Taxation Pre Assessment Flashcards
What year was the US income tax on individuals permanently established?
1913
What is the second-highest level of legislative authority of tax law in the US?
Internal Revenue Code
In which publications does the IRS provide information on the tax consequences of specific transactions encountered in practice?
Revenue rulings
What is an example of equity when evaluating a tax system?
Each taxpayer pays a different amount based on their income level
What is true horizontal equity?
Two taxpayers in similar situations paying the same tax
What is the nature of a progressive tax rate structure?
Tax rate increases as income increases
Which tax rate structure is exemplified by the FICA portion of Social Security taxes?
Regressive
Which tax is based on the value of an individual’s real estate?
Property tax
Which entities are considered flow-through entities in the US tax system?
Limited liability partnerships
A taxpayer fails to report income that exceeds 25% of reported gross income but files the return on time.
How many years after a return was originally due might the statue of limitations expire?
6 years
Which component of a tax practice focuses on minimizing taxes paid and maximizing after-tax flows while accommodating clients’ other desires?
Tax planning
Which tax term defines a personal expenditure such as charitable contributions and medical expenses which taxpayers may claim if they keep records?
Itemized deductions
What is a realization of income?
A form of direct cash flow from underlying assets - ex. payment for stocks sold
Which type of income satisfies all three requirements for the income to be taxable?
Renting out a condo
What is an example of a situation where a taxpayer actually or constructively received income that should be included in gross income for the current year?
taxpayer went on vacation the last two weeks of the year, and does not return and deposit the paycheck until the following January
What is included in gross income?
wages, dividends, capital gains, business income, retirement distributions
What is it called when a person attempts to not pay federal income taxes by willfully excluding taxable income?
Tax evasion
Which item is excluded from gross income by the Internal Revenue Code
gift cards
What must be included in gross income?
Receipt of cash dividends
Which two expenses are a tax-free use of a qualified tuition plan (QTP) distribution?
Rent and textbooks
What is an example that would result in taxable income?
Forgiveness of mortgage debt in a rental property
Which type of gain does a taxpayer have if the taxpayer owns stock that has appreciated in value?
An unrealized gain
What is true about realized and recognized gains and losses?
Realized losses may be more than recognized losses
What is an example of an ordinary asset?
Inventory