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

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Question 81

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

A) True
B) False

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Question 82

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

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Question 83

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In connection with facilitating the function of the IRS in the administration of the tax laws, comment on the utility of the following: a.An increase in the amount of the standard deduction. b.Dollar and percentage limitations on the deduction of personal casualty losses. c.Availability of interest and penalties for taxpayer noncompliance.

Logan dies with an estate worth $20 million. Under his will, $10 million passes to his wife while $10 million goes to his church. What is Logan's Federal estate tax result?

In 2017, 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.

The civil fraud penalty can entail large fines and possible incarceration.

In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?

The tax law allows an income tax deduction (or a credit) for foreign income taxes. Explain why.

Match the statements that relate to each other. Note: Some choices may be used more than once. a.3 years from date return is filed b.3 years from due date of return c.20% of underpayment d.5% per month (25% limit) e.0.5% per month (25% limit) f.Conducted at IRS office g.Conducted at taxpayer's office h.6 years i.45-day grace period allowed to IRS j.No statute of limitations (period remains open) k.75% of underpayment l.No correct match provided -Failure to file penalty

Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:

The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

Using the choices provided below, show the justification for each provision of the tax law listed. a.Economic considerations b.Social considerations c.Equity considerations d.​Both a. and b. -More rapid expensing for tax purposes of the costs of installing pollution control devices.

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. a.Deferral of gains from involuntary conversions b.Carryback and carryforward of net operating losses c."No change" is one possible result d.State income tax applied to visiting nonresident e.IRS special agent f.Undoing the "piggyback" result g.Ideal budget goal as to new tax legislation h.Every state that has a general sales tax has one i.Imposed by all states and the Federal government j.Imposed by some states but not the Federal government k.Imposed only by the Federal government l.No correct match provided -Export taxes

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

To mitigate the effect of the annual accounting period concept, the tax law permits the carryforward to other years of the excess charitable contributions of a particular year.

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.

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency. Since Tracy disagrees with the result, her next step is to go to court. Do you agree?

For Federal income tax purposes, there never has been a general amnesty period.

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. a.Deferral of gains from involuntary conversions b.Carryback and carryforward of net operating losses c."No change" is one possible result d.State income tax applied to visiting nonresident e.IRS special agent f.Undoing the "piggyback" result g.Ideal budget goal as to new tax legislation h.Every state that has a general sales tax has one i.Imposed by all states and the Federal government j.Imposed by some states but not the Federal government k.Imposed only by the Federal government l.No correct match provided -Decoupling

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.