Question 1

Tax evasion is a federal crime punishable by imprisonment.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements about implicit and explicit taxes is false?

Accepted Answer

A)  The amount of implicit tax on an investment depends on the owner's marginal tax rate. 
B)  The taxpayer pays an explicit tax to the taxing jurisdiction. 
C)  An investment yielding ordinary income taxed at the regular tax rates should not have an implicit tax. 
D)  None of the above is false. 
A)  The amount of implicit tax on an investment depends on the owner's marginal tax rate. 
B)  The taxpayer pays an explicit tax to the taxing jurisdiction. 
C)  An investment yielding ordinary income taxed at the regular tax rates should not have an implicit tax. 
D)  None of the above is false.

Question 3

Which of the following statements about the time period variable is false?

Accepted Answer

A)  If Congress replaced the current progressive income tax rates with a proportionate rate applying to all taxpayers, the time period variable would no longer be a factor in tax planning. 
B)  The time period variable becomes more important as the taxpayer's discount rate for computing NPV increases. 
C)  Tax planning strategies based on the time period variable must involve at least two different taxable years. 
D)  Tax planning strategies based on the time period variable reflect the time value of money. 
A)  If Congress replaced the current progressive income tax rates with a proportionate rate applying to all taxpayers, the time period variable would no longer be a factor in tax planning. 
B)  The time period variable becomes more important as the taxpayer's discount rate for computing NPV increases. 
C)  Tax planning strategies based on the time period variable must involve at least two different taxable years. 
D)  Tax planning strategies based on the time period variable reflect the time value of money.

Question 4

Tatun Inc. pays state income tax at a 5% rate and federal income tax at a 34% rate. Tatun recently engaged in a transaction in Mexico, which levied a $25,200 income tax on the transaction. Tatun's pretax net income for the current year is $1,913,900. Compute Tatun's total income tax burden assuming that:
A. Tatun's state tax is $95,695 ($1,913,900 * 5%), and its federal tax is $618,190 ([$1,913,900 - $95,695 deduction for state tax] * 34%). Tatun's total income tax burden is $739,085 ($95,695 state tax + $618,190 federal tax + $25,200 Mexican tax).
A. The Mexican tax is nondeductible for state and federal tax purposes.
B. Tatun's state tax is $94,435 ([$1,913,900 - $25,200 deduction for Mexican tax] * 5%), and its federal tax is $610,050 ([$1,913,900 - $94,435 deduction for state tax - $25,200 deduction for Mexican tax] * 34%). Tatun's total income tax burden is $729,685 ($94,435 state tax + $610,050 federal tax + $25,200 Mexican tax).
B. The Mexican tax is deductible for state and federal tax purposes.

Accepted Answer

A. Tatun's state tax is $95,695 ($1,913,

Question 5

The assignment of income doctrine holds that:

Accepted Answer

A)  Income from a transaction must be taxed to the person who receives the cash from the transaction. 
B)  Income from a transaction must be taxed to the person who reports the transaction on his or her tax return. 
C)  Income from a transaction must be taxed to the person that earns the income. 
D)  None of the above 
A)  Income from a transaction must be taxed to the person who receives the cash from the transaction. 
B)  Income from a transaction must be taxed to the person who reports the transaction on his or her tax return. 
C)  Income from a transaction must be taxed to the person that earns the income. 
D)  None of the above

Question 6

Municipal bond investments bear less implicit tax than investments in taxable corporate bonds.

Accepted Answer

A) True 
 B)False

Question 7

The tax law applies uniformly to every commercial transaction by every business entity.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is true?

Accepted Answer

A)  Mary Gilly owns 100% of the stock of Gilly Inc. Both Mary and Gilly Inc. are taxpayers under federal law. 
B)  The same rate schedule applies to both individual and corporate taxpayers. 
C)  The tax provisions governing the computation of individual business income are separate and distinct from the tax provisions governing the computation of corporate business income. 
D)  Mary Gilly owns 100% of the stock to Gilly Inc. Both Mary and Gilly Inc. are taxpayers under federal law and the tax provisions governing the computation of individual business income are separate and distinct from the tax provisions governing the computation of corporate business income. 
A)  Mary Gilly owns 100% of the stock of Gilly Inc. Both Mary and Gilly Inc. are taxpayers under federal law. 
B)  The same rate schedule applies to both individual and corporate taxpayers. 
C)  The tax provisions governing the computation of individual business income are separate and distinct from the tax provisions governing the computation of corporate business income. 
D)  Mary Gilly owns 100% of the stock to Gilly Inc. Both Mary and Gilly Inc. are taxpayers under federal law and the tax provisions governing the computation of individual business income are separate and distinct from the tax provisions governing the computation of corporate business income.

Question 9

Hilex Inc. structures a transaction to shift income from its California office to its Oregon office. This tax planning strategy may be taking advantage of the:

Accepted Answer

A)  Character variable 
B)  Time period variable 
C)  Entity variable 
D)  Jurisdiction variable 
A)  Character variable 
B)  Time period variable 
C)  Entity variable 
D)  Jurisdiction variable

Question 10

Planning opportunities are created when the tax law applies differentially to alternative business transactions.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about tax avoidance and tax evasion is false?

Accepted Answer

A)  Tax avoidance is legal, while tax evasion is illegal. 
B)  The difference between avoidance and evasion is clearly defined in the tax law. 
C)  Tax evasion is a federal felony offence. 
D)  Taxpayers should not regard tax avoidance as unethical. 
A)  Tax avoidance is legal, while tax evasion is illegal. 
B)  The difference between avoidance and evasion is clearly defined in the tax law. 
C)  Tax evasion is a federal felony offence. 
D)  Taxpayers should not regard tax avoidance as unethical.

Question 12

The substance over form doctrine allows the IRS to look through the legal formalities of a transaction to determine its true economic nature.

Accepted Answer

A) True 
 B)False

Tax evasion is a federal crime punishable by imprisonment.

Which of the following statements about implicit and explicit taxes is false?

Which of the following statements about the time period variable is false?

The assignment of income doctrine holds that:

Municipal bond investments bear less implicit tax than investments in taxable corporate bonds.

The tax law applies uniformly to every commercial transaction by every business entity.

Which of the following statements is true?

Hilex Inc. structures a transaction to shift income from its California office to its Oregon office. This tax planning strategy may be taking advantage of the:

Planning opportunities are created when the tax law applies differentially to alternative business transactions.

Which of the following statements about tax avoidance and tax evasion is false?

The substance over form doctrine allows the IRS to look through the legal formalities of a transaction to determine its true economic nature.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 4: Maxims of Income Tax Planning

Tax evasion is a federal crime punishable by imprisonment.

Which of the following statements about implicit and explicit taxes is false?

Which of the following statements about the time period variable is false?

The assignment of income doctrine holds that:

Municipal bond investments bear less implicit tax than investments in taxable corporate bonds.

The tax law applies uniformly to every commercial transaction by every business entity.

Which of the following statements is true?

Hilex Inc. structures a transaction to shift income from its California office to its Oregon office. This tax planning strategy may be taking advantage of the:

Planning opportunities are created when the tax law applies differentially to alternative business transactions.

Which of the following statements about tax avoidance and tax evasion is false?

The substance over form doctrine allows the IRS to look through the legal formalities of a transaction to determine its true economic nature.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters