Question 1

What might cause an individual to owe income taxes in more than one state?

Accepted Answer

The answer of What might cause an individual to owe...

Question 2

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.

Accepted Answer

The answer of State and local governments are sometimes forced...

Question 3

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.

Accepted Answer

The answer of Rick, the sole proprietor of an adult...

Question 4

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

Accepted Answer

The answer of What is the difference between an inheritance...

Question 5

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?

Accepted Answer

The answer of Brayden files his Federal income tax return...

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 issues Morgan can anticipate?

Accepted Answer

The answer of Morgan inherits her father's personal residence including...

Question 7

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?

Accepted Answer

The answer of Briana lives in one state and works...

Question 8

In late June 2018, 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?

Accepted Answer

The answer of In late June 2018, Art is audited...

Question 9

Under what conditions is it permissible, from an ethical standpoint, for a CPA firm to outsource tax return preparation to a third party?

Accepted Answer

The answer of Under what conditions is it permissible, from...

Question 10

Melinda has been referred to you by one of your clients. In the past, she has prepared her own income tax returns, but she has become overwhelmed by the increased complexity of the tax law. Consequently, Melinda wants you to prepare her return for calendar year 2018. In reviewing her 2017 return, you note that she has claimed as a deduction the entire cost of a business building that should have been capitalized and depreciated. What course of action should you follow?

Accepted Answer

The answer of Melinda has been referred to you by...

Question 11

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?

Accepted Answer

The answer of Two months after the burglary of his...

Question 12

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

Accepted Answer

The answer of What is a severance tax? How productive...

Question 13

In 2016, Deborah became 65 years old. In 2017 she added a swimming pool, and in 2018 she converted the residence to rental property and moved into an assisted living facility. Since 2015, Deborah's ad valorem property taxes have decreased once and increased twice. Explain.

Accepted Answer

The answer of In 2016, Deborah became 65 years old....

Question 14

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.

Accepted Answer

The answer of What are the pros and cons of...

Question 15

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

Accepted Answer

The answer of Virtually all state income tax returns contain...

Question 16

Your client, Connie, won $12,000 in a football office pool. She sees no reason to include it in her income for several reasons. First, the amount won will not be reported to the IRS. Second, as an average income employee, she is unlikely to be audited by the IRS. Third, she feels that she has probably lost this much in other past office pools. How do you respond?

Accepted Answer

The answer of Your client, Connie, won $12,000 in a...

Question 17

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?

Accepted Answer

The answer of Tracy has just been audited and the...

Question 18

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?

Accepted Answer

The answer of Logan dies with an estate worth $20...

Question 19

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

Accepted Answer

The answer of A lack of compliance in the payment...

Question 20

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:
  
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?

Accepted Answer

The answer of Due to the population change, the Goose...

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