South-Western Federal Taxation 2022: Individual Income Taxes 45th edition by James C. Young Test ban
a. $400.
b. $3,600.
c. $4,000.
d. $4,400.
ANSWER: c
111. A characteristic of the fraud penalties is:
a. When negligence and civil fraud apply to a deficiency, the negligence penalty predominates.
b. When criminal fraud can result in a fine and a prison sentence.
c. When the criminal fraud penalty is 75% of the deficiency attributable to the fraud.
d. When the IRS has the same burden of proof in the case of criminal fraud as with civil fraud.
ANSWER: b
112. Regarding proper ethical accounting guidelines, which, if any, of the following is correct?
a. The use of client estimates in preparing a return may be acceptable.
b. Under no circumstances should a question on a tax return be left unanswered.
c. If a client has made a mistake in a prior year’s return and refuses to correct it, the accountant should withdraw from the engagement.
d. If the exact amount of a deduction is not certain (e.g., around mid-$600s), it should be recorded as an odd amount (i.e., $649) so as to increase the appearance of greater certainty.
ANSWER: a
113. Both economic and social considerations can be used to justify:
a. Favorable tax treatment for accident and health plans provided for employees and financed by employers.
b. Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials).
c. Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.
d. Allowance of a deduction for state and local income taxes paid.
ANSWER: c
114. 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
115. 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
116. 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
117. 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.
ANSWER: a
118. 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
119. 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
120. Before proposing that the state’s sales tax be expanded to include food, a legislator should ask whether: