Taxation I - C237 Research Study Questions And Correct Detailed Answers Graded A+.

After reinstatement of the individual federal income tax in 1894, why was the tax challenged in the courts? A. Revenue from taxes was no longer necessary because the Civil War was over. B. Administration would be difficult since the tax was apportioned in proportion to state populations. C. The preferred method of taxation was on business transactions as opposed to individual income tax. D. The U.S. Constitution failed to define the meaning of income which would arguably prevent consistent application of the law. - correct answer B. Administration would be difficult since the tax was apportioned in proportion to state populations. What is the highest level of legislative authority of tax law in the United States? A. American Institute of Certified Public Accountants B. Journal of Taxation C. Revenue procedures D. Internal Revenue Code - correct answer D. Internal Revenue Code What are two primary sources of tax law in the United States? Choose 2 answers A. Tax adviser B. Court decisions C. Revenue rulings D. CCH's Master Tax Guide - correct answer B. Court decisions C. Revenue rulings What is a desirable characteristic when evaluating a tax system? A. Tax rules and regulations are changed frequently. B. Most tax returns are examined for accuracy by an IRS agent. C. Taxes are calculated on specialized software purchased from the IRS. D. Taxes can be estimated in advance if annual income remains the same. - correct answer D. Taxes can be estimated in advance if annual income remains the same. What is an example of equity when evaluating a tax system? A. Each taxpayer can choose the due date for their tax. B. Each taxpayer pays a different amount based on their income level. C.Individuals have designated amounts withheld from each paycheck. D. Individuals may take a standard deduction to reduce record keeping. - correct answer B. Each taxpayer pays a different amount based on their income level. What increases the tax base of an individual? A. College tuition B. Interest income C. Rent paid on a personal dwelling D. Property taxes on a personal dwelling - correct answer B. Interest income Which tax rate formula is the total tax liability divided by taxable income? A. Marginal tax rate B. Effective tax rate C. Average tax rate D. Progressive tax rate - correct answer C. Average tax rate An individual who has been divorced for two years earned $80,000 of taxable income last year. What is the individual's tax liability given the tax schedule above? A. $11,539 B. $11,588 C. $15,794 D. $15,926 - correct answer C. $15,794 Which tax is considered proportional? A. Excise tax B. Federal gift tax C. Employment tax D. Federal income tax - correct answer A. Excise tax Which two entities are typically considered flow-through entities in the U.S. tax system? Choose 2 answers A. Partnerships B. S corporations C. C corporations D. Individual taxpayers - correct answer A. Partnerships B. S corporations Which entities are subject to double taxation in the United States? A. Trusts B. Partnerships C. S corporations D. C corporations - correct answer D. C corporations A taxpayer fails to report income that exceeds 25% of reported gross income but files the return on time. How many years after a return was originally due might the statute of limitations expire? A. 3 years B. 4 years C. 5 years D. 6 years - correct answer D. 6 years Match the tax practice component with its definition. Answer options may be used more than once or not at all. - correct answer Tax compliance and procedure Includes preparing tax returns for individuals and entities and representing clients before the IRS Tax research Involves establishing the facts, identifying the issues, developing a solution, and communicating with the client Tax planning and consulting Focuses on minimizing taxes paid and maximizing after-tax cash flows while Financial planning Involves helping clients manage and insure their personal assets, investments, and retirement accounts What are exclusions? A. Items of income that the tax law specifically says are not taxable B. Expenses subtracted from adjusted gross income to arrive at taxable income C. Amounts subtracted from gross tax to arrive at the net tax (or refund) due D.Standard amounts that may be deducted for each qualifying child or qualifying relative - correct answer A. Items of income that the tax law specifically says are not taxable Classify each item with an income tax category. Answer options may be used more than once or not at all. Select your answers from the pull-down list. - correct answer