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Exam 1: Introduction to Taxation

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Question 41

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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?

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The real estate taxes probably will incr...

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Question 42

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

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B) False

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Question 43

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Currently, the Federal income tax is less progressive than it ever has been in the past.

In 2016, 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.

On transfers by death, the Federal government relies on an estate tax, while states impose an estate tax, an inheritance tax, both taxes, or neither tax.

Federal excise taxes that are no longer imposed include:

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

Tomas owns a sole proprietorship, and Lucy is the sole shareholder of a C corporation. In the current year both businesses make a net profit of $60,000. Neither business distributes any funds to the owners in the year. For the current year, Tomas must report $60,000 of income on his individual tax return, but Lucy is not required to report any income from the corporation on her individual tax return.

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.

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.

An inheritance tax is a tax on a decedent's right to pass property at death.

Eagle Company, a partnership, had a short-term capital loss of $10,000 during the year. Aaron, who owns 25% of Eagle, will report $2,500 of Eagle's short-term capital loss on his individual tax return.

Using the choices provided below, show the justification for each provision of the tax law listed. -A tax credit for amounts spent to furnish care for children while the parent is at work.

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

During the current year, Maroon Company had $125,000 net income from operations. Belinda, the sole owner of Maroon, is in the 33% marginal tax bracket. Determine the combined tax burden for Maroon and Belinda under the following independent situations. (Ignore any employment taxes.) a.Maroon Company is a C corporation and all of its after-tax income is distributed to Belinda. b.Maroon Company is a proprietorship and all of its after-tax income is withdrawn by Belinda. c.Maroon Company is an S corporation and all of its after-tax income is distributed to Belinda.

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?

Flycatcher Corporation, a C corporation, has two equal individual shareholders, Nancy and Pasqual. In the current year, Flycatcher earned $100,000 net profit and paid a dividend of $10,000 to each shareholder. Regardless of any tax consequences resulting from their interests in Flycatcher, Nancy is in the 33% marginal tax bracket and Pasqual is in the 15% marginal tax bracket. With respect to the current year, which of the following statements is incorrect?

Using the choices provided below, show the justification for each provision of the tax law listed. -Contributions to charitable organizations are deductible.

A use tax is imposed by: