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Which of the following taxes is regressive? A) Federal Insurance Contributions Act (FICA) B) excise tax C) property tax D) gift tax
A) Federal Insurance Contributions Act (FICA)
Which of the following serves as the highest authority for tax research, planning, and compliance activities? A) Internal Revenue Code B) Income Tax Regulations C) Revenue Rulings D) Revenue Procedures
A) Internal Revenue Code
All of the following are executive (administrative) sources of tax law except A) Internal Revenue Code. B) Income Tax Regulations. C) Revenue Rulings. D) Revenue Procedures.
A) Internal Revenue Code.
In an S corporation, shareholders A) are taxed on their proportionate share of earnings. B) are taxed only on dividends. C) may allocate income among themselves in order to consider special contributions. D) are only taxed on salaries.
A) are taxed on their proportionate share of earnings.
The largest source of revenues for the federal government comes from A) individual income taxes. B) corporate income taxes. C) Social Security and Medicare taxes (FICA). D) estate and gift taxes. Answer: A
A) individual income taxes.
A tax bill introduced in the House of Representatives is then A) referred to the House Ways and Means Committee for hearings and approval. B) referred to the full House for hearings. C) forwarded to the Senate Finance Committee for consideration. D) voted upon by the full House.
A) referred to the House Ways and Means Committee for hearings and approval.
Horizontal equity means that A) taxpayers with the same amount of income pay the same amount of tax. B) taxpayers with larger amounts of income should pay more tax than taxpayer's with lower amounts of income. C) all taxpayers should pay the same tax. D) none of the above.
A) taxpayers with the same amount of income pay the same amount of tax.
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 A) 0.5% per month (or factor thereof) up to a maximum of 25%. B) 5% per month (or factor thereof) up to a maximum of 25%. C) 20% per month (or factor thereof). D) 25%.
B) 5% per month (or factor thereof) up to a maximum of 25%.
What is an important aspect of a limited liability partnership? A) It is the same as a limited partnership where the general partner has unlimited liability. B) A partner has unlimited liability arising from his or her own acts of negligence or misconduct or similar acts of any person under his or her direct supervision, but does not have unlimited liability in other matters. C) All partners have limited liability regarding all partnership activities. D) All partners have unlimited liability.
B) A partner has unlimited liability arising from his or her own acts of negligence or misconduct or similar acts of any person under his or her direct supervision, but does not have unlimited liability in other matters.
Alan files his 2014 tax return on April 1, 2015. His return contains no misstatements or omissions of income. The statute of limitations for changes to the return expires A) April 1, 2018. B) April 15, 2018. C) April 15, 2017. D) The statute of limitations never expires.
B) April 15, 2018.
All of the following are classified as flow-through entities for tax purposes except A) partnerships. B) C corporations. C) S corporations. D) limited liability companies.
B) C corporations.
When returns are processed, they are scored to determine their potential for yielding additional tax revenues. This program is called A) Taxpayer Compliance Measurement Program. B) Discriminant Function System. C) Standard Audit Program. D) Field Audit Program.
B) Discriminant Function System.
Which of the following individuals is most likely to be audited? A) Lola has AGI of $35,000 from wages and uses the standard deduction. B) Marvella has a $145,000 net loss from her unincorporated business (a horse farm). She also received $950,000 salary as a CEO of a corporation. C) Melvin is retired and receives Social Security benefits. D) Jerry is a school teacher with two children earning $55,000 a year. He also receives $200 in interest income on a bank account.
B) Marvella has a $145,000 net loss from her unincorporated business (a horse farm). She also received $950,000 salary as a CEO of a corporation.
Which of the following is not a taxpaying entity? A) Corporation B) Partnership C) Individual D) All of the above are taxpayers.
B) Partnership
Which of the following is not an objective of the federal income tax law? A) Stimulate private investment. B) Reduce employment. C) Encourage research and development activities. D) Prevent taxpayers from paying a higher percentage of their income in personal income taxes due to inflation.
B) Reduce employment.
Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax of $12,000 on $120,000. The tax is a A) progressive tax. B) proportional tax. C) regressive tax. D) None of the above.
B) proportional tax.
Vertical equity means that A) taxpayers with the same amount of income pay the same amount of tax. B) taxpayers with larger amounts of income should pay more tax than taxpayer's with lower amounts of income. C) all taxpayers should pay the same tax. D) none of the above.
B) taxpayers with larger amounts of income should pay more tax than taxpayer's with lower amounts of income.
All of the following statements are true except A) the net income earned by a sole proprietorship is reported on the owner's individual income tax return. B) the net income of an S corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the S corporation to individual shareholders are also taxed. C) the net income of C corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the C corporation to individual shareholders is also taxed. D) LLCs are generally taxed as partnerships.
B) the net income of an S corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the S corporation to individual shareholders are also taxed.
Peyton has adjusted gross income of $20,000,000 on his 2014 tax return, filed April 15, 2015. 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? A) until April 15, 2017 B) until April 15, 2018 C) until April 15, 2021 D) The IRS can audit Peyton's return at any future date.
B) until April 15, 2018
What are the correct monthly rates for calculating failure to file and failure to pay penalties? A) Failure to file Failure to pay 5.0% 5.0% B) Failure to file Failure to pay 0.5% 0.5% C) Failure to file Failure to pay 5.0% 0.5% D) Failure to file Failure to pay 0.5% 5.0%
C) Failure to file Failure to pay 5.0% 0.5%
Latashia reports $100,000 of gross income on her 2014 tax return, filed April 15, 2015. She omits $30,000 of income, but the error was not fraudulent. When does the statute of limitations for examining her tax return expire? A) April 15, 2017 B) April 15, 2018 C) April 15, 2021 D) It never expires.
C) April 15, 2021
The Senate equivalent of the House Ways and Means Committee is the Senate A) Joint Committee on Taxation. B) Ways and Means Committee. C) Finance Committee. D) Joint Conference Committee.
C) Finance Committee.
Which of the following is not a social objective of the tax law? A) prohibition of a deduction for illegal bribes, fines and penalties B) a deduction for charitable contributions C) an exclusion for interest earned by large businesses D) creation of tax-favored pension plans
C) an exclusion for interest earned by large businesses
Which of the following steps, related to a tax bill, occurs first? A) signature or veto by the President of the United States B) consideration by the Senate C) consideration by the House Ways and Means Committee D) consideration by the Joint Conference Committee
C) consideration by the House Ways and Means Committee
Which of the following is not an advantage of a limited liability company (LLC)? A) limited liability for all members of a LLC B) ability to choose between taxation as a partnership or corporation C) default tax treatment as a corporation, unless otherwise elected D) All of the above are advantages of an LLC.
C) default tax treatment as a corporation, unless otherwise elected
When new tax legislation is being considered by Congress, A) the tax bill will usually originate in the Senate. B) different versions of the House and Senate bills are reconciled by the Speaker of the House and the President of the Senate. C) different versions of the House and Senate bills are reconciled by a Joint Conference Committee. D) after the President of the U.S. approves a tax bill, the Joint Conference Committee must then vote on passage of the bill.
C) different versions of the House and Senate bills are reconciled by a Joint Conference Committee.
Which of the following taxes is proportional? A) gift tax B) income tax C) sales tax D) Federal Insurance Contributions Act (FICA)
C) sales tax
The IRS must pay interest on A) all tax refunds. B) tax refunds paid later than 30 days after the due date. C) tax refunds paid later than 45 days after the due date. D) The IRS never pays interest on tax refunds.
C) tax refunds paid later than 45 days after the due date.
The term "tax law" includes A) Internal Revenue Code. B) Treasury Regulations. C) judicial decisions. D) all of the above.
D) all of the above.
Which of the following taxes is progressive? A) sales tax B) excise tax C) property tax D) federal income tax
D) federal income tax
Which of the following is not one of Adam Smith's canons of taxation? A) equity B) convenience C) certainty D) paid by all citizens
D) paid by all citizens