Question 1

Which of the following taxes is progressive?

Accepted Answer

A)  sales tax 
B)  excise tax 
C)  property tax 
D)  federal income tax

Question 2

AB Partnership earns $500,000 in the current year.Partners A and B are equal partners who do not receive any distributions during the year.How much income does partner A report from the partnership?

Accepted Answer

A)  $0 
B)  $250,000 
C)  $500,000 
D)  None of the above.

Question 3

Charlotte pays $16,000 in tax deductible property taxes.Charlotte's marginal tax rate is 28%,effective tax rate is 22% and average rate is 25%.Charlotte's tax savings from paying the property tax is

Accepted Answer

A)  $3,520. 
B)  $4,000. 
C)  $4,480. 
D)  $11,520.

Question 4

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

Accepted Answer

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%.

Question 5

The various entities in the federal income tax system may be classified into two general categories,taxpaying entities (such as individuals and C [regular] corporations) and flow-through entities such as sole proprietorships,partnerships,S corporations,and limited liability companies.

Accepted Answer

A) True 
 B)False

Question 6

During the current tax year,Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000.What is the amount of Frank Corporation's corporate income tax for the year?

Accepted Answer

The answer of During the current tax year,Frank Corporation generated...

Question 7

Jose dies in the current year and has a gross estate valued at $8,000,000.Over the past ten years Jose had made taxable gifts of $400,000.The estate incurs funeral and administrative expenses of $100,000 and also pays off Jose's debts which amount to $300,000.Jose bequeaths $500,000 to his wife.What is the amount of Jose's tax base,the amount on which the estate tax is computed?

Accepted Answer

A)  $7,100,000 
B)  $7,500,000 
C)  $1,650,000 
D)  $2,050,000

Question 8

Fireball Corporation is an S corporation.Leyla owns all of the stock.During the current year Fireball earned taxable income of $500,000 and paid a $300,000 distribution to Leyla.Which of the following statements is correct?

Accepted Answer

A)  Fireball will pay corporate income tax on its earnings, and Leyla will pay individual income tax on the distribution. 
B)  Only Fireball will pay taxes. Leyla will not pay any taxes due to her holdings in Fireball. 
C)  Fireball's income will flow through to Leyla's tax return, and she will pay the taxes on the $500,000 of corporate income. 
D)  Fireball will not pay any taxes, but Leyla will pay taxes on the distribution received.

Question 9

Gifts between spouses are generally exempt from transfer taxes.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not an advantage of a limited liability company (LLC)?

Accepted Answer

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.

Question 11

Which of the following is not one of Adam Smith's canons of taxation?

Accepted Answer

A)  equity 
B)  convenience 
C)  certainty 
D)  economic stimulation

Question 12

The Internal Revenue Service is the branch of the Treasury Department responsible for administering the federal tax law.

Accepted Answer

A) True 
 B)False

Question 13

Kole earns $140,000 in 2017 in his job as a sales manager.What is his FICA tax?

Accepted Answer

A)  $9,916 
B)  $9,377 
C)  $10,710 
D)  $9,731

Question 14

Flow-through entities do not have to file tax returns since they are not taxable entities.

Accepted Answer

A) True 
 B)False

Question 15

Firefly Corporation is a C corporation.Freya owns all of the stock.During the current year Firefly earned taxable income of $500,000 and paid a $300,000 dividend to Freya.Which of the following statements is correct?

Accepted Answer

A)  Firefly will pay corporate income tax on its earnings, and Freya will pay individual income tax on the dividends. 
B)  Only Firefly will pay taxes. Freya will not pay any taxes due to her holdings in Firefly. 
C)  Firefly's income will flow through to Freya's tax return, and she will pay the taxes on the $500,000 of corporate income. 
D)  Firefly will not pay any taxes, but Freya will pay taxes on the dividend received.

Question 16

Limited liability company members (owners) are responsible for the liabilities of their limited liability company.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following taxes is regressive?

Accepted Answer

A)  Federal Insurance Contributions Act (FIC
A)  
B)  excise tax 
C)  property tax 
D)  gift tax

Question 18

Individuals are the principal taxpaying entities in the federal income tax system.

Accepted Answer

A) True 
 B)False

Question 19

Larry and Ally are married and file a joint return.They are considering purchasing a personal residence that will generate two deductions: $10,000 in home mortgage interest and $8,000 in real estate taxes.Their marginal tax rate is 25%.What is the total tax savings if Larry and Ally purchase the residence?

Accepted Answer

The answer of Larry and Ally are married and file...

Question 20

When a change in the tax law is deemed necessary by Congress,the entire Internal Revenue Code must be revised.

Accepted Answer

A) True 
 B)False

Exam 1: An Introduction to Taxation

Which of the following taxes is progressive?

AB Partnership earns $500,000 in the current year.Partners A and B are equal partners who do not receive any distributions during the year.How much income does partner A report from the partnership?

Charlotte pays $16,000 in tax deductible property taxes.Charlotte's marginal tax rate is 28%,effective tax rate is 22% and average rate is 25%.Charlotte's tax savings from paying the property tax is

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

The various entities in the federal income tax system may be classified into two general categories,taxpaying entities (such as individuals and C [regular] corporations) and flow-through entities such as sole proprietorships,partnerships,S corporations,and limited liability companies.

During the current tax year,Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000.What is the amount of Frank Corporation's corporate income tax for the year?

Fireball Corporation is an S corporation.Leyla owns all of the stock.During the current year Fireball earned taxable income of $500,000 and paid a $300,000 distribution to Leyla.Which of the following statements is correct?

Gifts between spouses are generally exempt from transfer taxes.

Which of the following is not an advantage of a limited liability company (LLC) ?

Which of the following is not one of Adam Smith's canons of taxation?

The Internal Revenue Service is the branch of the Treasury Department responsible for administering the federal tax law.

Kole earns $140,000 in 2017 in his job as a sales manager.What is his FICA tax?

Flow-through entities do not have to file tax returns since they are not taxable entities.

Firefly Corporation is a C corporation.Freya owns all of the stock.During the current year Firefly earned taxable income of $500,000 and paid a $300,000 dividend to Freya.Which of the following statements is correct?

Limited liability company members (owners) are responsible for the liabilities of their limited liability company.

Which of the following taxes is regressive?

Individuals are the principal taxpaying entities in the federal income tax system.

When a change in the tax law is deemed necessary by Congress,the entire Internal Revenue Code must be revised.