Question 1 of 10

Which of the following statements are true? (There are multiple correct answers)

Richard painted his house which saved him $3,000. According to the realization requirement, Richard must recognize $3,000 of income.

A sole proprietorship purchased an asset for $1,000 in 2015 and its value was $1,500 at the end of 2015. In 2016, the sole proprietorship sold the asset for $1,400. The sole proprietorship realized a taxable gain of $400 in 2016 but an economic loss of $100 in 2016.

The Federal excise tax on cigarettes is an example of a proportional tax.

Daniel owned stock that decreased in value by $20,000 during the year, but he did not sell the stock. He earned $45,000 salary, but received only $34,000 because $11,000 in taxes were withheld. Daniel saved $10,000 of his salary and used the remainder for personal living expenses. Daniel's economic income for the year exceeded his gross income for tax purposes.

Mary is a cash basis attorney. In 2015, she performed services in connection with the formation of a corporation and received stock with a value of $4,000 for her services. By the end of the year, the value of the stock had decreased to $2,000. She continued to hold the stock. Mary must recognize $4,000 of gross income from the stock for 2015.

Question 2 of 10

Which of the following statements are true? (There are multiple correct answers)

The cash basis method of accounting is acceptable for tax purposes.

The recovery of a taxpayer's capital investment is included in his/her income.

Tax regulations are issued by the Federal Reserve Bank.

The penalty for failing to pay taxes due is 5% per month up to a maximum of 25% of the taxes due.

Tax legislation bills are considered in the House of Representatives before they are considered in the Senate.

Question 3 of 10

Which of the following statements are true? (There are multiple correct choices and you must select them all in order to get full credit.)

The first Federal corporate income tax was implemented in 1909.

The administrative sources of tax law includes the Sarbanes-Oxley Act.

The first Federal individual income tax was implemented in 1861.

In 2015, 49% of the U.S. government's budget receipts came from individual income taxes.

The process for creating a tax bill begins in the Senate Finance Committee.

Question 4 of 10

Which of the following statements are false? (There are multiple correct choices and you must select them all in order to get full credit.)

One of the objectives of the Federal tax law is to achieve equity within the tax law.

Tax avoidance can lead to fines and jail.

One of the important objectives of the Federal tax law is to regulate the economy and encourage behavior and businesses that are desirable.

The 16th Amendment to the Constitution was ratified in 1913.

Secondary sources of tax law are generally considered to have authority.

Question 5 of 10

Which of the following statements are false? (There are multiple correct answers)

The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

The most recent codification of the Internal Revenue Code occurred in 2013.

According to the IRS, economic income is not considered to be realized income.

According to the IRS, income is taxed when it realized.

The IRS will pay interest to a taxpayer on their tax refund if it is not received within 45 days of when the taxpayer filed his/her return.