Income Tax Exam I – Blaylock Exam Questions With Correct Answers
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Course
Income Tax
Institution
Income Tax
Income Tax Exam I – Blaylock Exam
Questions With Correct Answers
Purpose of a tax system - answer1. Raise revenue for government functions and services 2.
encourage/discourage certain behaviors by providing economic incentives to engage in that behavior
(ex. Save money, not smoke)
Calculatin...
Income Tax Exam I – Blaylock Exam
Questions With Correct Answers
Purpose of a tax system - answer✔1. Raise revenue for government functions and services 2.
encourage/discourage certain behaviors by providing economic incentives to engage in that behavior
(ex. Save money, not smoke)
Calculating taxes - answer✔Tax base x tax rate (each bracket amount x rate added together)
Types of tax rates - answer✔Progressive, Proportional, Regressive
Progressive - - answer✔increase as the base increases
Proportional - - answer✔same no matter what level of tax base
Regressive - - answer✔decreases as the base increases
Marginal Tax rate - answer✔- amount of tax paid per incremental dollar of income
Average Tax rate - - answer✔taxes paid/tax base
Effective tax rate - - answer✔taxes paid/total (economic) income
Incidence of tax - - answer✔who bears the economic burden of the tax Depends on the nature of the tax
and how elastic the demand is Inelastic - customer Elastic - producer
How to evaluate tax system - answer✔Sufficient, Equitable, Certain, Convenient, Efficient
Sources of tax law and their importance - answer✔Primary sources
Primary Sources of Tax Law - - answer✔Laws written by Congress, regulations by TD, Court rulings
Tax legislation process - answer✔Treasury department is primarily responsible for implementing tax
laws (carry a lot of authority)
Tax Legislation Path - answer✔House of ways/means → Consideration of House → Senate Finance →
Consideration of Senate →
Either to president or joint conference committee and back to house & senate → incorporated into code
if approved by president - answer✔
Revenue rulings - - answer✔IRS' interpretation of a specific fact pattern that they believe may be
broadly applicable
Private letter rulings - - answer✔issued like revenue rulings but are related to specific procedures the
IRS will follow (involve proposed transactions)
Other IRS publications are - answer✔not viewed as official pronouncements and cannot be relied upon
to avoid penalties
- answer✔
Legislative Treasury regulations - - answer✔congress gives TD authority to write the law
Procedural and interpretive regulations - - answer✔provide TD's official interpretation of the law -
Carries heavy weight but courts can disagree
Proposed regulation - - answer✔have not been through the public comment process and do not carry
the same weight as others
Temporary regs - - answer✔are valid for 3 years and carry the same weight as final regs for those 3 years
Options for pursuing tax cases in court - answer✔Pay additional tax and sue the IRS for a refund in either
District Court or Court of Federal Claims or Not pay tax and petition the tax court to hear their case
District court is - answer✔the only place a jury will hear a case
Only court that can take case if you do not pay tax upfront is - answer✔tax court
cases from court of federal claims can be appealed to - answer✔the federal circuit of the court of
appeals
Court of appeals are only bound to precedence - answer✔within their own circuit
Tax court and District court are appealed to - answer✔Regional circuit of court of appeals
Tax formula/calculation of tax owed - answer✔Tax base x tax rate (each bracket amount x rate added
together)
Gross income - answer✔all income from whatever source derived,
Cash method - - answer✔income is taxable when received
Accrual method - - answer✔income is taxable when service is provided
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