Question 1

Joy receives a used car worth $13,000 from her uncle as a graduation present. As a result of the gift I. Joy will have $13,000 of taxable income. II. Joy's uncle's gift will subject him to the gift tax.

Accepted Answer

Statement I is incorrect because gifts, including cars, are not considered taxable income for the recipient. Statement II is also incorrect because the donor, Joy's uncle, would be subject to the gift tax if he gave more than the annual exclusion amount, which is currently $15,000 per year per person. However, in this case, the value of the gift is below the annual exclusion amount, so the uncle would not owe gift tax.

Question 2

A property tax I. is levied on the value of property. II. is referred to as ad valorem. III. on personal property is more common than a tax on real property. IV. is based upon assessed value rather than actual transactions.

Accepted Answer

- Statement I is correct, as property tax is levied on the value of property.
- Statement II is correct, as property tax is referred to as ad valorem, meaning that it is calculated based on the value of the property.
- Statement IV is correct, as property tax is based upon assessed value, which is a value determined by a government assessor, rather than actual transactions. 
- Statement III is incorrect, as a tax on real property is more common than a tax on personal property.

Question 3

The calculation of an individual's income tax includes certain deductions for adjusted gross income. The following are examples of this class of deductions: I. Trade or business expenses II. Rental expenses III. Interest on student loans IV. Investment interest

Accepted Answer

Trade or business expenses and rental expenses are deductible for adjusted gross income, as they are necessary expenses for the purpose of producing income. Interest on student loans is also deductible up to a certain limit, and investment interest is deductible to the extent of investment income. Therefore, statements I, II, and III are correct. Statement IV is also correct, as investment interest is a deduction for adjusted gross income.

Question 4

The return selection program designed to select returns with the highest probability of errors is

Accepted Answer

The DIF program is specifically designed to identify returns with the highest probability of errors by comparing them to statistical averages, so it is the best choice for this scenario. The TCMP, special audit program, document perfection program, and information-matching program all have different purposes and are not specifically designed to identify returns with a high probability of errors.

Question 5

How much additional Social Security tax does Connie pay in 2014 on her $10,000 Christmas bonus? Her total earnings for the year before the bonus) are $42,000.

Accepted Answer

The answer of How much additional Social Security tax does...

Question 6

How long does a taxpayer have to file a petition with the U.S. Tax Court after receiving a Statutory Notice of Deficiency?

Accepted Answer

A taxpayer has 90 days to file a petition with the U.S. Tax Court after receiving a Statutory Notice of Deficiency.

Question 7

Sally is an electrician employed by Bogie Company. Sam is a self-employed electrician. During the current year, Sally's salary is $85,000 and Sam's net self-employment income is $85,000. Which of the following statements about the Social Security and self-employment taxes paid is/are correct? I. Sam's self-employment tax is greater than the Social Security tax paid on Sally's income. II. Sam and Sally pay the same amount of tax.

Accepted Answer

The answer of Sally is an electrician employed by Bogie...

Question 8

An excise tax I. is levied on the value of property. II. is levied on the quantity of the product or service. III. differs from an sale tax, because a sales tax is imposed on the value of property.

Accepted Answer

Statement II is correct because an excise tax is typically based on the quantity of a product or service, such as gallons of gasoline or cigarettes sold. Statement III is correct because a sales tax is imposed on the value of property or goods sold, whereas an excise tax is based on the quantity. Statement I is incorrect because an excise tax is not based on the value of property, but rather on the quantity of the product or service being taxed.

Question 9

Phyllis is an electrician employed by Bogie Company. Phil is a self-employed electrician. During the current year, Phyllis's salary is $75,000 and Phil's net self-employment income is $75,000. Which of the following statements about the Social Security and self-employment taxes paid is/are correct? I. Phil's self-employment tax is greater than the Social Security tax paid on Phyllis's income. II. Phil pays more self-employment tax than Phyllis pays in Social Security tax. III. Phil and Phyllis pay the same amount of tax. IV. Phil's self-employment tax is equal to the Social Security tax paid on Phyllis's income.
A) Only statement I is correct.
B) Only statement I is correct.
C) Only statement IV is correct.
D) Statements I and III are correct.
E) Statements II and IV are correct.

Accepted Answer

The answer of Phyllis is an electrician employed by Bogie...

Question 10

The income tax formula for individual taxpayers is unique in that deductions are broken into classes. I. This dichotomy of deductions results in an intermediate income number called adjusted gross income AGI). II. One class of deductions is called exclusions from income. III. One class of deductions is called deductions for adjusted gross income. IV. Expenses qualifying as deductions for adjusted gross income are not limited by the income of the taxpayer.

Accepted Answer

Statement I is correct because the income tax formula for individual taxpayers breaks deductions into classes, resulting in an intermediate income number called adjusted gross income (AGI).
Statement III is correct because one class of deductions is called deductions for adjusted gross income. 
Statement IV is correct because expenses qualifying as deductions for adjusted gross income are not limited by the income of the taxpayer. 
Statement II is incorrect because one class of deductions is called exclusions from income, not deductions for adjusted gross income, as stated in statement III.

Question 11

Which of the following are types of IRS examinations? I. Information matching program. II. Office examination. III. Field examination. IV. Revenue agent report.

Accepted Answer

The answer of Which of the following are types of...

Question 12

How much additional Social Security tax does Elise pay in 2014 on her $10,000 Christmas bonus? Her total earnings for the year before the bonus) are $130,000.

Accepted Answer

The answer of How much additional Social Security tax does...

Question 13

Christy's 2014 tax return was audited during November 2015. The auditor proposed additional tax due of $1,500. Christy disagreed. What should Christy do next? I. Within 30 days, she must file a protest. II. She must respond with a written protest letter. III. She may respond with an oral protest.

Accepted Answer

The answer of Christy's 2014 tax return was audited during...

Question 14

When property is transferred, gift and estate taxes are based on the

Accepted Answer

Gift and estate taxes are based on the fair market value of the assets on the date of transfer. This means that the value of the property at the time it is transferred is used to calculate the tax owed, rather than its original cost or the cost of replacing it. The fair market value is generally considered to be the price that a willing buyer would pay a willing seller for the property in an arm's length transaction.

Question 15

The term "tax law" as used in your textbook includes I. Treasury regulations. II. College textbooks i.e. "Concepts in Federal Income Taxes"). III. Internal Revenue Code of 1986. IV. Tax related decisions of a U.S. Circuit Court of Appeals.

Accepted Answer

Tax law encompasses Treasury regulations, the Internal Revenue Code of 1986, and tax-related decisions of U.S. Circuit Courts of Appeals. College textbooks, while educational, are not considered part of tax law itself.

Question 16

Rayburn is the sole owner of a dance studio. During the current year, his net self-employment income from the dance studio is $50,000. What is Rayburn 's self-employment tax?

Accepted Answer

Rayburn's self-employment tax is calculated as follows:
- First, he multiplies his net self-employment income by 92.35% to get his self-employment earnings: $50,000 x 92.35% = $46,175
- Then, he multiplies his self-employment earnings by the current self-employment tax rate of 15.3%: $46,175 x 15.3% = $7,056.98
- However, there is a deduction for half of the self-employment tax, so Rayburn can reduce his taxable income by $3,528.49: $7,056.98 / 2 = $3,528.49
- Therefore, Rayburn's self-employment tax is $7,056.98 - $3,528.49 = $3,528.49
- This amount is then added to his federal income tax liability when he files his tax return.

Therefore, the best choice is D.

Question 17

Sally is an electrician employed by Bogie Company. Sam is a self-employed electrician. During the current year, Sally's salary is $85,000 and Sam's net self-employment income is $85,000. Which of the following statements about the Social Security and self-employment taxes paid is/are correct? I. Sam pays more self-employment tax than Sally pays in Social Security tax. II. Sam's self-employment tax is equal to the Social Security tax paid on Sally's income.

Accepted Answer

The answer of Sally is an electrician employed by Bogie...

Question 18

Which of the following types of taxes rely solely on "income" as the tax base for determining the amount of tax liability? I. Sales Tax II. Property Tax III. Gift Tax IV. Social Security Tax V. Excise Tax

Accepted Answer

Only the Social Security tax relies solely on income as the tax base for determining the amount of tax liability. Sales tax relies on transactions, property tax relies on the value of property, gift tax relies on the value of the gift given, and excise tax relies on the specific product or service being taxed.

Question 19

Ordinary income is I. the common type of income that individuals and businesses earn. II. receives no special treatment under tax laws. III. the character of the gain from the sales of shares of stock held more than one year

Accepted Answer

Ordinary income is indeed the most common type of income that individuals and businesses earn, such as wages, salaries, commissions, and interest income from bonds. It does not receive special treatment under tax laws, meaning it is taxed at standard rates. The gain from the sale of shares of stock held for more than one year is typically considered a long-term capital gain, not ordinary income, and is subject to different tax rates.

Question 20

How much additional Social Security tax does Betty pay in 2014 on her $10,000 Christmas bonus? Her total earnings for the year before the bonus) are $100,000.

Accepted Answer

The answer of How much additional Social Security tax does...

Quiz 1: Federal Income Taxation-An Overview

Joy receives a used car worth $13,000 from her uncle as a graduation present. As a result of the gift I. Joy will have $13,000 of taxable income. II. Joy's uncle's gift will subject him to the gift tax.

A property tax I. is levied on the value of property. II. is referred to as ad valorem. III. on personal property is more common than a tax on real property. IV. is based upon assessed value rather than actual transactions.

The calculation of an individual's income tax includes certain deductions for adjusted gross income. The following are examples of this class of deductions: I. Trade or business expenses II. Rental expenses III. Interest on student loans IV. Investment interest

The return selection program designed to select returns with the highest probability of errors is

How much additional Social Security tax does Connie pay in 2014 on her $10,000 Christmas bonus? Her total earnings for the year before the bonus) are $42,000.

How long does a taxpayer have to file a petition with the U.S. Tax Court after receiving a Statutory Notice of Deficiency?

An excise tax I. is levied on the value of property. II. is levied on the quantity of the product or service. III. differs from an sale tax, because a sales tax is imposed on the value of property.

Which of the following are types of IRS examinations? I. Information matching program. II. Office examination. III. Field examination. IV. Revenue agent report.

How much additional Social Security tax does Elise pay in 2014 on her $10,000 Christmas bonus? Her total earnings for the year before the bonus) are $130,000.

Christy's 2014 tax return was audited during November 2015. The auditor proposed additional tax due of $1,500. Christy disagreed. What should Christy do next? I. Within 30 days, she must file a protest. II. She must respond with a written protest letter. III. She may respond with an oral protest.

When property is transferred, gift and estate taxes are based on the

The term "tax law" as used in your textbook includes I. Treasury regulations. II. College textbooks i.e. "Concepts in Federal Income Taxes") . III. Internal Revenue Code of 1986. IV. Tax related decisions of a U.S. Circuit Court of Appeals.

Rayburn is the sole owner of a dance studio. During the current year, his net self-employment income from the dance studio is $50,000. What is Rayburn 's self-employment tax?

Which of the following types of taxes rely solely on "income" as the tax base for determining the amount of tax liability? I. Sales Tax II. Property Tax III. Gift Tax IV. Social Security Tax V. Excise Tax

Ordinary income is I. the common type of income that individuals and businesses earn. II. receives no special treatment under tax laws. III. the character of the gain from the sales of shares of stock held more than one year

How much additional Social Security tax does Betty pay in 2014 on her $10,000 Christmas bonus? Her total earnings for the year before the bonus) are $100,000.