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Exam 1: An Introduction to Taxation

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Question 41

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A taxpayer's average tax rate is the tax rate applied to an incremental amount of taxable income that is added to the tax base.

A) True
B) False

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Question 42

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The federal income tax is the dominant form of taxation by the federal government.

A) True
B) False

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Question 43

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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

An individual will be subject to gift tax on gifts made to a charity greater than $14,000.

Martha is self-employed in 2016.Her business profits are $140,000.What is her self-employment tax?

When property is transferred,the gift tax is based on

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

Organizing a corporation as an S Corporation results in a single level of taxation.

All of the following are classified as flow-through entities for tax purposes except

What does the statute of limitations mean? Describe the different statutes of limitations that apply to tax returns.

Property is generally included on an estate tax return at its historical cost basis.

Describe the components of tax practice.

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

If a taxpayer's total tax liability is $30,000,taxable income is $100,000,and economic income is $120,000,the average tax rate is 30 percent.

The tax law encompasses administrative and judicial interpretations,such as Treasury regulations,revenue rulings,revenue procedures,and court decisions,as well as statutes.

Flow-through entities do not have to file tax returns since they are not taxable entities.

Peyton has adjusted gross income of $2,000,000 on his 2016 tax return,filed April 15,2017,the due date.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?

Charlie makes the following gifts in the current year: $40,000 to his spouse,$30,000 to his church,$18,000 to his nephew,and $25,000 to a friend.Assuming Charlie does not elect gift splitting with his wife,his taxable gifts in the current year will be

Individuals are the principal taxpaying entities in the federal income tax system.

Leonard established a trust for the benefit of his son.The principal amount of the trust is $400,000.The trust is projected to earn approximately 5% per year.In the current year,the trust earned $20,000.Expenses of $4,000 were incurred.Assume that $14,000 is distributed to Leonard's son. a.How much income is taxed to the trust? b.How much income is taxed to Leonard's son?