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

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Question 71

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The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.On what grounds can these provisions be justified?

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Social and economic considerat...

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Question 72

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Julius, a married taxpayer, makes gifts to each of his six children.A maximum of twelve annual exclusions could be allowed as to these gifts.

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B) False

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Question 73

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For individual taxpayers, the interest rate for income tax refunds (overpayments) is not the same as that applicable to assessments (underpayments).

If the tax deficiency is attributable to fraud, the negligence penalty will not be imposed.

In connection with facilitating the function of the IRS in the administration of the tax laws, comment on the utility of the following:

Taxes not imposed by the Federal government include:

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 deduction for certain expenses (interest and taxes) incident to home ownership.

During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure to file penalty is reduced by the amount of the failure to pay penalty.

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

For the tax year 2012, Andrew reported gross income of $200,000 on his timely filed Federal income tax return.

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

Federal excise taxes that are no longer imposed include:

Timothy recently converted a warehouse into apartment lofts, which he is renting to single professionals.In making the conversion, he emphasized improvements that were portable in nature.Thus, the sprinkler system, heating and cooling units, and room dividers are all removable from the building.In terms of ad valorem property taxes, what was Timothy trying to accomplish?

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 deduction for contributions by an employee to certain retirement plans.

In early July 2012, Gavin is audited by the IRS and a large deficiency is assessed.In October of the same year, his income tax return for the state is audited.What has probably happened?

What are the pros and cons of the following state and local tax provisions?

Pam, a widow, makes cash gifts to her four married children (including their spouses) and to her six grandchildren.

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. Tax credits available for the purchase of a vehicle that uses alternative (non-fossil) fuels.

A VAT (value added tax) :

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