Question 1

The term "tax law" includes

Accepted Answer

The term "tax law" includes all of the above, i.e., the Internal Revenue Code, Treasury Regulations, and judicial decisions. The Internal Revenue Code is the primary source of tax law, Treasury Regulations provide guidance on how to apply the code, and judicial decisions interpret the code and regulations. Therefore, all three sources are crucial in understanding and applying tax law.

Question 2

Peyton has adjusted gross income of $20,000,000 on his 2012 tax return,filed April 15,2013.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?

Accepted Answer

The IRS generally has three years from the date a tax return is filed or due, whichever is later, to audit the return. In this case, Peyton filed his 2012 tax return on April 15, 2013, so the IRS has until April 15, 2016, to audit his return.

Question 3

Which of the following serves as the highest authority for tax research,planning,and compliance activities?

Accepted Answer

The Internal Revenue Code serves as the highest authority for tax research, planning, and compliance activities as it is the primary source of federal tax law in the United States. Income Tax Regulations, Revenue Rulings, and Revenue Procedures are all secondary sources of tax law that provide guidance and clarification on interpreting and applying the Internal Revenue Code.

Question 4

In an S corporation,shareholders

Accepted Answer

In an S corporation, shareholders are taxed on their proportionate share of earnings. This means that they are taxed on their share of the corporation's profits, regardless of whether or not they actually receive a dividend. The profits are passed through to the shareholders' personal income tax returns, and they are responsible for paying taxes on that income.

Question 5

AB Partnership earns $500,000 in the current year.Partners A and B are equal partners who do not receive any distributions during the year.How much income does partner A report from the partnership?

Accepted Answer

Since each partner is an equal partner and did not receive any distributions during the year, each partner is entitled to half of the partnership's income. Therefore, partner A would report $250,000 in income from the partnership.

Question 6

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

Accepted Answer

The Internal Revenue Code is a statutory source of tax law, not an executive (administrative) source. Income Tax Regulations, Revenue Rulings, and Revenue Procedures are all examples of executive (administrative) sources of tax law.

Question 7

What is an important aspect of a limited liability partnership?

Accepted Answer

One important aspect of a limited liability partnership is that while partners generally have limited liability, they may still have unlimited liability for their own acts of negligence or misconduct. However, they will not have unlimited liability in other matters.

Question 8

When new tax legislation is being considered by Congress,

Accepted Answer

When new tax legislation is being considered by Congress, different versions of the House and Senate bills are reconciled by a Joint Conference Committee. This committee is made up of members from both the House and Senate and is responsible for drafting a compromise bill to be voted on by both chambers. After the committee proposes a final version of the bill, it goes back to the House and Senate for a final vote before being sent to the President for approval.

Question 9

A tax bill introduced in the House of Representatives is then

Accepted Answer

Tax bills are typically first referred to the House Ways and Means Committee for hearings and approval before they are sent to the full House for consideration and voting. This committee is responsible for reviewing and making recommendations on tax-related legislation before it is sent to the House floor.

Question 10

Rocky and Charlie form RC Partnership as equal partners.Rocky contributes $100,000 into RC while Charlie contributes real estate with a fair market value of $100,000.During the current year,RC earned net income of $600,000.The partnership distributes $200,000 to each partner.The amount that Rocky should report on his individual tax return is

Accepted Answer

The answer of Rocky and Charlie form RC Partnership as...

Question 11

When returns are processed,they are scored to determine their potential for yielding additional tax revenues.This program is called

Accepted Answer

The Discriminant Function System is used by the IRS to score tax returns and determine their potential for yielding additional tax revenues. This program uses a set of formulas and algorithms to identify returns with a high likelihood of errors or omissions, which are then flagged for further review and possible audit. The Taxpayer Compliance Measurement Program, Standard Audit Program, and Field Audit Program are other programs used by the IRS for compliance and enforcement purposes, but they are not specifically designed to score returns for potential revenue.

Question 12

Which of the following is not an advantage of a limited liability company (LLC)?

Accepted Answer

The answer of Which of the following is not an...

Question 13

The IRS must pay interest on

Accepted Answer

The answer of The IRS must pay interest on
...

Question 14

The Senate equivalent of the House Ways and Means Committee is the Senate

Accepted Answer

The Senate equivalent of the House Ways and Means Committee is the Senate Finance Committee. Option A is incorrect as the Joint Committee on Taxation is not a standing committee; it was created to advise the House Ways and Means Committee and the Senate Finance Committee on tax legislation. Option B is incorrect as it refers to the House committee, not the Senate equivalent. Option D is incorrect as the Joint Conference Committee is a temporary committee that is created to reconcile differences between the House and Senate versions of a bill.

Question 15

Alan files his 2012 tax return on April 1,2013.His return contains no misstatements or omissions of income.The statute of limitations for changes to the return expires

Accepted Answer

The answer of Alan files his 2012 tax return on...

Question 16

Which of the following individuals is most likely to be audited?

Accepted Answer

Marvella's high net loss from her unincorporated business paired with her high salary as a CEO may raise red flags for the IRS and increase the likelihood of an audit. The other options have lower incomes or simpler tax situations that may not warrant an audit.

Question 17

Which of the following steps,related to a tax bill,occurs first?

Accepted Answer

The House Ways and Means Committee is responsible for writing tax legislation in the House of Representatives, so consideration by this committee occurs before any other step.

Question 18

All of the following statements are true except

Accepted Answer

All the other statements are true. The net income of a sole proprietorship is reported on the owner's individual income tax return, the net income of a C corporation is subject to double taxation, and LLCs are generally taxed as partnerships. However, the net income of an S corporation is not subject to double taxation because it is a pass-through entity and its income is only taxed at the individual shareholder level.

Question 19

Latashia reports $100,000 of gross income on her 2012 tax return,filed April 15,2013.She omits $30,000 of income,but the error was not fraudulent.When does the statute of limitations for examining her tax return expire?

Accepted Answer

The answer of Latashia reports $100,000 of gross income on...

Question 20

Kate files her tax return 36 days after the due date.When she files the return,she sends a check for $2,000 which is the balance of the tax owed by her.Kate's penalty for failure to file a return will be

Accepted Answer

According to the IRS, the penalty for failure to file a tax return is 5% per month (or fraction thereof), up to a maximum of 25% of the balance due. Since Kate filed her return 36 days after the due date, she will be subject to a penalty of 5% for one month (which is the first month after the due date), plus an additional 1.5% for the 6 days in the second month (since a fraction of a month counts as a full month for penalty purposes). Therefore, her total penalty would be 6.5% (5% + 1.5%) of the balance due, which is $2,000. This means that her penalty for failure to file a return is $130 (6.5% of $2,000).

Quiz 2: an Introduction to Taxation