Question 1

Revenue neutrality means that any one taxpayer's tax liability remains the same.

Accepted Answer

Revenue neutrality means that the overall tax revenue remains the same, not necessarily that each individual taxpayer's liability remains unchanged.

Question 2

Subchapter C refers to the "Corporate Distributions and Adjustments" section of the Code.

Accepted Answer

Subchapter C of the Code refers to the Corporate Distributions and Adjustments section.

Question 3

Subchapter P refers to the "Partners and Partnerships" section of the Code.

Accepted Answer

Subchapter P of the Internal Revenue Code deals with "Capital Gains and Losses," not "Partners and Partnerships," which is covered under Subchapter K.

Question 4

The lowering of tax rates will lead to lower taxes and will achieve revenue neutrality.

Accepted Answer

The statement is false. The concept of revenue neutrality means that changes in tax rates or policies will not result in a net loss or gain of revenue for the government. However, whether lowering tax rates will achieve revenue neutrality depends on several factors such as the elasticity of demand for goods and services, the size of the tax base, and the level of government spending. In some cases, lower tax rates may stimulate economic growth and increase tax revenues, while in other cases, they may result in a decline in revenue. Therefore, it cannot be assumed that lowering tax rates will always lead to lower taxes and revenue neutrality.

Question 5

Neither the 1939 nor the 1954 Code substantially changed all the tax law existing on the date of its enactment.

Accepted Answer

Both the 1939 and 1954 Codes were largely codifications of existing tax law, rather than significant changes to the law. They organized existing laws and regulations into a more cohesive framework, rather than introducing major new policies or provisions.

Question 6

A major,but not the sole,objective of the tax laws is to raise revenue.

Accepted Answer

While raising revenue is a significant objective of tax laws, it is not the only objective. Tax laws are also designed to promote social and economic objectives, such as encouraging certain behaviors, reducing inequality, and promoting economic growth.

Question 7

Temporary Regulations have the same authoritative value as Finalized Regulations for 3 years.

Accepted Answer

Temporary Regulations have the same authoritative value as Finalized Regulations for 3 years, after which they expire, unless they are finalized or extended. During the 3-year period, taxpayers may rely on the temporary regulations as guidance for tax compliance purposes.

Question 8

The corporate tax rates are structured so as to favor small business.

Accepted Answer

Corporate tax rates often include lower rates or special deductions for small businesses to encourage entrepreneurship and economic growth.

Question 9

Federal tax legislation generally originates in the House Ways and Means Committee.

Accepted Answer

Federal tax legislation typically starts in the House Ways and Means Committee, which has jurisdiction over taxes and revenue-raising measures. However, the Senate Finance Committee also plays a significant role in shaping tax policy and legislation.

Question 10

The American Opportunity scholarship credit can be justified by economic considerations.

Accepted Answer

The answer of The American Opportunity scholarship credit can be...

Question 11

The deduction for charitable contributions can be explained by social considerations.

Accepted Answer

The deduction for charitable contributions encourages individuals to donate to organizations that benefit society, such as charities and educational institutions. This tax deduction is intended to incentivize charitable giving and support the work of nonprofit organizations that provide important services and programs to communities. Therefore, it can be explained by social considerations.

Question 12

Shorter asset lives and accelerated methods increase the tax incentive for capital outlays.

Accepted Answer

When assets have shorter lives and accelerated depreciation methods are used, the tax incentive for capital outlays is increased as more of the cost of the asset is deductible in the earlier years of its life.

Question 13

The adoption tax credit can be explained by social considerations.

Accepted Answer

The adoption tax credit is a social policy designed to encourage families to adopt children who are in need of permanent homes. It offers a tax credit to offset some of the expenses incurred during the adoption process, such as fees for home studies, legal expenses, and travel expenses. The tax credit is seen as a way to support families who are willing to provide loving homes for children who might otherwise be stuck in foster care or institutional settings, and to promote the well-being and stability of these children. Thus, the adoption tax credit is based on social considerations.

Question 14

Allowing a taxpayer to claim either a credit or a deduction for foreign taxes paid can be explained by equity considerations.

Accepted Answer

Allowing a taxpayer to claim either a credit or a deduction for foreign taxes paid is considered equitable because it prevents double taxation on the same income by both the United States and foreign countries. This ensures that taxpayers are not penalized for earning income abroad and promotes fairness in the tax system.

Question 15

There are two forms of fiscal policy: discretionary and automatic.

Accepted Answer

This is true, there are two forms of fiscal policy: discretionary and automatic. Discretionary fiscal policy refers to deliberate changes in government spending or taxation to achieve economic goals, while automatic fiscal policy refers to changes in government spending, taxation, or transfer payments that happen automatically without specific action from government officials.

Question 16

Proposed Regulations have the force and effect of law.

Accepted Answer

Proposed regulations are a preliminary step in the regulatory process and do not have the force and effect of law until they have been finalized and adopted through the proper legal procedures.

Question 17

The Internal Revenue Code appears in Title 26 of the U.S.Code.

Accepted Answer

The Internal Revenue Code is indeed located in Title 26 of the U.S.Code.

Question 18

Some Regulations are arranged in different sequence than the Code.

Accepted Answer

The answer of Some Regulations are arranged in different sequence...

Question 19

The refundable earned income tax credit is explained by economic considerations (i.e. ,the need to create additional jobs).

Accepted Answer

The refundable earned income tax credit is primarily designed to provide financial assistance to low- and moderate-income working individuals and families, rather than directly creating additional jobs.

Question 20

The desire to foster technological progress helps explain the favorable tax treatment accorded research and development expenditures.

Accepted Answer

The statement is true. Governments often provide tax incentives to encourage companies to invest in research and development, as the resulting technological progress can have many economic and social benefits.

Quiz 1: Understanding and Working With the Federal Tax Law