Saudi Electronic University

ACCT 422

CH1:

1)Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax of

$12,000 on $120,000. The tax is a

2. Which of the following taxes is progressive?

3. Which of the following taxes is proportional?

4. Which of the following taxes is regressive?

5. Sarah contributes $25,000 to a church. Sarah's marginal tax rate is 35% while her average tax rate is 25%. After considering her tax savings, Sarah's contribution costs

6. Helen, who is single, is considering purchasing a residence that will provide a $28,000 tax deduction for property taxes and mortgage interest. If her marginal tax rate is 25% and her effective tax rate is 20%, what is the amount of Helen's tax savings from purchasing the residence?

7. 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

8. Anne, who is single, has taxable income for the current year of $38,000 while total economic income is $43,000 resulting in a total tax of $5,429. Anne's average tax rate and effective tax rate are, respectively,

9. The unified transfer tax system

10. When property is transferred, the gift tax is based on

11. Paul makes the following property transfers in the current year:

• $22,000 cash to his wife
• $34,000 cash to a qualified charity
• $220,000 house to his son
• $3,000 computer to an unrelated friend

The total of Paul's taxable gifts, assuming he does not elect gift splitting with his spouse, subject to the unified transfer tax is

12. Charlie makes the following gifts in the current year: $40,000 to his spouse, $30,000 to his church,

$18,000 to his nephew, and $25,000 to a friend. Assuming Charlie does not elect gift splitting with his wife, his taxable gifts in the current year will be

13. Shaquille buys new cars for five of his friends. Each car cost $70,000. What is the amount of Shaquille's taxable gifts?

14. In 2013, an estate is not taxable unless the sum of the taxable estate and taxable gifts made after 1976 exceeds

15. Eric dies in the current year and has a gross estate valued at $6,500,000. The estate incurs funeral and administrative expenses of $100,000 and also pays off Eric's debts which amount to $250,000. Eric bequeaths $600,000 to his wife. Eric made no taxable transfers during his life. Eric's taxable estate will be

16. Thomas dies in the current year and has a gross estate valued at $3,000,000. During his lifetime (but after 1976) Thomas had made taxable gifts of $400,000. The estate incurs funeral and administrative expenses of $100,000 and also pays off Thomas' debts which amount to $300,000. Thomas bequeaths $500,000 to his wife. What is the amount of Thomas' tax base, the amount on which the estate tax is computed?

17. Which of the following statements is incorrect?

18. Denzel earns $120,000 in 2013 through his job as a sales manager. What is his FICA tax?

19. Martha is self-employed in 2013. Her business profits are $140,000. What is her self-employment tax?

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

21. Horizontal equity means that

22. Vertical equity means that

23. Which of the following is not an objective of the federal income tax law?

24. Which of the following is not a social objective of the tax law?

25. Which of the following is not a taxpaying entity?

26. All of the following are classified as flow-through entities for tax purposes except

27. Rocky and Charlie form RC Partnership as equal partners. Rocky contributes $100,000 into RC while Charlie contributes real estate with a fair market value of $100,000. During the current year, RC earned net income of $600,000. The partnership distributes $200,000 to each partner. The amount that Rocky should report on his individual tax return is

28. 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?

29. In an S corporation, shareholders

30. All of the following statements are true except

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

32. What is an important aspect of a limited liability partnership?

33. The term "tax law" includes

1. Internal Revenue Code.
2. Treasury Regulations.
3. judicial decisions.
4. all of the above.

34. Which of the following serves as the highest authority for tax research, planning, and compliance activities?

35. All of the following are executive (administrative) sources of tax law except

36. Which of the following steps, related to a tax bill, occurs first?

37. A tax bill introduced in the House of Representatives is then

38. When new tax legislation is being considered by Congress,

39. The Senate equivalent of the House Ways and Means Committee is the Senate

40. When returns are processed, they are scored to determine their potential for yielding additional tax revenues. This program is called

41. Which of the following individuals is most likely to be audited?

42. Alan files his 2012 tax return on April 1, 2013. His return contains no misstatements or omissions of income. The statute of limitations for changes to the return expires

43. Peyton has adjusted gross income of $20,000,000 on his 2012 tax return, filed April 15, 2013. He accidentally failed to include $200,000 that he received for a television advertisement. How long does the IRS have to audit Peyton's federal tax return?

44. Latashia reports $100,000 of gross income on her 2012 tax return, filed April 15, 2013. She omits

$30,000 of income, but the error was not fraudulent. When does the statute of limitations for examining her tax return expire?

45. The IRS must pay interest on