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

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Question 41

True/False

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In 2014,José,a widower,sells land (fair market value of $100,000)to his daughter,Linda,for $50,000.José has not made a taxable gift.

A) True
B) False

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Question 42

Multiple Choice

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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.

A) Economic considerations
B) Social considerations
C) Equity considerations

D) None of the above
E) All of the above

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Question 43

Multiple Choice

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Using the choices provided below,show the justification for each provision of the tax law listed. -Tax credits for home improvements that conserve energy.

A lack of compliance in the payment of use taxes can be resolved by several means.In this regard,comment on the following: a.Registration of automobiles. b.Reporting of Internet purchases on state income tax returns.

Before the Sixteenth Amendment to the Constitution was ratified,there was no valid Federal income tax on individuals.

Social considerations can be used to justify:

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

Several years ago,Logan purchased extra grazing land for his ranch at a cost of $240,000.In 2014,the land is condemned by the state for development as a highway maintenance depot.Under the condemnation award,Logan receives $600,000 for the land.Within the same year,he replaces the property with other grazing land.What is Logan's tax situation if the replacement land cost: a.$210,000? b.$360,000? c.$630,000? d.Why?

The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.

Under what conditions is it permissible,from an ethical standpoint,for a CPA firm to outsource tax return preparation to a third party?

Using the choices provided below,show the justification for each provision of the tax law listed. -A deduction for contributions by an employee to certain retirement plans.

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

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. -Import taxes (customs duties)

Match the statements that relate to each other.Note: Some choices may be used more than once. -Fraud and statute of limitations

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?

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

As a matter of administrative convenience,the IRS would prefer to have Congress decrease (rather than increase)the amount of the standard deduction allowed to individual taxpayers.

David files his tax return 45 days after the due date.Along with the return,David remits a check for $40,000 which is the balance of the tax owed.Disregarding the interest element,David's total failure to file and to pay penalties are:

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

Using the choices provided below,show the justification for each provision of the tax law listed. -Tax credits available for the purchase of a vehicle that uses alternative (non-fossil) fuels.