Individual Income Tax Test 1

Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case: A. Tax Court only. B. U.S. Court of Federal Claims only. C. U.S. District Court only. D. Tax Court or the U.S. District Court. E. Tax Court or the U.S. Court of Federal Claims.

B the us court of federal claims will appeal to the us circuit court of appeals for the federal circuit.

Basu received a letter from the IRS that gave him the choice of (1) paying a proposed deficiency or (2) filing a petition with the U.S. Tax Court. Basu received the: A. 30-day letter. B. 90-day letter. C. Appeals letter. D. Tax adjustment letter. E. None of the choices are correct.

B ticket to court after 30 day court

Guaranteed appeal after trial court

"matter of right"

A taxpayer can avoid a substantial understatement of tax penalty: A. if the position is frivolous and disclosed on the tax return. B. if the position has a realistic possibility of being sustained by the IRS or courts. C. if there is substantial authority to support the position. D. if the position has a reasonable basis and is not disclosed on the tax return. E. None of the choices are correct.

C

If the President vetoes tax legislation, Congress: A. cannot override the President's veto. B. can override the President's veto with a 50 percent positive vote in the House and Senate. C. can override the President's veto with a 2/3rd positive vote in the House and Senate. D. can override the President's veto with a 75 percent positive vote in the House and Senate. E. None of the choices are correct.

C

Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris? A. Determination letter. B. Private letter ruling. C. Tax treaty. D. Regulation. E. Revenue procedure.

C

Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake? A. DIF System. B. Mathematical correction. C. Document perfection. D. Information matching. E. None of the choices are correct.

C

Margaret was issued a $150 speeding ticket. This is: A. a tax because payment is required by law. B. a tax because the payment is not related to any specific benefit received from the government agency collecting the ticket. C. not a tax because it is considered a fine intended to punish illegal behavior. D. a tax because it is imposed by a government agency. E. not a tax because Margaret could have avoided payment if she did not speed.

C

The regulation with the lowest authoritative weight is the: A. Procedural regulation. B. Interpretative regulation. C. Proposed regulation. D. Legislative regulation. E. None of the choices are correct.

C

Which of the following courts is the only court that provides for a jury trial? A. Tax Court. B. U.S. Court of Federal Claims. C. U.S. District Court. D. U.S. Circuit Court of Appeals. E. None of the choices are correct.

C

Which of the following is not a factor that determines whether an individual taxpayer is required to file a tax return? A. Filing status. B. Taxpayer's gross income. C. Taxpayer's employment. D. Taxpayer's age. E. None of the choices are correct.

C

Which of the following taxes represents the largest portion of U.S. Federal Tax revenues? A. Employment taxes B. Corporate income taxes C. Individual income taxes D. Estate and gift taxes E. None of the choices are correct

C

Which of the following would not be a failure of the horizontal equity concept? A. Two taxpayers with identical income pay different amounts of tax because one taxpayer's income includes tax exempt interest. B. Two taxpayers pay different amounts of property tax amounts on similar plots of land (i.e., same value) because one plot of land is used to raise crops. C. Two taxpayers pay different amounts of estate tax because one taxpayer's estate is worth significantly more. D. All of the choices are correct. E. None of the choices are correct.

C

Tanya's employer offers a cafeteria plan that allows employees to choose among a number of benefits. Each employee is allowed $6,000 in benefits. For 2020, Tanya selected $3,360 ($280 per month) of parking, $1,840 in 401(k) contributions, and $800 of cash. How much must Tanya include in taxable income? A. $0. B. $120. C. $1,040. D. $2,760.

C $1,040 is includable: $120 of parking benefits [($280 - $270) × 12)] and $800 of cash.

Stevie recently received 1,000 shares of restricted stock from her employer, Nicks Corporation, when the share price was $8 per share. Stevie's restricted shares vested three years later when the market price was $11. Stevie held the shares for a little more than a year and sold them when the market price was $16. Assuming Stevie did not make a section 83(b) election, what is the amount of Stevie's ordinary income with respect to the restricted stock? A. $5,000. B. $8,000. C. $11,000. D. $16,000

C $11,000 (1,000 shares × $11 market price on vesting date).

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, how much federal tax will he owe? (Use tax rate schedule) A. $13,200.00 B. $10,239.50 C. $9,139.50 D. $4,453.50 E. None of the choices are correct

C $9,139.50 = 4,453.50 + 0.22(60,000 − 38,700)

If Susie earns $750,000 in taxable income, how much tax will she pay as a single taxpayer for year 2018? (Use tax rate schedule) A. $216,879.00 B. $277,500.00 C. $243,189.50 D. $247,189.50 E. None of the choices are correct.

C 150,689.50 + 0.37(750,000 − 500,000) = 243,189.50

Which of the following statements regarding employer provided educational benefits is true? A. All undergraduate tuition expenses can be excluded. B. Only educational benefits from public universities can be excluded. C. Up to $5,250 in tuition benefits can be excluded. D. All graduate tuition expenses are included.

C an annual benefit of $5,250 can be excluded.

Which of the following forms is filled out by an employee, who is a citizen, at the beginning of an employment relationship? A. Form Q-2. B. Form W-2. C. Form W-4. D. Form 1099.

C employees fill out a W-4 to indicate their tax status, number of dependents and other items that affect income tax withholding.

Which of the following is an example of a nontaxable fringe benefit? A. Personal use of corporate jet. B. $1,000,000 group term life insurance policy. C. $225 of employer provided parking. D. Automobile allowance.

C employer provided parking is nontaxable up to $270 per month.

Edie would like to better understand a new code section enacted four weeks ago. Which of the following authorities will help Edie understand the newly enacted code section? A. IRS regulations. B. U.S. Tax Court cases. C. Committee reports. D. IRS revenue rulings. E. None of the choices are correct.

C of the authorities listed, only committee reports will be available to aide in understanding a new code section.

Which of the following items is not included on an employee's Form W-2? A. Taxable wages, tips, and compensation. B. Social Security withholding. C. Value of stock options granted during the year. D. Federal and state income tax withholding

C stock options are reported as taxable compensation typically upon vesting.

Sin taxes are: A. taxes assessed by religious organizations. B. taxes assessed on certain illegal acts. C. taxes assessed to discourage less desirable behavior. D. taxes assessed to fund a specific purpose. E. None of the choices are correct.

C surcharges on alcohol and tobacco products are examples of "sin taxes".

Henry filed his 2019 tax return on May 15, 2020. The statute of limitations for IRS assessment on Henry's 2019 tax return should end: A. May 15, 2022. B. April 15, 2022. C. May 15, 2023. D. April 15, 2023. E. None of the choices are correct.

C the SOL ends three years from the later of (1) the date the tax return was filed or (2) the tax return's original due date.

How is the bargain element for a stock option calculated? A. The difference between the strike price and the market price on the date of grant. B. The difference between the market price on the exercise date and the market price on the date of grant. C. The difference between the market price on the exercise date and the strike price. D. The difference between the market price on the sale date and the strike price.

C the bargain element is simply the difference between the market price on the exercise date and the strike price.

Statute of Limitations

3 years from the LATER of date return was filed OR date was due ORIGINALLY filing early expedites sol

Obligation to file corrected error

3 years goes both ways

Employment and Unemployment Tax

34.1% of tax revenue keeps you out of poverty as an old person

Estate and Trusts Tax Rate

37%

Highest tax rate

37%

How many justices to hear a case?

4

Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions, which audit program likely identified Tyrone's tax return for audit? A. DIF System. B. Deduction Detective. C. Document perfection. D. Information matching. E. None of the choices are correct.

A

Which of the following has the highest authoritative weight? A. Legislative regulation. B. Private letter ruling. C. Revenue ruling. D. Action on decision. E. Revenue procedure.

A

Which of the following represents the largest percentage of state tax revenues? A. Sales tax B. Individual income tax C. Corporate income taxes D. Property tax E. None of the choices are correct

A

Which types of penalties are only imposed after normal due process including a trial? A. Criminal penalties. B. Civil penalties. C. Criminal and civil penalties. D. Failure-to-file penalty. E. None of the choices are correct.

A

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. How much money would Leonardo and Theresa save if they file jointly instead of separately for year 2018? (Use tax rate schedule) A. Nothing B. $103.50 C. $309.75 D. $5,932.50 E. None of the choices are correct.

A $20,479.00 both separate and joint = $0.

Stevie recently received 1,000 shares of restricted stock from her employer, Nicks Corporation, when the share price was $8 per share. Stevie's restricted shares vested three years later when the market price was $11. Stevie held the shares for a little more than a year and sold them when the market price was $16. Assuming Stevie did not make a section 83(b) election, what is the amount of Tom's gain on the sale? A. $5,000. B. $8,000. C. $11,000. D. $16,000

A $5,000 gain is $16,000 (1,000 shares × $16 market value on sale date) of sales proceeds less $11,000 (1,000 shares × $11 market price on vesting date) basis.

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, what is his average tax rate (rounded)? (Use tax rate schedule) A. 15.23% B. 12.00% C. 7.42% D. 22.00% E. None of the choices are correct

A 15.23% = $9,139.50/60,000

If Susie earns $750,000 in taxable income and files as head of household for year 2018, what is Susie's average tax rate (rounded)? (Use tax rate schedule)". A. 32.24% B. 33.85% C. 35.00% D. 37.00% E. None of the choices are correct.

A [$149,298 + 0.37($750,000 − $500,000)]/750,000 = 32.24%

Greg earned $25,500 this year and had $1,500 of federal income taxes withheld from his salary. Assuming that Greg is single, 25 years old, and will have a total tax liability of $1,430 (and thus will receive a $70 refund), he: A. is required to file a tax return. B. is not required to file a tax return but should file a return anyway. C. is required to file a tax return but should not file because he owes no tax. D. is not required to file a tax return and should not file a return. E. None of the choices are correct.

A above threshold

The ultimate economic burden of a tax is best captured by: A. the marginal tax rate. B. the effective tax rate. C. the average tax rate. D. the proportional tax rate. E. None of the choices are correct.

B

Which of the following is false? A. A proportional tax rate structure imposes a constant tax rate while a progressive tax rate structure imposes an increasing marginal rate related to the tax base. B. The average tax rate changes under a proportional tax rate structure, but it is static for a progressive tax rate system. C. An example of a proportional tax is the tax on gasoline. D. An example of a progressive tax is the federal tax on gifts. E. None of the choices are correct.

B

Which of the following is not a common method that the IRS uses to select returns for audit? A. DIF system. B. Tax Select system. C. Information matching. D. Document perfection. E. None of the choices are correct.

B

Which of the following is not one of the basic tax rate structures? A. Proportional B. Equitable C. Regressive D. Progressive E. All of these are different kinds of the basic tax rate structures

B

Which of the following statements is true? A. Municipal bond interest is subject to explicit federal tax. B. Municipal bond interest is subject to implicit tax. C. Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk. D. All of these statements are true.

B

Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $12 per share) from his employer. At the time he started working, the stock price was $11 per share. Now that the share price is $25 per share, he exercises all of the options. Two years later Bad Brad sells the stock for $27 per share. What is Bad Brad's basis in his stock for purposes of calculating the gain or loss at the time of the sale? A. $7,200. B. $7,800. C. $15,000. D. $16,200.

C the basis is the $7,200 (600 shares × $12 strike price) cash paid and the $7,800 (600 shares × $13 bargain element) income recognized on the exercise—which is equal to the market price on the exercise date.

Which of the following is not an example of a nontaxable fringe benefit? A. Monthly employer provided transit benefit of $100. B. Group-term life insurance policy providing $100,000 of coverage. C. Employer provided parking of $100 per month. D. Qualified employee discounts.

B only $50,000 of group-term life insurance qualifies as a nontaxable fringe benefit.

When a publicly traded CEO's salary exceeds $1,000,000, the employee ________ taxed on the entire amount, and the employer ________ allowed a deduction on the entire amount. A. is; is B. is; is not C. is not; is D. is not; is not

B section 162(m) limits the deduction for compensation paid by a publicly traded company to a covered employee to $1,000,000 per year.

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, what is his current marginal tax rate? (Use tax rate schedule) A. 12.00% B. 22.00% C. 24.00% D. 32.00% E. None of the choices are correct

B see 2018 IRS rate schedule for single taxpayers.

Which of the following is not a requirement of a "qualified employee discount"? A. The discount relates to goods or services of the employer. B. The discount on services doesn't exceed 20 percent of the price offered to customers C. The discount can be elected up to five times annually. D. The employee discount on goods is not greater than employer's average gross profit.

C there is no limitation on the number of times the employees can use the discount.

Who can practice before the IRS

CPA attorney enrolled agents

Rowanda could not settle her tax dispute with the IRS at the appeals conference. If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency, Rowanda should litigate in the: A. U.S. District Court. B. U.S. Circuit Court of Appeals. C. U.S. Court of Federal Claims. D. Tax Court. E. None of the choices are correct.

D

The concept of tax sufficiency: A. suggests the need for tax forecasting. B. suggests that a government should estimate how taxpayers will respond to changes in the current tax structure. C. suggests that a government should consider the income and substitution effects when changing tax rates. D. All of the choices are correct. E. None of the choices are correct.

D

The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this? A. A sin tax B. An excise tax C. It is not a tax; it is a fine D. A sin tax and an excise tax are correct E. None of the choices are correct

D

Which judicial doctrine means that a court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction? A. Judicial hierarchy. B. The Goldman rule. C. Judicial consistency. D. Stare decisis. E. None of the choices are correct.

D

Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue? A. Only issue treasury bonds. B. Only cut funding to various federal projects. C. Only increase federal spending. D. Issue treasury bonds and cut funding to various federal projects but not increase federal spending. E. None of the choices are correct.

D

Which of the following is considered a tax? A. Tolls B. Parking meter fees C. Annual licensing fees D. A local surcharge paid on retail sales to fund public schools E. Entrance fees paid at national parks

D

Which of the following principles encourages the vertical equity concept? A. Pay as you go. B. Economy. C. Income effects. D. Ability to pay principle. E. None of the choices are correct.

D

Which of the following represents the largest percentage of local (county) tax revenues? A. Sales tax B. Individual income tax C. Corporate income taxes D. Property tax E. None of the choices are correct

D

Which of the following statements concerning cafeteria plans is true? A. Allows employees to choose from a menu of fringe benefits or to choose cash. B. Most of the menu choices are nontaxable fringe benefits. C. Any receipt of cash option that is elected is treated at taxable compensation. D. All of the statements are true.

D

Which of the following statements is true regarding the $1,000,000 limit on covered employees for publicly traded companies starting in 2018? A. The limitation applies to all employees. B. The limitation applies to all officers. C. The limitation applies only to the CEO and three other highest compensated officers. D. The limitation applies only to the CEO, CFO, and three other highest compensated officers and all covered employees from previous years.

D the limitation applies to the CEO, CFO, and three other highest compensated officers. once you're covered, you're always covered EX: former executive getting paid in the current year

Lavonda discovered that the 5th Circuit (where Lavonda resides) has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case: A. Tax Court only. B. U.S. Court of Federal Claims only. C. U.S. District Court only. D. Tax Court or the U.S. District Court. E. Tax Court or the U.S. Court of Federal Claims.

D the tax court and the us district court will appeal to the 5th circuit.

Systems of IRS to flag returns

DIF system documentation perfection information matching program

Which of the following is false regarding a section 83(b) election? A. The election freezes the value of the employee's compensation as of the grant date. B. The election is an important tax planning tool if the stock is expected to increase in value. C. The election must be made within 30 days of the grant date. D. If an employee leaves before the vesting date, any loss is limited to $3,000.

D employees are not allowed to deduct a loss if restricted stock subject to a section 83(b) election is forfeited.

Which of the following regarding the Form W-4 is not correct? A. Determines an employee's income tax withholding. B. Employees can claim more allowances than personal exemptions that will be claimed. C. Employees can specify additional amounts to be withheld each month D. The form can only be adjusted at the beginning of year or start of employment.

D employees may adjust the Form W-4 throughout the year.

Generally, if April 15 falls on a Saturday, individual tax returns will be due on: A. April 14. B. April 15. C. April 16. D. April 17. E. None of the choices are correct.

D in massachusetts you get an extra day for patriots day

Which of the following is a fringe benefit that employers can discriminate among employees? A. Health and accident insurance. B. Qualified employee discount. C. Employee educational assistance. D. None of the above.

D see exhibit 12-12.

Bill filed his 2019 tax return on March 15, 2020. The statute of limitations for IRS assessment on Bill's 2019 tax return should end: A. March 15, 2022. B. April 15, 2022. C. March 15, 2023. D. April 15, 2023. E. None of the choices are correct.

D the SOL ends three years from the later of (1) the date the tax return was filed or (2) the tax return's original due date.

Francis works for a local fly fishing shop. The shop allows employees to purchase two fly rods per year at a discount. This year, Francis purchased one rod. The rod normally retails for $300, was purchased for $225, was sold to Francis for $250, and the employer's average gross profit percentage is 30 percent. What amount of the discount must be included in Francis' income? A. $0. B. $25. C. $40. D. Some other amount.

A because the discount was less than the employer's average gross profit percentage, here is no income inclusion.

Which of the following audits is the most common and typically less comprehensive? A. Correspondence. B. Random. C. Office. D. Field. E. None of the choices are correct.

A by mail

Which of the following refers to the date stock options are awarded to an employee? A. Grant date. B. Exercise date. C. Lapse date. D. Vesting date.

A the grant date is the date on which an employee receives the stock options.

Which of the following benefits cannot be excluded as a no additional cost service fringe benefit? A. Free tax return preparation from a client. B. Complementary dry cleaning for employees at a laundry company. C. A car wash at an automobile dealership. D. Free local phone service for phone company employees.

A the service must be provided at no additional cost by the employer.

Dan received a letter from the IRS that gave him the choice of (1) requesting a conference with an Appeals Officer or (2) agreeing to a proposed tax adjustment. Dan received the: A. 30-day letter. B. 90-day letter. C. Appeals letter. D. Tax adjustment letter. E. None of the choices are correct.

A ticket to appeal

For which of the following tax violations may a civil penalty be imposed on taxpayers? A. Failure to file a tax return. B. Failure to pay tax owed. C. Fraud. D. Failure to make estimated tax payments. E. All of the choices are correct.

E

Which of the following is a correct statement? A taxpayer filing a fraudulent tax return: A. is potentially subject to criminal penalties. B. is potentially subject to civil penalties. C. is potentially subject to fines and a prison sentence. D. will have an unlimited statute of limitations for the fraudulent tax return. E. All of the choices are correct.

E

Which of the following is a source of a tax practitioner's professional responsibilities? A. AICPA Code of Professional Conduct. B. Statements on Standards for Tax Services. C. Circular 230. D. State Board of Accountancy statutes. E. All of the choices are correct.

E

Allen filed his 2019 tax return on May 15, 2020 and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2019 tax return should end: A. May 15, 2022. B. April 15, 2022. C. May 15, 2023. D. April 15, 2023. E. None of the choices are correct.

E because Allen underreported his gross income by > 25%, the SOL ends six years from the later of (1) the date the tax return was filed or (2) the tax return's original due date.

Andy filed a fraudulent 2019 tax return on May 1, 2020. The statute of limitations for IRS assessment on Andy's 2019 tax return should end: A. May 1, 2023. B. April 15, 2023. C. May 1, 2026. D. April 15, 2026. E. None of the choices are correct.

E there is no statute of limitations for fraudulent tax returns

Martin has never filed a 2019 tax return despite earning approximately $30,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2019 tax return? A. 2023. B. 2024. C. 2025. D. 2026. None of the choices are correct

E there is no statute of limitations if a taxpayer fails to file a tax return.

Taxes influence which of the following decisions? A. Business decisions B. Personal decisions C. Political decisions D. Investment decisions E. All of the choices are correct.

E.

Ways and Means Committee

a permanent committee of the United States House of Representatives that makes recommendations to the House on all bills that would raise revenue

Use Tax

a tax imposed on the retail price of goods owned, possessed, or consumed within a state that were not purchased within the state.

When IRS loses in trial or appellate courtrs

acquiescence non-acquiescence

Revenue Rulings

address the application of the code and regulations to a specific factual situation. while revenue rulings have less authoritative weight, they provide a much more detailed interpretation of the Code as it applies to a specific transaction and fact pattern. revenue rulings are binding on the IRS until revoked, superseded or modified.

Form 870

adjustment agreement to close audit

Excise Tax

aka sin tax EX: alcohol, cigarettes, gas, diesel, phone, hotels, rental cars

US Court of Federal Claims

all cases life term 1 court in DC pay tax (pay to play) no small claims justice department no jury

US District Court

all cases life term judges no travel, 94 state based judges pay tax (pay to play) no small claims justice department jury trial

Documentation Perfection

all returns are checked for math/tax errors

Cafeteria Plans

an arrangement that allows employees to make their own choices about benefit options

Office Exam

at local IRS offices broader scope more complex EX: small businesses or high income individuals

Economic Income

average rate of taxation on each dollar of total income

Information Matching Program

compares the taxpayer's tax return to information submitted to the IRS from other taxpayers EX: w-2, 1099-int, 1099-div

Nontaxable Fringe Benefits

congress uses tax code to regulate society employers CANT discriminate

Joint Conference Committee

consists of members from the w&m committee and the sf committee

3 statutory tax authorities

constitution internal revenue code of 1986 tax treaty

Types of Audits

correspondence office exam field exam

Stare Decisis

court will rule consistently with previous rulings or rulings of higher courts with appellate jurisdiction

Group-term life insurance

covers up to the first $50,000 employer may discriminate

Spending

democratic route to increase economy good for middle class

Gross Income

determines if you have to file

Bargain Element

difference between the fair market value of stock and the exercise price on the exercise date

Qualified Employee Discounts

discounts offered employees on merchandise or services that the employer ordinarily sells or provides to customers. discounts must be generally available to all employees. in the case of property, the discount cannot exceed the employer's gross profit (the sales price cannot be less than the employer's cost). in the case of services, the discounts cannot exceed 20 percent of the normal sales price.

Being selected for an IRS audit

dont panic less than 1% of returns are audited

Ordinary Income

earnings other than capital gain EX: salary, bonus, wages

Earnings Per Share

earnings/shares outstanding

Qualified Moving Expense Reimbursement

employees are taxed on payments they receive from employers for house hunting trips, temporary housing allowances and reimbursements for expenses related to the sale of their prior residence. EX: cost of moving household items and travel (including lodging) for the employee and dependents as long as the employee's move meets certain distance and length of employment tests

Flexible Spending Arrangements

employees use pre-tax dollars to set up these accounts and draw down on them to pay qualified medical expenses during the year. unused amounts are forfeited at the end of the year. USE IT OR LOSE IT

De Minimis Fringe Benefits

employer may discriminate occasional or incidental fringe benefits EX: occasional personal use of a copy machine, noncash traditional holiday gifts (Thanksgiving turkey or Christmas ham), and occasional tickets to sporting or theatrical events.

Taxable Fringe Benefits

employers CAN discriminate gym membership season tickets employee deduction is the COST of the benefit, not the value treated like cash

Health and Accident Insurance and Benefits

employers may NOT discriminate employee excludes benefit from gross benefit

No-Additional Cost Services

employers provide to employees in the ordinary course of business that generate no substantial costs to the employer on a SPACE AVAILABLE basis

BSO

estimate value of stock and charge to income expense

Working Condition Fringe Benefits

exclude from income any benefit provided by an employer that would be deductible as an ordinary and necessary expense by the employee if the employee rather than the employer paid the expense employer may discriminate EX: CPA exam fees

Dependent Care Benefits

exclude up $5,000 for care of children under 13

Employee Educational Assistance

exclude up to $5,250

Revenue Procedures

explain in great detail IRS practice and procedures in administering tax law

Procedural Regulations

explain treasury department procedures as they relate to administering the code.

Convenience

facilitate collection without hardship

Tax policy rarely plays an important part in presidential campaigns.

false

If a taxpayer is due a refund, she does not have to file a tax return.

false a taxpayer must file a tax return in order to claim a tax refund.

If a taxpayer loses a case at the Circuit Court level, he is granted an automatic appeal hearing with the Supreme Court.

false appeals to the us supreme court are not granted automatically, only to the circuit courts

If an individual taxpayer is unable to file a tax return by its original due date, the taxpayer can request an automatic 9-month extension to file the return.

false automatic 6-month extension to file the return.

Excise taxes are typically levied on the value of a good purchased.

false excise taxes are levied on the quantity of products purchased.

For 2020, up to $300 of monthly transportation fringe benefits can be excluded from income.

false for 2020, up to $270 of monthly transportation fringe benefits can be excluded from income.

Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.

false only a few people

Secondary authorities are official sources of the tax law with a lesser "weight" than primary authorities.

false primary authorities are official sources of the tax law.

Common examples of sin taxes include the taxes imposed on airline tickets and gasoline.

false surcharges on airline taxes and gasoline are examples of excise taxes. Surcharges on alcohol and tobacco products are examples of "sin taxes".

Proposed and Temporary Regulations have the same authoritative weight.

false temporary regulations have more authoritative weight than proposed regulations.

The 9th Amendment to the U.S. Constitution removed all doubt that a federal income tax was allowed under the U.S. Constitution.

false the 16th Amendment was ratified in February 1913.

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.

false the limit is $5,000

A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning.

false the marginal tax rate is particularly useful in tax planning because it represents the rate of taxation or savings that would apply to additional taxable income or additional tax deductions.

A sales tax is a common example of a progressive tax rate structure.

false the sales tax is a common example of a proportional (flat) tax rate system. income tax is an example of a progressive tax structure

In researching a tax issue, Eric finds that the U.S. Circuit Court of Appeals for the Federal Circuit previously has ruled in favor of his tax position, whereas the 11th Circuit (Eric's circuit) previously has ruled against his tax position. If Eric is contemplating litigating his tax position with the IRS, he should prefer to have his case first tried by the U.S. Tax Court.

false us court of federal claims

On Form W-4, an employee can only claim one allowance for each personal or dependency exemption that will be claimed on the employee's income tax return.

false withholding mechanism

Interest rate for late payments

federal rate + 3%

W-4

federal tax form each state has their own version (MD507) change once a quarter basically a withholding form monitor/adjust

Three Forms of Regulation

final temporary proposed

January 1, 2006

firms must measure the economic value of options on the grant date and the amortize this cost on a straight-line basis over the vesting period of the options. to determine economic value, firms typically use either the Black-Scholes option pricing model or the binomial option pricing model.

Salary

fixed amount

Dynamic Forecasting

forecasting which tries to predict possible responses by taxpayers to new tax laws

Self Employed

form 1099 for compensation schedule C on form 1040

6 month extension

granted automatically extension to FILE, not an extension to PAY

Thomas

hw bush conservative

Supreme Court

if all else fails 9 justices - 1 chief, 8 associate nominated by the president confirmed by the senate serve a life term

Section 83(b) Election

if the employee makes the Section 83(b) election, the value of the restricted stock is taxed on the grant date rather than the date on which the stock vests.

IRC Section 6694

imposes a penalty on a tax practitioner for any tax position that is not supported by substantial authority

ISO

incentive stock options employees love employers hate if they hold the shares for at least two years after the grant date and on year after the exercise date, they will not be taxed until they sell the stock employer does not get a tax deduction

Effective Tax Rate

includes taxable and nontaxable income represents economic income provides better depiction of taxpayer's tax burden =total tax/total income ETR <= ATR (except when the taxpayer has fines, penalties, or tax-exempt interest)

Implicit Taxes

indirect taxes (not paid directly to the government) that result from a tax advantage the government grants to certain transactions to satisfy social, economic, or other objectives

Secondary Authorities

interpretations of primary

Three Purposes of Regulation

interpretative procedural legislative

Regular Decisions

involve new or unusual points of law

Memorandum Decisions

involve questions of fact or that application of existing law

Determination Letters

issued by local IRS directors, are generally not controversial

Circular 230

issued by the IRS and provides regulations governing tax practice and procedure and applies to all persons practicing before the IRS

Internal Revenue Code of 1986

last substantial update referred to by section

Vesting

legal entitlement to buy stock at a certain price

Letting Rulings

less authoritative but more specific than revenue rulings and regulations. letter rulings generally may not be used as precedent by taxpayers. may be cited as authority to avoid the substantial understatement penalty under IRC Section 6662 imposed on taxpayers and the related tax practitioner penalty under Sec. 6694.

Married

less tax withheld

Section 162(m)

limits CEO, CFO, and three other highest compensated officers compensation to $1million

Appeal process

look at transcripts to find errors by the judge NOT A REDO

Final Regulations

regulations that have been issued in final form, and thus, until revoked, they represent the treasury's interpretation of the code.

Private Letter Rulings

represent the IRS's application of the Code and other tax authorities to a specific transaction and taxpayer. issued in response to a taxpayer request and are common for proposed transactions with potentially large tax implications.

Interpretative Regulations

represent the treasury's interpretation of the code

Tax Relief

republican route to increase economy good for wealthy

Hot trend in employee compensation

restricted stock

Technical Advice Memorandum

ruling issued by the IRS national office, requested by an IRS agent, and generally for a completed transaction

Vermont is allowed to...

run a deficit

Main source of state revenue

sales tax

Tax Filings

single married jointly married separate head of household surviving spouse with child

Flat Tax

single tax everyone pays 15% MTR = ATR

Sufficiency

size of tax revenue

Retirement

social security starts at 62 incentive to wait to collect

Legislative Regulations

some code sections give the secretary of the treasury or his delegate the authority to prescribe regulations to carry out the details of administration or to otherwise complete the operating rules. regulations issued pursuant to this type of authority truly possess the force and effect of law. in effect, congress is almost delegating its legislative powers to the treasury department.

Process of Enacting Tax Laws

starts at the house of representatives modified in the senate ways and means committee makes a compromise back to senate - senate finance committee if approved, joint conference committee president approval if president vetoes, back to house congress can override veto

Types of Sufficiency Systems

static forecasting dynamic forecasting income effect substitution effect

Five types of tax systems

sufficiency equity certainty convenience economy

W-2

summarizes salary/wages and withholdings year end report

Amount of Tax =

tax base * tax rate

Graduated Tax

tax base is divided into brackets each bracket is taxed at a different rate

US Tax Court

tax cases only 19 judges, 15 year term travel all over US dont have to pay tax small claims <50K IRS chief counsel no jury

Who decided the case venue?

taxpayer

Which of the following pairs of items is not needed to calculate the after-tax proceeds for a same-day sale? A. Strike price and market price on exercise date. B. Strike price and market price on grant date. C. Market price on sale date and market price on exercise date. D. Market price on sale date and marginal tax rate.

the market price on grant date is not needed.

Static Forecasting

the process of forecasting tax revenues based on the existing state of transactions while ignoring how taxpayers may alter their activities in response to a tax law change. most accurate

Disqualifying Disposition

the sale of stock acquired using incentive stock options prior to satisfying certain holding period requirements. failing to satisfy the holding period requirements converts the options into nonqualified stock options.

Golsen Rule

the tax court will abide by rulings of the circuit court that has appellate jurisdiction for a case

Self-employment Tax

the total social security and Mmedicare tax, including employer-matching contributions, paid by people who work for themselves.

Risk of 83(b) election

there is no offsetting deduction if the property is forfeited accelerated liability

Substitution Effect

when consumers react to an increase in a good's price by consuming less of that good and more of other goods

Tax gross up

when corporations provide taxable fringe benefits to senior executives, they also provide the executives enough cash to cover the taxes so the benefit actually costs the executive nothing

Equity Based Compensation

when employees hold stock, their compensation increases in tandem with their employer's stock price

Certainty

when to pay, where to pay, how to determine

Restricted Stock

when you vest, you buy taxed on FMV when you vest less downside for employees

Marginal Tax Rate

where are you right now? if you had 1 more dollar, how much would you pay extra? = change in tax/change in taxable income ATR < MTR changes based on additional income/deductions pushing you into higher/lower brackets

Hierarchy of Probability

will 100% should 70% more likely than not 51% substantial authority 35% reasonable basis 20%

Average Tax Rate

working your way up the tax schedule average level of taxation on each dollar of income = total tax/taxable income

What if you wait 10 years to exercise?

you cant exercise after 10 years

Treasury Dept

charged with administering and interpreting the tax laws of the US

Roberts

chief justice bush conservative swing vote

Breyer

clinton liberal

Ginsburg

clinton liberal

Healthcare

collect at 65

Transfer Tax

$15,000 per donee $11.58 million tax free assets

Current US defecit

$23.1 trillion

Qualified Transportation Fringe Benefits

$270 per month

Medicare

1.45% unlimited pays for medical insurance for individuals who are elderly or disable

Corporate Tax Rate

21%

Partnership Tax Date

15th day of the 3rd month

Corporate Tax Payments

15th day of the 3rd, 6th, 9th, or 12th month of the fiscal year

Corporate Tax Date

15th day of the 4th month

Constitution

16th amendment, 1913

When was the highest tax rate?

1981 70%

Individual Tax Date

4/15

Individual Tax Payments

4/15 6/15 9/15 1/15

Federal Income Tax

47.3% of tax revenue 16th amendment in 1913

Failure to File Penalties

5% of the tax due for each month max 25% penalty does not apply if no tax is owed

Civil Penalties

51% at fault reasonable cause

Social Security Tax

6.2% capped at 137,700 in 2020 wages in excess of the cap are not subject to tax pays for monthly retirement, survivor, and disability benefits to qualifying individuals

How many tax brackets are there?

7

Criminal Court

97% willful intent beyond a reasonable doubt

Employers often withhold federal income taxes directly from worker's paychecks. This is an example of which principle in practice? A. Convenience. B. Economy. C. Certainty. D. Equity. E. None of the choices are correct.

A

If Lindley requests an extension to file her individual tax return, the latest she could pay her tax due without penalty is: A. April 15 B. October 15 C. August 15 D. November 15 E. None of the choices are correct.

A

Proportional Tax Rate Structure

AKA flat tax imposes a constant tax rate throughout the tax base. as the tax base increases, the taxes paid increase proportionally. EX: sales tax, corporate tax rate

States With No Income Tax

Alaska Florida Nevada South Dakota Texas Washington Wyoming

Congress recently approved a new, smaller budget for the IRS. What taxation concept evaluates the cost of administering our tax law? A. Convenience. B. Economy. C. Certainty. D. Equity. E. None of the choices are correct.

B

Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic is single, 30 years old, and will have zero tax liability this year, he: A. is required to file a tax return. B. is not required to file a tax return but should file a return anyway. C. is required to file a tax return but should not file because he owes no tax. D. is not required to file a tax return and should not file a return. E. None of the choices are correct.

B

Generally, code sections are arranged (grouped together): A. chronologically. B. by topic. C. randomly. D. by length. E. None of the choices are correct.

B

Grace's employer is now offering group-term life insurance. The company will provide each employee with $200,000 of group-term life insurance. It costs Grace's employer $700 to provide this amount of insurance to Grace each year. Assuming that Grace is 43 years old, use the table to determine the monthly premium that Grace must include in income as a result of receiving the group-term life benefit. Uniform Premiums for $1,000 of Group-Term Life Insurance Protection 5-Year Age Bracket Cost per $1,000 of Protection for One Month Under 25 $0.05 25 to 29 0.06 30 to 34 0.08 35 to 39 0.09 40 to 44 0.10 45 to 49 0.15 50 to 54 0.23 55 to 59 0.43 60 to 64 0.66 65 to 69 1.27 70 and above 2.06 A. $0. B. $15.00. C. $22.00. D. $58.33.

B $200,000 policy less $50,000 exemption times 10 cents per month per thousand of coverage.

Stevie recently received 1,000 shares of restricted stock from her employer, Nicks Corporation, when the share price was $8 per share. Stevie's restricted shares vested three years later when the market price was $11. Stevie held the shares for a little more than a year and sold them when the market price was $16. Assuming Stevie made a section 83(b) election, what is the amount of Stevie's ordinary income with respect to the restricted stock? A. $5,000. B. $8,000. C. $11,000. D. $16,000.

B $8,000 (1,000 shares × $8 market price on grant date).

Stevie recently received 1,000 shares of restricted stock from her employer, Nicks Corporation, when the share price was $8 per share. Stevie's restricted shares vested three years later when the market price was $11. Stevie held the shares for a little more than a year and sold them when the market price was $16. Assuming Stevie made a section 83(b) election, what is the amount of Tom's gain on the sale? A. $5,000. B. $8,000. C. $11,000. D. $16,000

B $8,000 gain is $16,000 (1,000 shares × $16 market value on sale date) of sales proceeds less $8,000 (1,000 shares × $8 market price on grant date) basis.

Maren received 10 NQOs (each option gives her the right to purchase 10 shares of stock for $8 per share) at the time she started working when the stock price was $6 per share. When the share price was $15 per share, she exercised all of her options. Eighteen months later she sold all of the shares for $20 per share. What is the amount of Maren's bargain element? A. $0. B. $700. C. $900. D. $1,500. E. None of the choices are correct.

B 10 options × 10 shares × ($15 market price at exercise - $8 exercise price).

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, what is his effective tax rate (rounded)? (Use tax rate schedule) A. 20.31% B. 14.06% C. 15.23% D. 22.00% E. None of the choices are correct

B 14.06% = $9,139.50/(60,000 + 5,000)

If Paula requests an extension to file her individual tax return, the latest she could file her return without a failure-to-file penalty is: A. September 15 B. October 15 C. August 15. D. November 15 E. None of the choices are correct.

B 6 months

Which of the following statements regarding income tax withholding is not correct? A. Employees that also have self-employment income can have additional amounts of federal tax withheld to avoid estimated tax payments. B. Employees cannot claim an allowance for a child unless they are entitled to claim the child as a dependent. C. Employees can claim exempt status and avoid withholding. D. Married employees can choose to have income tax withholding on wages withheld at the higher single rates.

B additional allowances can be claimed for many purposes (e.g., large itemized deductions) in addition to personal and dependency exemptions.

Which of the following statements regarding restricted stock is false? A. Like stock options, restricted stock has to vest before it can be sold. B. Like nonqualified stock options, the employee's income inclusion for restricted stock is the bargain element. C. Even if the value of restricted stock decreases from the price on the grant date, it retains some value to the employee. D. There is no effective tax planning elections for restricted stock.

B employees are taxed on the full fair market value of the restricted stock.

Tasha receives reimbursement from her employer for dependent care expenses for up to $8,000. Tasha applies for and receives reimbursement of $6,000 for her 10-year-old son. How much, if any, is includible in her income? A. $0. B. $1,000. C. $3,000. D. $6,000.

B employees may exclude up to $5,000 of dependent care expenses.

Which of the following is false regarding dependent care expenses? A. Up to $5,000 of reimbursed expenses can qualify. B. Employers may discriminate among employees. C. Dependent children under 13 qualify. D. Spouses who are physically or mentally unable to care for themselves qualify.

B employers may not discriminate with respect to dependent care expenses.

Which of the following statements regarding income tax withholding is not correct? A. The withholding tables are designed so that employee withholding approximates the tax liability. B. Large itemized deductions require the need for additional withholding. C. The withholding tables vary based on filing status. D. Extra allowances can be claimed and reduce withholding.

B itemized deductions reduce the withholding required by the taxpayer.

Kevin is the financial manager of Levingston BMW. The shop allows employees to purchase up to two vehicles per year at a discount. Levingston's average gross profit percentage is 15%. This year Kevin purchased a 530 model and a new M3. Model FMV Dealer Cost Employee Price 530 $63,000 $50,000 $54,000 M3 $70,000 $60,000 $57,000 What amount must Kevin include in income? A. $0. B. $2,500. C. $2,950. D. $22,000.

B kevin must include $2,500 into his gross income. this is because the $13,000 ($70,000 - $57,000) discount received on the M3 is larger than the qualified employee discount of $10,500 (sales price of $70,000 times the average gross profit percentage of 15%). there is no gross income from the purchase of the 530 since the $9,000 ($63,000 - $54,000) discount is less than the qualified employee discount of $9,450 ($63,000 times the average gross profit percentage of 15%).

Which of the following is true regarding stock options? A. A loss is realized when stock options lapse. B. There is typically no tax effect on the grant date. C. Income recognized on the exercise date is greater for incentive stock options than nonqualified options. D. The bargain element on a nonqualified option is taxed to employees at capital gain rates.

B no tax effect is incurred by employees or employers on the grant date.

Circular 230 was issued by: A. AICPA. B. State Boards of Accountancy. C. American Bar Association. D. IRS. E. None of the choices are correct.

D

A taxpayer can avoid a substantial understatement of tax penalty: A. if the position is frivolous and disclosed on the tax return. B. if the position has a realistic possibility of being sustained by the IRS or courts. C. if the position is not frivolous and disclosed on the tax return. D. if the position has a reasonable basis and is disclosed on the tax return. E. None of the choices are correct.

D "disclosed" is the most important part

Aharon exercises 10 stock options awarded several years ago. The following information pertains to the options: (1) each option gives the employee the right to buy 10 shares, (2) the market price on the grant date was $7, (3) the strike price is $10, and (4) the market price on the exercise date was $15. How much will it cost Aharon to purchase the options on the exercise date? A. $90. B. $500. C. $700. D. $1,000.

D $1,000 (10 options × 10 shares × $10 exercise price).

Which of the following audits is the least common, broadest in scope, and typically most complex? A. Correspondence. B. Targeted. C. Office. D. Field. E. None of the choices are correct.

D IRS moves in

Corporations are required to file a tax return only if their taxable income is greater than: A. $0. B. $1,000. C. $600. D. $750. E. None of the choices are correct. Corporations are always required to file a tax return.

E

What is the tax date calls on a saturday?

Due next business day

Tax Base of Property Tax

FMW real -> land , structures, improvements personal -> tangible and intangible

Acquiescence

IRS agree to the court's decision

Hazards of Litigation

IRS chance of winning the case in court

Field Exam

IRS comes to your office broadest scope most complex can last years

Overpaid Tax

IRS issues refund

Owes Tax

IRS requests payment

Nonaquiescence

IRS will continue to fight

More allowance, _____ tax

LESS

States that only tax individual dividend and interest income

New Hampshire Tennessee

Senate Finance Committee

The Senate committee that, along with the House Ways and Means Committee, writes the tax codes, subject to the approval of Congress as a whole.

Temporary Regulations

regulations issued with a limited life (three years for regulations issued after november 20, 1988). during their life, temporary regulations carry the same authoritative weight as final regulations.

Appellate Court

us court of appeals - geographic based (tax court and district court) us court of appeals for federal claims

VAT

value added tax aka a national sales tax in europe

Equity

ability to pay

Alito

bush conservative

Wage

by the hour

Highest state tax rate

california - 13%

Judicial Branch

can shoot down law but not rewrite law

Hold > 1 Year

capital gain

DIF system

math model - unknown to public higher score, higher likelihood (outliers)

#1 goal of board of directors

maximize shareholder wealth align with employee interests retention tool

Economy

minimize compliance and administrative costs

Regressive Tax Rate Structure

more money, less tax tax base and taxes paid increase, MTR decreases uncommon EX: social security

Progressive Tax Rate Structure

more money, more taxes, higher rates until 37% ATR <= MTR EX: income tax (fed and state)

Correspondence

most common exclusively by mail very narrow in scope not complex

Benefits of Paying Taxes

national defense judicial system law enforcement public school highways

Tax Treaty

negotiated agreements between countries that describe the tax treatment of entities subject to tax in both countries

Publications and Tax Return Form Instructions

neither of which may be cited as precedent nor relied upon to avoid taxpayer or tax practitioner penalties

Is there an income tax on municipal bonds?

no

NQO

nonqualified stock options any future appreciation or depreciation of the sock will be treated for tax purposes as either short-term or long-term capital gain or loss depending on the holding period, which begins on the date of exercise viewed as performance based compensation

AICPA Code of Professional Conduct

not specific to tax practice and provides broader professional standards that are especially relevant for auditors (independent CPAs charged with examining an entity's financial statements). Provisions included in the Code of Professional Conduct address the importance of a CPA maintaining independence from the client and using due professional care in carrying out responsibilities.

Kagan

obama liberal

Sotomayor

obama liberal

Primary Authorities

official sources of tax law

Hold < 1 Year

ordinary income

Key Components of a Tax

payment required payment imposed by government agency (federal, state, local) payment not tied directly to benefit received by the taxpayer

Alternative Minimum Tax

personal income tax rate that applies to cases where taxes would otherwise fall below a certain level

Taxes

principle revenue raiser for governments

Main source of local revenue

property tax

AICPA's Statements on Standards for Tax Services (SSTS)

recommend appropriate standards of practice for tax professionals and are intended to complement other provisions that govern tax practice

7 SSTS

recommending a tax return position answering questions on a tax return preparing a tax return using data supplied by a client using estimates on a tax return taking a tax return position inconsistent with a previous year's tax return discovering a tax return error giving tax advice to taxpayers

Proposed Regulations

regulations issued in proposed form (a draft) they do not carry the same authoritative weight as temporary or final regulations. all regulations are issued in proposed form first to allow public comment on them.

90 Day Letter

the IRS letter received after an audit and receipt of the 30-day letter that explains that the taxpayer has 90 days to either (1) pay the proposed deficiency or (2) file a petition in the U.S. Tax Court to hear the case. AKA the statutory notice of deficiency

30 Day Letter

the IRS letter received after an audit that instructs the taxpayer that he or she has 30 days to either (1) request a conference with an independent appeals officer or (2) pay proposed deficiency

Income Effect

the change in consumption resulting from a change in real income

Meals and Lodging for Convenience of the Employer

the cost is not subject to the 50% deductibility limitation on meals. Employers may generally discriminate between employees in providing for the convenience of the employer benefits.

Stock Options

the future value of stock options awards will depend on the exercise price, the company's future share price, the exercise date of the option, and the timing for selling the shares received from the option exercise.

Vertical Equity

the idea that taxpayers with a greater ability to pay taxes should pay larger amounts

How is a deficit financed?

through debt

Cashless Exercise

to avoid overweighting their investment portfolios with a single stock, employees exercising NQOs often immediately sell all or a significant portion of the shares acquired on the exercise date

An acquiescence indicates that the IRS lost a court case and that it has decided to follow the court's ruling in the future.

true

An employee's income with respect to restricted stock is the fair market value on the vesting date.

true

As required by the Constitution, all tax bills are supposed to originate in the House of Representatives.

true

Dynamic forecasting takes into consideration taxpayers' responses to a tax change when estimating tax revenues.

true

Horizontal equity is defined in terms of taxpayers in similar situations whereas vertical equity is defined in terms of taxpayers in different situations.

true

If the IRS assesses additional tax on a tax return upon audit, a taxpayer may be subject to interest and penalties on the underpayment.

true

In a progressive tax rate system, the marginal tax rate will often be greater than the average tax rate.

true

In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate.

true

In considering the "economy" criterion in evaluating tax systems, one must consider this criterion from both the taxpayer and the government's perspective.

true

One key characteristic of a tax is that it is a required payment to a governmental agency.

true

Revenue rulings and revenue procedures are examples of primary authorities.

true

The Internal Revenue Code of 1986 is the name of the current income tax code of the United States of America.

true

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

true

The use of restricted stock is increasing relative to the use of stock options.

true

When stock options are exercised they are converted into actual employer stock.

true

While state sales taxes are quite common, currently the U.S. federal government does not impose a sales tax.

true

an extension to file a tax return does not extend the due date for tax payments.

true

one benefit of a sin tax is that it should decrease the demand for the products being taxed.

true

Qualified employee discounts allow employees to purchase employer goods at a discount.

true buy at gross profit %

Hotel employees can receive free nights lodging on a space available basis without incurring compensation.

true cant call in advance

Employees will always prefer to receive incentive stock options over nonqualified stock options.

true capital gains taxed at a lower rate

If a taxpayer has little cash and a very technical tax case that she feels very strongly that the tax rules are "on her side," she should prefer to have her case tried in the U.S. Tax Court.

true dont have to pay in tax court

Employers sometimes pay a "gross-up" to employees to cover taxes associated with taxable fringe benefits they provide.

true executives

Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.

true first $50k is tax free

The date on which stock options are given to the employee is called the grant date.

true grant date is the promise date

The date on which stock options are no longer subject to forfeiture is called the vesting date.

true legal right to buy

Health insurance is an example of a nontaxable fringe benefit.

true most significant

Employers always prefer to award incentive stock options rather than nonqualified stock options.

true no deduction

Flexible spending accounts allow employees to set aside before-tax dollars for medical and dependent care expenses.

true use it or lose it

Gorsuch

trump conservative

Kavanaugh

trump conservative

Horizontal Equity

two taxpayers in similar situations pay the same tax

Exceptions of Statute of Limitations

understated >25% of gross income - 6 years if you never filed a return OR there is fraud - unlimited