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Exam 1: Introduction to Taxation

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Question 31

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A small business corporation can elect to avoid the corporate income tax.

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Question 32

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Currently,the tax base for the Social Security component of the FICA is not limited to a dollar amount.

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B) False

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Question 33

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A deduction for certain income from manufacturing activities.

As it is consistent with the wherewithal to pay concept,the tax law requires a seller to recognize gain in the year the installment sale occurs.

In 2015,José,a widower,sells land (fair market value of $100,000)to his daughter,Linda,for $50,000.José has not made a taxable gift.

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

Rachel is the sole member of an LLC,and Jordan is the sole shareholder of a C corporation.Both businesses were started in the current year,and each business has a long-term capital gain of $10,000 for the year.Neither business made any distributions during the year.With respect to this information,which of the following statements is correct?

Lucinda is a 60% shareholder in Rhea Corporation,a calendar year S corporation.During the year,Rhea Corporation had gross income of $550,000 and operating expenses of $380,000.In addition,the corporation sold land that had been held for investment purposes for a short-term capital gain of $30,000.During the year,Rhea Corporation distributed $50,000 to Lucinda.With respect to this information,which of the following statements is correct?

Rajib is the sole shareholder of Robin Corporation,a calendar year S corporation.Robin earned net profit of $350,000 ($520,000 gross income - $170,000 operating expenses)and distributed $80,000 to Rajib.Rajib must report Robin Corporation profit of $350,000 on his Federal income tax return.

Which,if any,of the following is a typical characteristic of an ad valorem tax on personalty?

A bribe to the local sheriff,although business related,is not deductible.

In 2013,Deborah became 65 years old.In 2014 she added a swimming pool,and in 2015 she converted the residence to rental property and moved into an assisted living facility.Since 2012,Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

Jason's business warehouse is destroyed by fire.As the insurance proceeds exceed the basis of the property,a gain results.If Jason shortly reinvests the proceeds in a new warehouse,no gain is recognized due to the application of the wherewithal to pay concept.

To lessen,or eliminate,the effect of multiple taxation,a taxpayer who is subject to both foreign and U.S.income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

More rapid expensing for tax purposes of the costs of installing pollution control devices.

Indicate which,if any,statement is incorrect.State income taxes:

Which,if any,of the following transactions will increase a taxing jurisdiction's revenue from the ad valorem tax imposed on real estate?

One of the motivations for making a gift is to save on income taxes.

Donald owns a 45% interest in a partnership that earned $130,000 in the current year.He also owns 45% of the stock in a C corporation that earned $130,000 during the year.Donald received $20,000 in distributions from each of the two entities during the year.With respect to this information,Donald must report $78,500 of income on his individual income tax return for the year.

Which,if any,of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?