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Question;101. The U.S.;(either Federal, state, or local) does not impose;a. Franchise;taxes.;b. Severance;taxes.;c. Occupational;fees.;d. Custom;duties.;e. Export;duties.;102. The;proposed flat tax;a. Would;eliminate the income tax.;b. Would;simplify the income tax.;c. Would;tax the increment in value as goods move through the production and;manufacturing stages to the marketplace.;d. Is a tax;on consumption.;e. None of;the above.;103. A VAT;(value added tax);a. Is regressive;in its effect.;b. Has not;proved popular outside of the U.S.;c. Is not a;tax on consumption.;d. Is used;exclusively by third world (less developed) countries.;e. None of;the above.;104. Characteristics;of the ?Fair Tax? (i.e., national sales tax) include which, if any, of the;following;a. Abolition;of the Federal individual (but not the corporate) income tax.;b. Abolition;of all Federal income taxes but retention of payroll taxes (including the;self-employment tax).;c. Abolition;of all Federal income taxes and payroll taxes but retention of the Federal;estate and gift taxes.;d. Abolition;of all Federal income and payroll taxes as well as the Federal estate and gift;taxes.;e. None of the;above.;105. In terms of;probability, which of the following taxpayers would be least likely to be;audited by the IRS?;a. Taxpayer;owns and operates a check-cashing service.;b. Taxpayer;is an employed electrician.;c. Taxpayer;just received a $3 million personal injury award as a result of a lawsuit.;d. Taxpayer;just won a $1 million slot machine jackpot at a Las Vegas casino.;e. Taxpayer;has been audited several times before.;106. Which of;the following is a characteristic of the audit process?;a. Most;taxpayer audits involve ?special? agents.;b. Self-employed;taxpayers are less likely to be selected for audit than employed taxpayers.;c. Less;important issues are handled by means of a correspondence audit.;d. If a;taxpayer disagrees with the IRS auditor?s finding, the only resort is to the;courts.;e. None of;the above.;107. David files;his tax return 45 days after the due date. Along with the return, David remits;a check for $40,000 which is the balance of the tax owed. Disregarding the;interest element, David?s total failure to file and to pay penalties are;a. $400.;b. $3,600.;c. $4,000.;d. $4,400.;e. None of the above.;108. A;characteristic of the fraud penalties is;a. When;negligence and civil fraud apply to a deficiency, the negligence penalty;predominates.;b. Criminal;fraud can result in a fine and a prison sentence.;c. The;criminal fraud penalty is 75% of the deficiency attributable to the fraud.;d. The IRS;has the same burden of proof in the case of criminal fraud than with civil;fraud.;e. None of;the above.;109. Regarding;proper ethical guidelines, which (if any) of the following is correct?;a. The use;of client estimates in preparing a return may be acceptable.;b. Under no;circumstances should a question on a tax return be left unanswered.;c. If a;client has made a mistake in a prior year?s return and refuses to correct it;you should withdraw from the engagement.;d. If the;exact amount of a deduction is not certain (e.g., around mid-$600s), it should;be recorded as an odd amount (i.e., $649) so as to increase the appearance of;greater certainty.;e. None of;the above.;?;110. Both;economic and social considerations can be used to justify;a. Favorable;tax treatment for accident and health plans provided for employees and financed;by employers.;b. Disallowance;of any deduction for expenditures deemed to be contrary to public policy (e.g.;fines, penalties, illegal kickbacks, bribes to government officials).;c. Various;tax credits, deductions, and exclusions that are designed to encourage;taxpayers to obtain additional education.;d. Allowance;of a deduction for state and local income taxes paid.;e. None of;the above.;111. Social;considerations can be used to justify;a. Allowance;of a credit for child care expenses.;b. Allowing;excess capital losses to be carried over to other years.;c. Allowing;accelerated amortization for the cost of installing pollution control facilities.;d. Allowing;a Federal income tax deduction for state and local sales taxes.;e. None of;the above.;112. Allowing a;domestic production activities deduction for certain manufacturing income can;be justified;a. As;mitigating the effect of the annual accounting period concept.;b. As;promoting administrative feasibility.;c. By;economic considerations.;d. Based on;the wherewithal to pay concept.;e. None of;the above.;113. Provisions;in the tax law that promote energy conservation and more use of alternative;(non-fossil) fuels can be justified by;a. Political;considerations.;b. Economic;and social considerations.;c. Promoting;administrative feasibility.;d. Encouragement;of small business.;e. None of;the above.;114. Which, if;any, of the following provisions cannot be justified as mitigating the effect;of the annual accounting period concept?;a. Nonrecognition;of gain allowed for involuntary conversions.;b. Net;operating loss carryback and carryover provisions.;c. Carryover;of excess charitable contributions.;d. Use of;the installment method to recognize gain.;e. Carryover;of excess capital losses.;115. 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.;116. 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. A clear;reflection of income result.;b. The tax;benefit rule.;c. The;arm?s length concept.;d. The;wherewithal to pay concept.;e. None of;the above.

 

Paper#39448 | Written in 18-Jul-2015

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