Exam 1

Question 1

Tax

Answer 1

Payment that is required by a government agency but unrelated to any benefit

Question 2

flat tax

Answer 2

a single rate is applied

Question 3

Graduated Tax

Answer 3

Each bracket is taxed a different rate

Question 4

Marginal Tax Rate

Answer 4

Incremental tax paid on incremental amount of deductions

Question 5

Average Tax Rate

Answer 5

Average level of taxation on each of dollar of taxable income

Question 6

Effective Tax Rate

Answer 6

Average rate of taxation for each dollar of total income

Question 7

Proportional Tax Rate

Answer 7

Imposes a constant tax rate throughout the tax base (flat tax)

Question 8

Progressive Tax Rate

Answer 8

Imposes an increasing marginal tax rate as the tax base increases

Question 9

Federal Taxes

Answer 9

Income, Employment/Unemployment, Excise, and Transfer Taxes

Question 10

Explicit Tax

Answer 10

Directly Assessed

Question 11

Various Criteria for Tax Systems

Answer 11

Sufficiency
Equity
Certainty
Convenience
Economy

Question 12

6 Month Extension

Answer 12

Granted automatically by the IRS, extension only for filing, not for payment.

Question 13

Penalty for Late filing

Answer 13

5% tax due each month payment isn’t recieved

Question 14

Statute of Limitations

Answer 14

3 years after either the due date or when it was filed

Question 15

DIF

Answer 15

Assigns score to each tac return probability

Question 16

Document Perfection Program

Answer 16

Checks all returns for mathematical errors

Question 17

Information Matching Program

Answer 17

Compares info from the tax return with info submitted to the IRS

Question 18

Types of Audits

Answer 18

Correspondence, Office, and field

Question 19

30-day Letter

Answer 19

Must either request a conference with an appeals officer or agree to proposed adjustment

Question 20

90-day Letter

Answer 20

Either pay proposed deficiency or file a petition in the US Tax court yo hear case

Question 21

Tax Court

Answer 21

National court of tax experts

Question 22

US District Court

Answer 22

Gerneralist, may have a jury

Question 23

US Court of Federal Claims

Answer 23

All types of claims against the government

Question 24

US Circuit of Appeal

Answer 24

Appealed from Tax court

Question 25

3 Legislative Authorities

Answer 25

US constitution IRC Tax Treaties

Question 26

Tax Legislative Process

Answer 26

US HoR-> US Senate ->UD President | Joint Committee Conference

Question 27

Lowest Authority

Answer 27

US District courts, US court of federal claims, and the US Tax Court

Question 28

3 Forms of Regulation

Answer 28

Final Temporary Proposed

Question 29

Tax Research Steps

Answer 29

``` Understand the fact Identify Issues Locate Relevant Authorities Analyze Authorities Document and communicate results ```

Question 30

Adjusted Gross Income

Answer 30

Gross income - AGI above line deductions

Question 31

Taxable income

Answer 31

Adjusted Gros income - AGI below line deduction

Question 32

Ordinary Income

Answer 32

Taxed at Ordinary rates

Question 33

Capital Income

Answer 33

Gains/losses on disposition

Question 34

Qualified Dividend

Answer 34

Generally taxed at 15%

Question 35

Deduction

Answer 35

decrease Taxable income

Question 36

Tax Credits

Answer 36

Decreases Tax Payable

Question 37

Tax prepayments

Answer 37

Withholdings Estimated Tax Payments Overpaid taxes

Question 38

Dependency Req

Answer 38

US citizen or resident not file jointly must be considered qualified

Question 39

Qualified Child

Answer 39

Relationship Age Residence Support

Question 40

Qualified Relative

Answer 40

Relationship Support Gross Income

Question 41

Multiple Support Agreement

Answer 41

Must provide 10% or more support and a signed agreement

Question 42

Timing Strategies

Answer 42

When the income is taxed or deducted affects PV | Tax rate changes the benfits

Question 43

Timing when Rates are Constant

Answer 43

Either Accelerate deductions or defer taxable income

Question 44

Timing Strategy with changes

Answer 44

TR^Calc Optimal tax stat for deduction and income | TRv Accelerate deductions into earlier years

Question 45

Limitations on Timing strategy

Answer 45

Constructive Doctorine- resticts deferral for cash method Acc Ded = Cash Defer Inc = retain asset

Question 46

Income shifting trategies

Answer 46

Shifting income from high tax rate payers to low tax rate payers

Question 47

Assignment of Income Doctorine

Answer 47

Income to be taxed to the tax payer that actually earns it.

Question 48

Conversion Strategies

Answer 48

Recasting income and expenses recieve the most favorable tax treat,emt

Question 49

Business Purpose Doctrine

Answer 49

Allows IRS to challenge and disallow business expenses for transactions with no underlying business motivation.

Question 50

Step-Transaction Doctrine

Answer 50

Allows the IRS to collapse a series of related transactions into one

Question 51

Substance over Form Doctrine

Answer 51

Allows IRS to Consider the transactions substance regardless of its form to reclassify the transaction according to substance

Question 52

Economic Substance Doctrine

Answer 52

Requires transactions to have 2 req: Must meaningfully change taxpayers economic position Must have substantial purpose for the transaction

Question 53

Realization Principal

Answer 53

Taxpayer engages in transaction w/ third party | Transaction results in measurable change in property

Question 54

From of Reciept

Answer 54

Facilitates the exchange of rights to goods/services

Question 55

Return of Capital Principal

Answer 55

Cost of an asset is it's beginning tax basus

Question 56

Tax benefit Rule

Answer 56

Indiv can claim Deductation in Y1

Question 57

Annual Exclusion Ratio

Answer 57

Original investment/ Expected value of annuity

Question 58

Alimony before 2018

Answer 58

Taxable and deductible