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Individual Taxation Chapters 1-5

Individual Taxation Chapters 1-5

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Published by Hassan Khan Niazi

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Published by: Hassan Khan Niazi on Jun 26, 2012
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Name: ________________________ Class: ___________________ Date: __________ ID: A
1
BUSA307 - Federal Taxation, Sample Exam 1 Chapters 1-5
True/False
 Indicate whether the statement is true or false.
____ 1. Julie inherits her mother’s personal residence, which she converts to a furnished rent house. This changeshould affect the amount of 
ad valorem
property taxes levied on the properties.____ 2. Julius, a married taxpayer, makes gifts to each of his six children. Only six per donee annual exclusions willbe allowed as to these gifts.____ 3. The due dates for filing state income tax returns most often are the same as the due date of the Federalincome tax return.____ 4. The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.____ 5. During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure tofile penalty is reduced by the amount of the failure to pay penalty.____ 6. The tax law provides various tax credits, deductions, and exclusions that are designed to encourage taxpayersto obtain additional education. These provisions can be justified on both economic and equity grounds.____ 7. As it is consistent with the wherewithal to pay concept, the tax law permits a seller to recognize gain in theyear the installment sale took place.____ 8. The 1954 Code codification substantially changed the tax law existing on the date of its enactment.____ 9. Regular decisions of the Tax Court generally involve novel issues previously resolved by the U.S. Tax Court.____ 10. The following citation
cannot 
be correct:
Jack D. Carr 
, T.C. Memo. 1985-19.____ 11. Online research systems are generally less costly than CD-ROM services.____ 12. Kim, a citizen of Korea, is a resident of the U.S. Any income Kim receives from land he owns in Korea is
not 
subject to the U.S. income tax.____ 13. An increase in the amount of a taxpayer’s AGI can reduce the amount of medical expenses allowed as adeduction.____ 14. Darren, age 20 and not disabled, earns $4,500 during 2006. Darren’s parents
cannot 
claim him as adependent unless he is a full-time student.____ 15. Stealth taxes are directed at higher income taxpayers.____ 16. When the kiddie tax applies, the child need
not 
file an income tax return as the child’s income will bereported on the parents’ return.____ 17. Regardless of the standard deduction and exemption amounts, a self-employed individual with net earningsof $400 or more from a business or profession must file a Federal income tax return.____ 18. In 2006, Tony is a widower and maintains a household in which he and his unmarried daughter, Marie, live.If Marie is not Tony’s dependent, he
cannot 
claim head of household filing status.____ 19. On June 30, 2006, an accrual basis taxpayer sold a contract to provide the same service each month for 36months, July 2006 through June 2009. The contract price received was $3,600. The taxpayer may recognize$600 gross income in 2006 and $3,000 in 2007.
 
Name: ________________________ ID: A
2____ 20. George and Erin are divorced, and George is required to pay Erin $20,000 of alimony each year. Georgeearns $75,000 a year. Erin is
not 
required to include the alimony payments in gross income because Georgeearned the income and therefore he should pay the tax on the income.____ 21. In the case of a below-market gift loan for which there is no exception to the imputed interest rules, thelender must recognize imputed interest income.____ 22. Susan purchased an annuity for $120,000. She is to receive $15,000 each year and her life expectancy is 12years. If Susan collects under the annuity for 13 years, the entire $15,000 received in the 13th year must beincluded in her gross income.____ 23. If a Nobel peace prize winner transfers the prize to a qualified government unit or nonprofit organization,then the prize is excluded from the winner’s gross income if the amount of the prize does not exceed 50% of the winner’s AGI.____ 24. Norma’s income for 2006 is $27,000 from part-time work and $9,000 of Social Security benefits. Norma isnot married. A portion of her Social Security benefits must be included in her gross income.____ 25. Sam received $25,000 of salary, interest, and dividends in 2006. He also received $10,000 as worker’scompensation benefits. Sam must include either 50% or 85% of the worker’s compensation benefits in grossincome for 2006.
Multiple Choice
 Identify the choice that best completes the statement or answers the question.
____ 26. Which, if any, of the following statements best describes the history of the Federal income tax?a. It existed during the Civil War.b. The Federal income tax on corporations was held by the U.S. Supreme Court to becontrary to the U.S. Constitution.c. The Federal income tax on individuals was held by the U.S. Supreme Court to beallowable under the U.S. Constitution.d. Both the Federal income tax on individuals and on corporations was held by the U.S.Supreme Court to be contrary to the U.S. Constitution.e. None of the above.____ 27. Which, if any, of the following taxes is
progressive
(rather than
proportional
)?a. A city’s excise tax on hotel occupancy.b. Medicare component of FICA and FUTA.c. Federal gas guzzler tax.d. Value added taxes.e. None of the above.____ 28. Which, if any, of the following occurrences will
increase
a taxing jurisdiction’s revenue from
ad valorem
taxes imposed on real estate?a. A tax holiday expires.b. The state condemns farmland for a prison facility.c. A church builds a school on vacant land it already owns.d. An apartment building is acquired by a university for use as a dormitory..e. None of the above.
 
Name: ________________________ ID: A
3____ 29. A use tax is imposed by:a. The Federal government and all states.b. The Federal government and a majority of the states.c. A minority of the states and not the Federal government.d. All states and not the Federal government.e. None of the above.____ 30. Property can be transferred within the family group by gift or at death. One motivation for preferring the giftapproach is:a. To take advantage of the per donee annual exclusion.b. To avoid a future decline in value of the property transferred.c. To take advantage of the higher unified transfer tax credit available under the gift tax.d. To shift income to higher bracket donees.e. None of the above.____ 31. State income taxes can:a. Piggyback to the Federal version.b. Decouple from the Federal version.c. Apply to visiting nonresidents.d. Provide occasional amnesty programs.e. All of the above.____ 32. A characteristic of FICA is that:a. It is imposed only on the employer.b. It applies when a 19-year-old son works for his parents.c. It provides a modest source of income in the event of loss of employment.d. It is administered by both state and Federal governments.e. None of the above.____ 33. The proposed
flat tax
:a. Would simplify the income tax.b. Would eliminate the income tax.c. Would tax the increment in value as goods move through the production andmanufacturing stages to the marketplace.d. Is a tax on consumption.e. None of the above.____ 34. Which of the following is characteristic of the IRS audit procedure?a. The percentage of individual income tax returns that the IRS audits has significantlyincreased over the years.b. An office audit takes place at the office of the taxpayer.c. One of the factors that leads to an audit is the information provided by informants.d. Only IRS special agents can conduct field audits.e. None of the above.____ 35. Aidan files his tax return 65 days after the due date. Along with the return, Aidan remits a check for $6,000which is the balance of the tax owed. Disregarding the interest element, Aidan’s total failure to file and topay penalties are:a. $90.b. $810.c. $900.d. $990.e. None of the above.

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