b. False 22. The portion of a shareholder- employee's salary that is classified as unreasonable has no effect on the amount of the shareholder employee's gross income but results in an increase in the taxable income of the corporation. a. True b. False 23. The cash method can always be used by a corporation even if inventory and cost of goods sold are a significant income-producing factor in the business. a. True b. False 24. James is in the business of debt collection. He purchased a $20,000 account receivable from Green Corporation for $15,000. During the year, he collected $17,000 in final settl ement of the account. James can take a $2,000 bad debt deduction in the current year, a. True b. False 25. A cash basis taxpayer must include as income the procee ds from the sale of an account receivable to a collection agency. a. True b. False Part II- Multiple Choice questions (26 points) Which, if any, of the following taxes are proportional (rathe r than progressive)? a. State general sales tax b. Federal individual income tax c. Federal estate tax d. Federal gift tax c. All of these 2. Taxes not imposed by the Federal government include: a. Tobacco excise tax. b. Customs duties (tariffs on imports). c. Tax on rental cars. d. Gas guzzler tax. e. None of these 1. 3. Burt and Lisa are married and live in a common law state. Burt wants to make gifts to their four children in 2019. What is the maximum amount of the annual exclusion they will be allowed for these gifts? a. S15,000 b. $30,000 c. $60,000. d. $120,000 e. None of these CILITA d. S120,000 e. None of these 4. A characteristic of FUTA is that: a. It is imposed on both employer and employee. b. It is imposed solely on the employee. c. Compliance requires following guidelines issued by both state and Federal regulatory authorities d. It is applicable to spouses of employees but not to any ch ildren under age 18 e. None of these S. Both economic and social considerations can be used to jus tify: a. Favorable tax treatment for accident and health plans pro vided for employees and financed by employers b. Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials). c. Various tax credits, deductions, and exclusions that are d esigned to encourage taxpayers to obtain additional education. d. Allowance of a deduction for state and local income taxe spaid e. None of these 6. Which of the following taxes is paid only by the employer? a. FICA b. FUTA c. Social Security tax d. Medicare tax 7. Subtitle A of the Internal Revenue Code covers which of th e following taxes? a. Income taxes b. Estate and gift taxes c. Excise taxes d. Employment taxes c. All of these 8. Which of the following is not an administrative source of ta x law? a. Field Service Advice b. Revenue Procedure c. Technical Advice Memoranda d. General Counsel Memorandum e. All of these are administrative sources. 9. Which item may not be cited as a precedent? a. Regulations b. Temporary Regulations c. Technical Advice Memoranda d. U.S. District Court decision e. None of these 10