Chapter 1, Problem 20P

Which of the following is not a true statement regarding revenues from various types of nonexchange transactions?   Derived tax revenues occur as a result of sales and or income tax.   Imposed nonexchange revenues consist of only fines and penalties assessed by the governing agency.   Government mandated nonexchange transactions includes grants from the federal government to the local public-school system for a free lunch program.   Voluntary nonexchange transactions can originate from a governmental agency or private citizen organization.   Imposed nonexchange transactions revenue recognition is made in the time period when the resulting resources are required to be used or in the first period in which use is permitted.

Congress uses the tax code to influence our behavior. Examples include deductions for mortgage interest and property taxes to steer people to home ownership instead of renting. Tax credits for purchasing products that use alternative energy are another incentive. Likewise, deductions for charitable contributions encourage charitable donations. Is this a good (i.e., proper) way for Congress to achieve economic objectives? Can you identify other tax deductions or tax credits that encourage particular behaviors?

Which of the following statements are TRUE?(i) Interest expense incurred on loan to purchase motor cars for salesmen’s use is deductible as the salesmen use the cars only for meetings with customers and suppliers.(ii) Expenses which qualify for special deduction under Section 14Q relates to capital expenditure which do not qualify for capital allowances claim.(iii) Donation of computers to institutions of public character by an individual is not deductible.

Which of the following statements is (are) correct? (x)  Part of the administrative burden of a tax is the cost of implementing and administering government programs that use the tax revenue that is collected (y)  A tax loophole occurs when tax laws give preferential treatment to specific types of behavior. (z)  A mortgage interest deduction would be considered a tax loophole because it allows home purchasers to reduce their tax liability when they pay mortgage interest. A. (x), (y) and (z) B. (x) and (y) only C. (x) and (z) only D. (y) and (z) only E. (y) only

Which is an incorrect statement regarding taxes? *       a. Taxes are necessary for the continued existence of the government.       b. The obligation to pay tax does not rest upon the privilege enjoyed by or the protection afforded to the citizen of the government but upon the necessity of money for the support of the state.       c. There should be personal benefit enjoyed from the government before one is required to pay tax.       d. Taxes should be collected without unnecessary delay but its collection should not be tainted with arbitrariness.       e. Answer not given

Which of the following are not deductible by a CPA who prepares tax returns? a. Subscription to the Kiplinger Tax letter b. Subscription to CCH service online c.Dues to the country club to entertain clients d. Dues to the California Society of CPAs

Congress chose to exempt certain income from taxation, such as scholarships, gifts, life insurance proceeds, and employee fringe benefits. Given the primary purpose of IRC is to raise revenue for the government, why do you think Congress would provide for these and other exceptions?

These are involuntary fees levied on individuals or corporations and imposed by the government —whether local, regional, or national to finance government activities. a. Taxes b. Excise Taxes c. Property Tax d. VAT

Which of the following will be considered as tax evasion?   Reducing tax by paying gift aid donations    Reducing tax by buying an electric car so that first year allowance is claimed   By not declaring a source of income and the actual income intentionally   By utilizing a loophole in the tax system without violating the tax law