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

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Question 21

Multiple Choice

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Which, if any, of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?

A) A tax holiday is granted to an out-of-state business that is searching for a new factory site.
B) An abandoned church is converted to a restaurant.
C) A public school is razed and turned into a city park.
D) A local university sells a dormitory that will be converted for use as an apartment building.
E) None of the above.

F) A) and D)
G) All of the above

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Question 22

Multiple Choice

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The U.S. (either Federal, state, or local) does not impose:

A) Franchise taxes.
B) Severance taxes.
C) Occupational fees.
D) Custom duties.
E) Export duties.

F) A) and E)
G) B) and D)

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Question 23

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The annual exclusion, currently $14,000, is available for gift and estate tax purposes.

In terms of revenue neutrality, comment on a tax cut enacted by Congress that: a. contains revenue offsets. b. includes a sunset provision.

If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments begins on the date the return is filed.

Match the statements that relate to each other. Note: Some choices may be used more than once. -Late filing and statute limitations (deficiency situations)

In terms of Adam Smith's canons of taxation, how does the Federal income tax fare as far as economy is concerned?

In late June 2014, Art is audited by the state and a large deficiency is assessed. In November of the same year, his Federal income tax return is audited by the IRS. What has probably happened?

A use tax is imposed by:

Can a taxpayer start the 3-year statute of limitations on additional assessments by the IRS by filing his income tax return early (i.e., before the due date)? Can the period be shortened by filing late (i.e., after the due date)?

A Federal excise tax is no longer imposed on admission to theaters.

The tax law allows, under certain conditions, deferral of gain recognition for involuntary conversions. a. What is the justification for this relief measure? b. What happens if the proceeds are not entirely reinvested?

Using the choices provided below, show the justification for each provision of the tax law listed. -A deduction for certain expenses (interest and taxes) incident to home ownership.

In preparing a tax return, all questions on the return must be answered.

Which, if any, is not one of Adam Smith's canons of taxation?

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Income tax amnesty

If more IRS audits are producing a greater number of no change results, this indicates increased compliance on the part of taxpayers.

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

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:

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