Question 1

Two months after the burglary of his personal residence,Eric is audited by the IRS.Among the items taken in the burglary was a shoe box containing approximately $50,000 in cash.Eric is the owner and operator of a cash-and-carry liquor store.Eric wonders why he was audited.Can you help explain?

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Question 2

In late June 2016,Art is audited by the state and a large deficiency is assessed.In November of the same year,his Federal income tax return is audited by the IRS.What has probably happened?

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Question 3

In terms of Adam Smith's canons of taxation,how does the Federal income tax fare as far as economy is concerned?

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Question 4

The Federal income tax is based on a pay-as-you-go system and has become a "mass tax." Explain this statement.

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Question 5

Due to the population change,the Goose Creek School District has decided to close one of its high schools.Since it has no further need of the property,the school is listed for sale.The two bids it receives are as follows:
United Methodist Church
$1,700,000
Planet Motors
1,600,000
The United Methodist Church would use the property to establish a sectarian middle school.Planet,a well-known car dealership,would revamp the property and operate it as a branch location.
If you were a member of the School District board,what factors would you consider in evaluating the two bids?

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Question 6

Morgan inherits her father's personal residence including all of the furnishings.She plans to add a swimming pool and sauna to the property and rent it as a furnished house.What are some of the ad valorem property tax problems Morgan can anticipate?

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Question 7

Virtually all state income tax returns contain checkoff boxes for donations to various causes.On what grounds has this procedure been criticized?

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Question 8

Brayden files his Federal income tax return by April 15,but does not pay the tax.Although he expects to pay interest on the large amount of tax he still owes,he feels that the timely filing has avoided any penalties.Is Brayden's assumption correct?

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Question 9

Briana lives in one state and works in the adjoining state.Both states tax the income she earns from her job.Does Briana have any relief from this apparent double taxation of the same income?

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Question 10

Logan dies with an estate worth $20 million.Under his will,$10 million passes to his wife while $10 million goes to his church.What is Logan's Federal estate tax result?

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Question 11

Rick,the sole proprietor of an adult entertainment club,is audited by the IRS.On the third day of the field audit,the regular IRS agent is accompanied by a special agent.Should Rick be concerned by this new development? Explain.

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Question 12

In 1985,Roy leased real estate to Drab Corporation for 20 years.Drab Corporation made significant capital improvements to the property.In 2005,Drab decides not to renew the lease and vacates the property.At that time,the value of the improvements is $800,000.Roy sells the real estate in 2016 for $1,200,000 of which $900,000 is attributable to the improvements.When is Roy taxed on the improvements made by Drab Corporation?

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Question 13

What is the difference between an inheritance tax and an estate tax? Who imposes these taxes?

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Question 14

With regard to state income taxes,explain what is meant by the "jock tax"?

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Question 15

In 2014,Deborah became 65 years old.In 2015 she added a swimming pool,and in 2016 she converted the residence to rental property and moved into an assisted living facility.Since 2013,Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

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Question 16

A lack of compliance in the payment of use taxes can be resolved by several means.In this regard,comment on the following:
a.Registration of automobiles.
b.Reporting of Internet purchases on state income tax returns.

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Question 17

What are the pros and cons of the following state and local tax provisions?
a.An ad valorem property tax holiday made available to a manufacturing plant that is relocating.
b.Hotel occupancy tax and a rental car surcharge.
c.A back-to-school sales tax holiday.

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Question 18

State and local governments are sometimes forced to find ways to generate additional revenue.Comment on the pros and cons of the following procedures:
a.Decouple what would be part of the piggyback format of the state income tax.
b.Tax amnesty provisions.
c.Internet shaming.

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Question 19

What is a severance tax? How productive can it be in terms of generating revenue?

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Question 20

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency.Since Tracy disagrees with the result,her next step is to go to court.Do you agree?

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Quiz 1: An Introduction to Taxation and Understanding the Federal Law