South-Western Federal Taxation 2022: Individual Income Taxes 45th edition by James C. Young Test ban
a. The state tax agency will allow this expansion.
b. A majority of his constituents agree.
c. Grocery stores will be able to collect the tax.
d. The state’s constitution allows for this tax.
ANSWER: d
121. Jane is the tax director for Tangent Software Corporation. She is unsure whether Tangent is required to charge sales tax when software is provided to customers in State X via the “cloud.” This indicates that the sales tax does not meet the principle of:
a. Equity.
b. Certainty.
c. Neutrality.
d. Economic growth and efficiency.
ANSWER: b
122. 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
123. Which of the following statements about a value added tax (VAT) is false?
a. Many countries use a VAT.
b. The United States has imposed a VAT since 1913.
c. A VAT has been proposed in the United States to replace part of the income tax.
d. A VAT operates similarly to a sales tax.
ANSWER: b
124. The quote engraved on the IRS building in Washington, DC, at the entrance states:
a. Nothing is certain, except death and taxes.
b. Taxes are what we pay for civilized society.
c. Everyone welcome.
d. Taxes are the most difficult thing in the world to understand.
ANSWER: b
125. Tax functions that accounting and finance professionals may assist clients with include all but the following:
a. Tax compliance.
b. Tax planning.
c. Cash management to ensure timely payment of taxes.
d. Tax evasion.
ANSWER: d
126. Which of the following taxes is paid only by the employer?
a. FICA
b. FUTA
c. Social Security tax
d. Medicare tax
ANSWER: b
127. 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
128. The AICPA Statements on Standards for Tax Services are:
a. Enforceable.
b. Educational.
c. Out of date.
d. Do not exist.
ANSWER: a
129. “Bracket creep” is avoided by:
a. Using sunset provisions.
b. Providing special tax rules for small businesses.
c. The statute of limitations.
d. Adjusting the rate brackets for inflation annually.
ANSWER: d
Matching
Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
a. Deferral of gains from involuntary conversions
b. Carryforward of net operating losses
c. “No change” is a possible result
d. State income tax applied to a visiting nonresident
e. IRS special agent
f. Undoing the “piggyback” result
g. Ideal budget goal as to new tax legislation
h. Every state that has a general sales tax has one
i. Imposed by all states and the Federal government
j. Imposed by some states but not the Federal government
k. Imposed only by the Federal government
l. No correct match provided
130. Employee temporarily working in another state for two months
ANSWER: d
131. Decoupling
ANSWER: f
132. Discriminant Function (DIF)
ANSWER: l
133. Tax fraud suspected
ANSWER: e
134. Revenue neutrality
ANSWER: g
135. Revenue Agent's Report (RAR)
ANSWER: c