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Exam 1: Introduction to Taxation

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Question 1

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Even if property tax rates are not changed,the amount of ad valorem taxes imposed on realty may not remain the same.

A) True
B) False

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Question 2

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One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within the family unit.

A) True
B) False

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Question 3

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Currently,the tax base for the Social Security component of the FICA is not limited to a dollar amount.

The FICA tax (Medicare component)on wages is progressive since the tax due increases as wages increase.

Currently,the Federal income tax is less progressive than it ever has been in the past.

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

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

A Federal excise tax is no longer imposed on admission to theaters.

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: $\begin{array}{ll}\text { United Methodist Church } & \$ 1,700,000 \\\text { Planet Motors } & 1,600,000\end{array}$ 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?

Taxes not imposed by the Federal government include:

To mitigate the effect of the annual accounting period concept,the tax law permits the carryforward to other years of the excess charitable contributions of a particular year.

Federal excise taxes that are no longer imposed include:

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

Taxes levied by both states and the Federal government include:

Sales made by mail order are not exempt from the application of a general sales (or use)tax.

Juanita owns 60% of the stock in a C corporation that had a profit of $200,000 in 2013.Carlos owns a 60% interest in a partnership that had a profit of $200,000 during the year.The corporation distributed $45,000 to Juanita,and the partnership distributed $45,000 to Carlos.Which of the following statements relating to 2013 is incorrect?

As a matter of administrative convenience,the IRS would prefer to have Congress decrease (rather than increase)the amount of the standard deduction allowed to individual taxpayers.

A use tax is imposed by:

Jake,the sole shareholder of Peach Corporation,a C corporation,has the corporation pay him $100,000.For tax purposes,Jake would prefer to have the payment treated as dividend instead of salary.

Eagle Company,a partnership,had a short-term capital loss of $10,000 during the year.Aaron,who owns 25% of Eagle,will report $2,500 of Eagle's short-term capital loss on his individual tax return.