income tax on corporations is the same as that applicable to individuals.

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Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -Contributions to charitable organizations are deductible.

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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 equity grounds.

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Characteristics of the "fair tax" (i.e., national sales tax) include which, if any, of the following:

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The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

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Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

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Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

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Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -Employee temporarily working in another state for two months

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Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -A Federal deduction for state and local income taxes paid.

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

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Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -A deduction for qualified tuition paid to obtain higher education.

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Not all of the states that impose a general sales tax also have a use tax.

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Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -Import taxes (customs duties)

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Stealth taxes have the effect of generating additional taxes from all taxpayers.

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A use tax is imposed by:

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A landlord leases property upon which the tenant makes improvements.The improvements are significant and are not made in lieu of rent.At the end of the lease, the value of the improvements are not income to the landlord.This rule is an example of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.

Correct AnswerverifiedShow Answer

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