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

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Question 1

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When Congress enacts a tax cut that is phased in over a period of years,revenue neutrality is achieved.

A) True
B) False

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Question 2

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

A) True
B) False

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Question 3

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Due to the population change,the Goose Creek School District has decided to close one of its high schools.Since it has no further need of the property,the school is listed for sale.The two bids it receives are as follows: The United Methodist Church would use the property to establish a sectarian middle school.Planet,a well-known car dealership,would revamp the property and operate it as a branch location. If you were a member of the School District board,what factors would you consider in evaluating the two bids?

Currently,the tax base for the Medicare component of the FICA is not limited to a dollar amount.

In 2012,José,a widower,sells land (fair market value of $100,000)to his daughter,Linda,for $50,000.José has made a taxable gift of $50,000.

Sales made by mail order are not exempt from the application of a general sales (or use)tax.

The annual exclusion,currently $13,000,is available for gift but not estate tax purposes.

Under Clint's will,all of his property passes to either the Lutheran Church or to his wife.No Federal estate tax will be due on Clint's death in 2012.

A state income tax can be imposed on nonresident taxpayers who earn income within the state or on an itinerant basis.

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

The tax law allows an income tax deduction for state and local income taxes.Explain why.

A parent employs his twin daughters,age 18,in his sole proprietorship.The daughters are not subject to FICA coverage.

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

Paige is the sole shareholder of Citron Corporation.During the year,Paige leases a building to Citron for a monthly rental of $80,000.If the fair rental value of the building is $60,000,what are the income tax consequences to the parties involved?

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

There is no Federal excise tax on hotel occupancy.

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

Taxes levied by both states and the Federal government include:

Morgan inherits her father's personal residence including all of the furnishings.She plans to add a swimming pool and sauna to the property and rent it as a furnished house.What are some of the ad valorem property tax problems Morgan can anticipate?

Which,if any,of the following statements best describes the history of the Federal income tax?