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Title: Started: Submitted: Time spent: Total score: 1. Which of the following is an employment tax? Student Value Correct Response Answer A. The Gift Tax B. Customs duties C. Excise taxes D. FICA Tax Score: 1/1 100% Correct. FICA is an employment tax. [Employment Taxes p. 1-16] Feedback CHAPTER 1 - MULTIPLE CHOICE QUESTIONS June 11, 2011 2:12 PM June 11, 2011 2:36 PM 00:24:03 26/31 = 83.871% Total score adjusted by 0.0 Maximum possible score: 31

2. Which of the following items will not be subject to indexing under the tax law? Student Response A. The standard deduction B. The child care credit C. Personal and dependency exemptions D. The tax brackets 100% Correct. The child care credit is not indexed. [Equity Considerations p. 1-28] Value Correct Answer Feedback

Score:

1/1

3. The total FICA tax rate imposed on individual taxpayers is? Student Value Correct Response Answer A. OASDI rate plus Medicare rate B. OASDI rate less FUTA rate C. OASDI rate plus the FUTA rate D. OASDI rate less Medicare rate Score: 1/1 100% Feedback Correct. The OASDI rate plus Medicare rate is the total rate. [Employment Taxes p. 1-16]

4. The installment method of reporting gains can be justified based on: Student Response A. Both mitigation of the annual accounting period and wherewithal to pay B. Mitigation of 0% the annual accounting period C. Social consideration D. Wherewithal to pay Incorrect. The installment method mitigates the annual accounting period. [Equity Considerations p. 1-28] Value Correct Answer Feedback

Score:

0/1

5. Raul's gross income is $80,000 and he has business deductions of $6,000. His itemized deductions are $10,000 and he has one personal exemption. Raul's taxable income is calculated as: Student Value Correct Response Answer A. $80,000 6,000 10,000 B. $80,000 6,000 10,000 + exemption C. $80,000 - 100% 6,000 10,000 exemption D. $80,000 6,000 exemption Score: 1/1 Correct. $80,000 - 6,000 - 10,000 - exemption. [Income Taxes p. 114] Feedback

6. Jeanne earned wages of $120,000. The total amount of FICA tax due from Jeanne and her employer is calculated as follows: Student Value Correct Response Answer A. [(OASDI rate + Medicare rate) x annual maximum] x2 B. [(OASDI rate x annual maximum) + (Medicare rate x $120,000)] Feedback

C. [(OASDI rate + Medicare rate) x $120,000] x2 100% D. [(OASDI rate x annual maximum) + (Medicare rate x $120,000)] x2 Score: 1/1 Correct. [(OASDI rate x annual maximum) + (Medicare rate x $120,000)] x 2. [Employment Taxes p. 1-16]

7. The total FUTA tax payable by their employer before any state credits is calculated as: Student Value Correct Response Answer A. FUTA wages x (FUTA rate FICA rate) 100% B. FUTA wages x FUTA rate C. (FUTA wages x FUTA rate) x 2 D. (FUTA wages x FUTA rate) x 50% Score: 1/1 Correct. FUTA wages x FUTA rate. [Employment Taxes p. 1-16] Feedback

8. Byron files his tax return 45 days late. Along with the return, he remits a check for $6,000, which is the balance of the tax owed. Disregarding interest, what is Byron's penalty for failure to file?

Student Value Correct Response Answer A. $540 100%

Feedback Correct. 5% per month or fraction thereof, or 10% x $6,000 = $600, less failure to pay penalty of .5% per month or fraction thereof, (1% x $6,000 = $60), which equals $540. [Interest and Penalties p. 122]

B. $60 C. $-0D. $600 Score: 1/1

9. The value added tax is: Student Response A. used by several European Union countries B. both used by several European Union countries and a tax on consumption C. a form of income tax on corporations D. a tax on consumption Score: 0/1 Value Correct Answer 0% Feedback Incorrect. The VAT is a consumption tax used by several European countries. [Proposed U.S. Taxes p. 1-18]

10. John received $140,000 when the state condemned his house for a new freeway. The house cost John $84,000. John immediately purchased a new home for $140,000. From this sale, John should report a taxable gain of:

Student Value Correct Response Answer A. $84,000 B. $56,000 C. $140,000 D. $-0Score: 1/1 100%

Feedback

Correct. The gain is not taxable. [Equity Considerations p. 1-28]

11. Interest rates charged by the IRS for taxpayer assessments (underpayments) and for tax refunds (overpayments) are determined: Student Value Correct Response Answer A. SemiAnnually B. Annually C. Monthly D. Quarterly 100% Correct. The interest rates are determined quarterly. [Interest and Penalties p. 1-22] Feedback

Score: 1/1

12. Vicky filed her 2010 individual tax return on January 15, 2011. The return was properly signed and filed. The statute of limitations for Vicky's 2010 return expires on: Student Value Correct Response Answer A. January 15, 2014 0% Feedback Incorrect. The statute of limitations is 3 years from due date of the return. [Statute of Limitations p. 1-21]

B. January 15, 2013 C. April 15, 2014 D. April 15,

2013 Score: 0/1

13. Mark and Silva are married with four grown children, three of whom are married, and six grandchildren. What is the maximum amount Mark and Jane can give to their family in 2010 without incurring the Federal gift tax if they elect "gift splitting?" Student Value Correct Response Answer A. $338,000 B. $246,000 C. $220,000 D. $312,000 0% Incorrect. By electing "gift splitting" to 13 family members (4 children, 3 spouses of children, and 6 grandchildren), $338,000 can be given in 2010 (13 x $13,000 x 2). [Gift Taxes p. 1-13] Feedback

Score: 0/1

14. Which of the following is not an economic consideration of the tax law? Student Response Value Correct Answer Feedback Correct. Wherewithal to pay is an equity consideration. [Equity Considerations p. 1-28]

100% A. The wherewithal to pay concept B. Encouragement of small business C. Encouragement of certain industries D. Encouragement of certain activities Score: 1/1

15. The net operating loss provision of the tax law is an example of: Student Response Value Correct Answer Feedback Correct. NOLs are an equity consideration. [Equity Considerations p. 1-28]

100% A. An equity consideration B. An economic consideration C. A political consideration D. A social consideration Score: 1/1

16. Which of the following is not a social consideration in the tax law? Student Response A. A speeding ticket paid by a truck driver is nondeductible B. Qualified pension and profit-sharing plan C. Expensing soil and water conservation costs D. Child care credit Score: 1/1 100% Correct. Soil and water conservation expensing is an economic consideration. [Economic Considerations p. 125] Value Correct Answer Feedback

17. Which of the following is the best example of a tax law provision designed to aid in controlling the economy?

Student Response A. Net operating loss carryover B. Personal exemption C. Child care credit

Value Correct Answer

Feedback

D. Depreciation 100% deduction

Correct. The depreciation deduction aids in controlling the economy. [Economic Considerations p. 1-25]

Score:

1/1

18. Smith Corporation pays $4,000 per month rent on a building to Mary Smith, its sole shareholder. The fair market value of the rent determined at "arm's length" would be $1,800 per month. Smith Corporation will be allowed a monthly rental deduction of: Student Value Correct Response Answer A. $2,200 B. $1,800 100% Correct. The amount is what would be paid to an unrelated third party. [Influence of the Courts p. 1-33] Feedback

C. $-0D. $4,000 Score: 1/1

19. A father rents property to his daughter for $10,000 a year. If the IRS wants to examine this transaction it will be interested in: Student Value Correct Response Answer A. The tax benefit rule Feedback

B. Public policy limitations C. The arm's length concept D. Installment sales rules Score: 1/1 100% Correct. Rentals between related parties are judged by the arms length concept. [Influence of the Courts p. 1-33]

20. Several years ago, Fran entered into an agreement to rent a building to Meg for 20 years. During the first year of the lease, Meg made $60,000 in capital improvements to the building. This year the lease is terminated and Fran takes possession of the building. The fair market value of the capital improvements in the year of termination is $75,000. In the year of the termination of the lease, Fran must recognize taxable gain of: Student Value Correct Response Answer A. $75,000 B. $-0100% Correct. The improvements are not income. [Influence of the Courts p. 1-33] Feedback

C. $60,000 D. $15,000 Score: 1/1

21. On a tax return that is filed 45 days late, Christy pays $33,000 in additional taxes. Of this amount, $10,000 is attributable to Christy's negligence. What is Christy's negligence penalty? Student Value Correct Response Answer A. $6,600 B. $2,000 C. $500 D. $-0100% Correct. $2,000 = 20% x $10,000 [Interest and Penalties p. 1-22] Feedback

Score: 1/1

22. When a tax base is $20,000, the tax liability is $6,000 and when the tax base is $200,000, the tax liability is $60,000. This tax rate structure is: Student Response A. Progressive B. Parallel C. Proportional 100% Correct. When the tax rate stays the same the tax is proportional. [Tax Rates p. 1-6] Value Correct Answer Feedback

D. Regressive Score: 1/1

23. When a tax base is $20,000, the tax liability is $6,000 and when the tax base is $200,000, the tax liability is $80,000. This tax rate structure is: Student Response A. Proportional B. Regressive C. Progressive 100% Correct. When the tax rate increases the tax is progressive. [Tax Rates p. 1-6] Value Correct Answer Feedback

D. Parallel Score: 1/1

24. For 1913 individual tax returns filed on March 1, 1914, the maximum marginal tax rate was: Student Value Correct Response Answer A. 15% B. 6% 100% Correct. The 1913 maximum marginal tax rate was 6%. [Revenue Acts p. 1-3] Feedback

C. 12% D. 10% Score: 1/1

25. The pay-as-you-go system of withholding used by the United States Government was passed into law in: Student Value Correct Response Answer A. 1925 B. 1913 C. 1943 100% Correct. The pay-as-you-go system was passed in 1943. [Historical Trends p. 1-4] Feedback

D. 1954 Score: 1/1

26. A(n) ________ tax is an ad valorem tax (usually at the same rate as the sales tax) on the utilization, consumption, or storage of tangible property. Student Value Correct Response Answer A. Use 100% Feedback Correct. A use tax is an ad valorem tax. [Transaction Taxes p. 1-9]

B. Excise C. Severance D. Luxury Score: 1/1

27. Which of the following states does not impose an income tax on individuals? Student Value Correct Response Answer Feedback

A. Alabama B. Vermont C. Nevada 100% Correct. Nevada does not have a state income tax. [Income Taxes p. 1-14]

D. Virginia Score: 1/1

28. Which of the following was not part of the Guiding Principles of Good Tax Policy issued by the AICPA? Student Response Value Correct Answer Feedback Correct. The tax should be neutral in terms of its effect on business decisions. [Criteria Used in the Selection of a Tax Structure p. 1-4]

A. The tax system 100% should influence business decisions. B. The tax system should be structured to minimize noncompliance. C. The tax system should not reduce economic growth and efficiency. D. The tax system should be simple. Score: 1/1

29. The American Institute of CPAs has a set of enforceable pronouncements for tax practice by CPAs. The name of these pronouncements is: Student Response A. The Tax Code Value Correct Answer Feedback

of Ethics B. Statements on Responsibilities in Tax Practice C. Circular 230 D. Statements on 100% Standards for Tax Services Correct. The enforceable pronouncements are called, "Statements on Standards for Tax Services." [Tax Practice p. 1-23]

Score: 1/1

30. In 2009 what is the maximum taxable estate that does not have to pay the estate tax because of the unified credit? Student Value Correct Response Answer A. $2.0 Million 0% Feedback Incorrect. The 2009 unified credit of $1,445,800 will cover the tax on a 3.5 Million taxable estate. [Death Taxes p. 1-11]

B. $3.5 Million C. $1.5 Million D. $1.0 Million Score: 0/1

31. In the case of civil fraud by a taxpayer, the penalty is ________ percent of the underpayment attributable to the fraud. Student Value Correct Response Answer A. 20 B. 8 C. 75 100% Correct. The civil fraud penalty is 75% of the underpayment. [Interest and Penalties p. 1-22] Feedback

D. 5 Score: 1/1