48 Free Test Bank for Prentice Halls Federal Taxation 2012 Individuals 25th Edition by Pope

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When new tax legislation is being considered by Congress,

•  A) the tax bill will usually originate in the Senate.
•  B) different versions of the House and Senate bills are reconciled by the Speaker of the House and the President of the Senate.
•  C) different versions of the House and Senate bills are reconciled by a Joint Conference Committee.
•  D) after the President of the U.S. approves a tax bill, the Joint Conference Committee must then vote on passage of the bill.

Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax of $12,000 on $120,000. The tax is a

•  A) progressive tax.
•  B) proportional tax.
•  C) regressive tax.
•  D) None of the above.

In an S corporation, shareholders

•  A) are taxed on their proportionate share of earnings.
•  B) are taxed only on dividends.
•  C) may allocate income among themselves in order to consider special contributions.
•  D) are only taxed on salaries.

Sarah contributes $25,000 to a church. Sarah's marginal tax rate is 35% while her average tax rate is 25%. After considering her tax savings, Sarah's contribution costs

•  A) $6,250.
•  B) $8,750.
•  C) $16,250.
•  D) $18,750.

Which of the following taxes is progressive?

•  A) sales tax
•  B) excise tax
•  C) property tax
•  D) income tax

Which of the following is not an objective of the federal income tax law?

•  A) Stimulate private investment.
•  B) Reduce employment.
•  C) Encourage research and development activities.
•  D) Prevent taxpayers from paying a higher percentage of their income in personal income taxes due to inflation.

The IRS must pay interest on

•  A) all tax refunds.
•  B) tax refunds paid later than 30 days after the due date.
•  C) tax refunds paid later than 45 days after the due date.
•  D) The IRS never pays interest on tax refunds.

Denzel earns $120,000 this year through his job as a sales manager. What is his FICA tax?

•  A) $8,170
•  B) $8,064
•  C) $8,362
•  D) $9,180

Peyton has adjusted gross income of $20,000,000 on his 2010 tax return, filed April 15, 2011. He accidentally failed to include $200,000 that he received for a television advertisement. How long does the IRS have to audit Peyton's federal tax return?

•  A) until April 15, 2013
•  B) until April 15, 2014
•  C) until April 15, 2017
•  D) The IRS can audit Peyton's return at any future date.

Which of the following taxes is regressive?

•  A) Federal Insurance Contributions Act (FICA)
•  B) excise tax
•  C) property tax
•  D) gift tax

Which of the following serves as the highest authority for tax research, planning, and compliance activities?

•  A) Internal Revenue Code
•  B) Income Tax Regulations
•  C) Revenue Rulings
•  D) Revenue Procedures

Which of the following statements is incorrect?

•  A) Property taxes are levied on real estate.
•  B) Excise taxes are assessed on items such as gasoline and telephone use.
•  C) Gift taxes are levied on the recipient of a gift.
•  D) The estate tax is based on the fair market value of property at death or the alternate valuation date.

Which is not a component of tax practice?

•  A) providing clients tax refund advance loans
•  B) tax research
•  C) tax planning and consulting
•  D) compliance

Which of the following taxes is proportional?

•  A) gift tax
•  B) income tax
•  C) sales tax
•  D) Federal Insurance Contributions Act (FICA)

Which of the following is not a taxpaying entity?

•  A) Corporation
•  B) Partnership
•  C) Individual
•  D) Trust

Which of the following steps, related to a tax bill, occurs first?

•  A) signature or veto by the President of the United States
•  B) consideration by the Senate
•  C) consideration by the House Ways and Means Committee
•  D) consideration by the Joint Conference Committee

Which of the following individuals is most likely to be audited?

•  A) Lola has AGI of $35,000 from wages and uses the standard deduction.
•  B) Marvella has a $145,000 net loss from her unincorporated business (a horse farm). She also received $350,000 salary as a CEO of a corporation.
•  C) Melvin is retired and receives Social Security benefits.
•  D) Jerry is a school teacher with two children earning $45,000 a year. He also receives $200 in interest income on a bank account.

What is an important aspect of a limited liability partnership?

•  A) It is the same as a limited partnership where the general partner has unlimited liability.
•  B) Partners have unlimited liability arising from his or her own acts of negligence or misconduct or similar acts of any person under his or her direct supervision.
•  C) All partners have limited liability regarding all partnership activities.
•  D) All partners have unlimited liability.

All of the following are executive (administrative) sources of tax law except

•  A) Internal Revenue Code.
•  B) Income Tax Regulations.
•  C) Revenue Rulings.
•  D) Revenue Procedures.

A tax bill introduced in the House of Representatives is then

•  A) referred to the House Ways and Means Committee for hearings and approval.
•  B) referred to the full House for hearings.
•  C) forwarded to the Senate Finance Committee for consideration.
•  D) voted upon by the full House.

When returns are processed, they are scored to determine their potential for yielding additional tax revenues. This program is called

•  A) Taxpayer Compliance Measurement Program.
•  B) Discriminant Function System.
•  C) Standard Audit Program.
•  D) Field Audit Program.