33 Free Test Bank for South Western Federal Taxation 2013 Individual Income Taxes 36th Edition by Hoffman

33 free test bank for South-Western Federal Taxation 2013 Individual Income Taxes 36th Edition by Hoffman multiple choice questions are generally open to anyone interested in learning how to prepare income taxes as well as individual income tax concepts. Our free following questions and available answers will definitely sharpen students’ skills and knowledge of taxation. View and self-evaluate exactly how you can grasp the principles of individual income tax in the free test bank sample in the textbook.

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

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•  Taxpayer owns and operates a check-cashing service.
•  Taxpayer is an employed electrician.
•  Taxpayer just received a $3 million personal injury award as a result of a lawsuit.
•  Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.
•  Taxpayer has been audited several times before.

A characteristic of the fraud penalties is:

•  When negligence and civil fraud apply to a deficiency, the civil fraud penalty predominates.
•  Civil fraud can result in a fine and a prison sentence.
•  The criminal fraud penalty is 75% of the deficiency attributable to the fraud.
•  The IRS has the same burden of proof in the case of criminal fraud than with civil fraud.
•  None of the above.

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

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

Taxes levied by both states and the Federal government include:

•  General sales tax.
•  Custom duties.
•  Car rental tax.
•  Franchise tax.
•  None of the above.

Characteristics of the “Fair Tax” (i.e., national sales tax) include which, if any, of the following:

•  Abolition of the Federal individual (but not the corporate) income tax.
•  Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax).
•  Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes.
•  Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes.
•  None of the above.

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

•  To take advantage of the higher unified transfer tax credit available under the gift tax.
•  To avoid a future decline in value of the property transferred.
•  To take advantage of the per donee annual exclusion.
•  To shift income to higher bracket donees.
•  None of the above.

Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:

•  Political considerations.
•  Economic and social considerations.
•  Promoting administrative feasibility.
•  Encouragement of small business.
•  None of the above.

A use tax is imposed by:

•  The Federal government and all states.
•  The Federal government and a majority of the states.
•  All states and not the Federal government.
•  Most of the states and not the Federal government.
•  None of the above.

Taxes levied by all states include:

•  Tobacco excise tax.
•  Individual income tax.
•  Inheritance tax.
•  General sales tax.
•  None of the above.

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

•  Nonrecognition of gain allowed for involuntary conversions.
•  Net operating loss carryback and carryover provisions.
•  Carry over of excess charitable contributions.
•  Use of the installment method to recognize gain.
•  Carry over of excess capital losses.

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

•  A resident dies and leaves his farm to his church.
•  A large property owner issues a conservation easement as to some of her land.
•  A tax holiday issued 10 years ago has expired.
•  A bankrupt motel is acquired by the Red Cross and is to be used to provide housing for homeless persons.
•  None of the above.

Burt and Lisa are married and live in a common law state. Burt wants to make gifts to their five children in 2012. What is the maximum amount of the annual exclusion they will be allowed for these gifts?

•  $130,000.
•  $65,000.
•  $26,000.
•  $13,000.
•  None of the above.

Taxes not imposed by the Federal government include:

•  Tobacco excise tax.
•  Hotel occupancy tax.
•  Customs duties (tariffs on imports).
•  Gas guzzler tax.
•  None of the above.

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

•  Franchise taxes.
•  Severance taxes.
•  Occupational fees.
•  Export duties.
•  Customs duties.

A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of:

•  A clear reflection of income result.
•  The tax benefit rule.
•  The arm’s length concept.
•  The wherewithal to pay concept.
•  None of the above.

Both economic and social considerations can be used to justify:

•  Favorable tax treatment for accident and health plans provided for employees and financed by employers.
•  Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials).
•  Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.
•  Allowance of a deduction for state and local income taxes paid.
•  None of the above.

Which of the following is a characteristic of the audit process?

•  Most taxpayer audits involve “special” agents.
•  Self-employed taxpayers are less likely to be selected for audit than employed taxpayers.
•  Less important issues are handled by means of a correspondence audit.
•  If a taxpayer disagrees with the IRS auditor’s finding, the only resort is to the courts.
•  None of the above.

Which, if any, is not one of Adam Smith’s canons of taxation?

•  Economy.
•  Certainty.
•  Convenience.
•  Simplicity.
•  Equality.

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

•  Taxpayer compliance is greater for personal use property than for business use property.
•  The tax on automobiles sometimes considers the age of the vehicle.
•  Most states impose a tax on intangibles.
•  The tax on intangibles generates considerable revenue since it is difficult for taxpayers to avoid.
•  None of the above.

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

•  A tax holiday is granted to an out-of-state business that is searching for a new factory site.
•  An abandoned church is converted to a restaurant.
•  A public school is razed and turned into a city park.
•  A local university sells a dormitory for use as an apartment building.
•  None of the above.

Scott files his tax return 65 days after the due date. Along with the return, Scott remits a check for $50,000 which is the balance of the tax owed. Disregarding the interest element, Scott’s total failure to file and to pay penalties are:

•  $8,250.
•  $7,500.
•  $6,000.
•  $750.
•  None of the above.

Which, if any, of the following statements best describes the history of the Federal income tax?

•  It existed during the Civil War.
•  The Federal income tax on corporations was held by the U.S. Supreme Court to be contrary to the U.S. Constitution.
•  The Federal income tax on individuals was held by the U.S. Supreme Court to be allowable under the U.S. Constitution.
•  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.
•  None of the above.

A VAT (value added tax):

•  Is regressive in its effect.
•  Has not proved popular outside of the U.S.
•  Is not a tax on consumption.
•  Is used exclusively by third world (less developed) countries.
•  None of the above.

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

•  As mitigating the effect of the annual accounting period concept.
•  As promoting administrative feasibility.
•  By economic considerations.
•  Based on the wherewithal to pay concept.
•  None of the above.

Social considerations can be used to justify:

•  Allowance of a credit for child care expenses.
•  Allowing excess capital losses to be carried over to other years.
•  Allowing accelerated amortization for the cost of installing pollution control facilities.
•  Allowing a Federal income tax deduction for state and local sales taxes.
•  None of the above.

Indicate which, if any, statement is incorrect. State income taxes:

•  Can piggyback to the Federal version.
•  Cannot apply to visiting nonresidents.
•  Can decouple from the Federal version.
•  Can provide occasional amnesty programs.
•  None of the above.

A characteristic of FUTA is that:

•  It is imposed on both employer and employee.
•  It is imposed solely on the employee.
•  Compliance requires following guidelines issued by both state and Federal regulatory authorities.
•  It is applicable to spouses of employees but not to any children under age 18.
•  None of the above.

A characteristic of FICA is that:

•  It applies when one spouse works for the other spouse.
•  It is imposed only on the employer.
•  It provides a modest source of income in the event of loss of employment.
•  It is administered by both state and Federal governments.
•  None of the above.

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

•  Federal corporate income tax.
•  Federal employment taxes (i.e., FICA, FUTA).
•  Federal estate tax.
•  Federal gift tax.
•  All of the above.