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Exam 1: Introduction to Taxation

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Question 41

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Which, if any, of the following taxes are proportional (rather than progressive) ?

A) State general sales tax
B) Federal corporate income tax
C) Federal estate tax
D) Federal gift tax
E) All of these

F) C) and D)
G) All of the above

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Question 42

Multiple Choice

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

A) Penalties are imposed for failure to file a return or pay a tax on time.
B) Prepaid income is taxed in the year received and not in the year earned.
C) Annual adjustments for indexation increases the amount of the standard deduction allowed.
D) Casualty losses must exceed 10% of AGI to be deductible.
E) A deduction is allowed for charitable contributions.

F) A) and D)
G) A) and E)

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Question 43

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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.

The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied tax rates from a low of 2% to a high of 6%.

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their four children in 2017.What is the maximum amount of the annual exclusion they will be allowed for these gifts?

Which, if any, of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?

When a state decouples from a Federal tax provision, it means that this provision will not apply for state income tax purposes.

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

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

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.

Taylor, a widow, makes cash gifts to her five married children (including their spouses) and to her seven grandchildren.What is the maximum amount Taylor can give for calendar year 2017 without using her unified transfer tax credit?

States impose either a state income tax or a general sales tax, but not both types of taxes.

Social considerations can be used to justify:

Employment taxes apply to all entity forms of operating a business.As a result, employment taxes are a neutral factor in selecting the most tax effective form of operating a business.

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Donald owns a 45% interest in a partnership that earned $130,000 in the current year.He also owns 45% of the stock in a C corporation that earned $130,000 during the year.Donald received $20,000 in distributions from each of the two entities during the year.With respect to this information, Donald must report $78,500 of income on his individual income tax return for the year.

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

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

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.