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Exam 1: Introduction to Taxation

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Question 21

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In 1985,Roy leased real estate to Drab Corporation for 20 years.Drab Corporation made significant capital improvements to the property.In 2005,Drab decides not to renew the lease and vacates the property.At that time,the value of the improvements is $800,000.Roy sells the real estate in 2015 for $1,200,000 of which $900,000 is attributable to the improvements.When is Roy taxed on the improvements made by Drab Corporation?

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Roy is not subject to taxation on the im...

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Question 22

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A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.

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B) False

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Question 23

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Quail Corporation is a C corporation with net income of $125,000 during the current year.If Quail paid dividends of $25,000 to its shareholders,the corporation must pay tax on $100,000 of net income.Shareholders must report the $25,000 of dividends as income.

On transfers by death,the Federal government relies on an estate tax,while states impose an estate tax,an inheritance tax,both taxes,or neither tax.

A deduction for certain expenses (interest and taxes)incident to home ownership.

Taylor,a widow,makes cash gifts to her five married children (including their spouses)and to her seven grandchildren.What is the maximum amount Taylor can give for calendar year 2015 without using her unified transfer tax credit?

A deduction for contributions by an employee to certain retirement plans.

The tax law contains various tax credits,deductions,and exclusions that are designed to encourage taxpayers to obtain additional education.On what grounds can these provisions be justified?

Currently,the Federal income tax is less progressive than it ever has been in the past.

Mona inherits her mother's personal residence,which she converts to a furnished rent house.These changes should affect the amount of ad valorem property taxes levied on the properties.

The principal objective of the FUTA tax is to provide some measure of retirement security.

Unlike FICA,FUTA requires that employers comply with state as well as Federal rules.

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

Property can be transferred within the family group by gift or at death.One motivation for preferring the gift approach is:

A Federal excise tax is no longer imposed on admission to theaters.

To mitigate the effect of the annual accounting period concept,the tax law permits the carryforward to other years of the excess charitable contributions of a particular year.

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within the family unit.

A tax credit for amounts spent to furnish care for children while the parent is at work.

Tax credits for home improvements that conserve energy.

The tax law provides various tax credits,deductions,and exclusions that are designed to encourage taxpayers to obtain additional education.These provisions can be justified on both economic and equity grounds.