South-Western Federal Taxation 2022 Essentials of Taxation Individuals and Business Entities 25th ed

78. Social considerations can be used to justify:
a.  Allowance of a credit for child care expenses.
b.  Allowing excess capital losses to be carried over to other years.
c.  Allowing accelerated amortization for the cost of installing pollution control facilities.
d.  Allowing a Federal income tax deduction for state and local sales taxes.
ANSWER: a
79. Allowing a tax credit for certain solar energy property can be justified:
a.  As helping small businesses.
b.  As promoting administrative feasibility.
c.  As promoting a government policy to use alternative energy sources.
d.  Based on the wherewithal to pay concept.
ANSWER: c
80. Provisions in the tax law that promote energy conservation and more use of alternative (nonfossil) fuels can be
justified by:
a.  Political considerations.
b.  Economic and social considerations.
c.  Promoting administrative feasibility.
d.  Encouragement of small business.
ANSWER: b
81. Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period
concept?
a.  Nonrecognition of gain allowed for involuntary conversions.
b.  Net operating loss carryover provisions.
c.  Use of the installment method to recognize gain.
d.  Carryover of excess capital losses.
Name:
Class:
Date:
Ch 1 Introduction To Taxation
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ANSWER: a
82. Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility
(simplifying the task of the IRS)?
a.  Penalties are imposed for failure to file a return or pay a tax on time.
b.  Annual adjustments for indexation increases the amount of the standard deduction allowed.
c.  Personal casualty losses in Federally declared disaster areas must exceed 10% of AGI to be deductible.
d.  A deduction is allowed for charitable contributions.
ANSWER: d
83. A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not
made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an
example of:
a.  A clear reflection of income result.
b.  The tax benefit rule.
c.  The arm’s length concept.
d.  The wherewithal to pay concept.
ANSWER: d
84. Two years ago, State Y enacted a new income tax credit for college prep materials. The credit is available to
individuals and is equal to 40% of the cost of the items. The credit may not exceed $50 in any year. State Y's director of
finance has discovered this year that the amount of credit claimed is far higher than expected. Which principle of good tax
policy might not have been considered in designing this tax that caused the original cost estimate to be too low?
a.  Equity.
b.  Simplicity.
c.  Economy in collection.
d.  Minimum tax gap.
ANSWER: d
85. Which of the following taxes is paid only by the employer?
a.  FICA
b.  FUTA
c.  Social Security tax
d.  Medicare tax
ANSWER: b
86. A rationale for the installment sale method tax rule is:
a.  Ability to pay.
b.  Equity and fairness.
c.  Simplicity.
d.  Revenue neutrality.
ANSWER: a
Matching
Name:
Class:
Date:
Ch 1 Introduction To Taxation
Copyright Cengage Learning. Powered by Cognero.  Page 14
Using the following choices, show the justification for each provision of the tax law listed.
a.  Economic considerations
b.  Social considerations
c.  Equity considerations
d.  Both a. and b.
87. A tax credit for amounts spent to furnish care for children while the parent is at work.
ANSWER: b
88. Additional depreciation deduction allowed for the year the asset is acquired.
ANSWER: a
89. Tax brackets are increased for inflation.
ANSWER: c
90. A small business corporation can elect to avoid the corporate income tax.
ANSWER: a
91. A deduction for contributions by an employee to certain retirement plans.
ANSWER: d
92. A deduction for qualified tuition paid to obtain higher education.
ANSWER: d
93. A deduction for certain expenses (interest and taxes) incident to home ownership.
ANSWER: d
94. A Federal deduction for state and local income taxes paid.
ANSWER: c
95. A deduction for interest on student loans.
ANSWER: d
96. A bribe to the local sheriff, although business related, is not deductible.
ANSWER: b
97. Contributions to charitable organizations are deductible.