A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of:

A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of:

a. A clear reflection of income result.
b. The tax benefit rule.
c. The arm's length concept.
d. The wherewithal to pay concept.
e. None of these.

Answer: D

Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS)?

Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS)?

a. Penalties are imposed for failure to file a return or pay a tax on time.
b. Prepaid income is taxed in the year received and not in the year earned.
c. Annual adjustments for indexation increases the amount of the standard deduction allowed.
d. Casualty losses must exceed 10% of AGI to be deductible.
e. A deduction is allowed for charitable contributions.

Answer: E

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

a. Nonrecognition of gain allowed for involuntary conversions.
b. Net operating loss carryback and carryover provisions.
c. Carry over of excess charitable contributions.
d. Use of the installment method to recognize gain.
e. Carry over of excess capital losses.

Answer: A

Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:

Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:

a. Political considerations.
b. Economic and social considerations.
c. Promoting administrative feasibility.
d. Encouragement of small business.
e. None of these.

Answer: B

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

a. As mitigating the effect of the annual accounting period concept.
b. As promoting administrative feasibility.
c. By economic considerations.
d. Based on the wherewithal to pay concept.
e. None of these.

Answer: C

Social considerations can be used to justify:

Social considerations can be used to justify:

a. Allowance of a credit for child care expenses.
b. Allowing excess capital losses to be carried over to other years.
c. Allowing accelerated amortization for the cost of installing pollution control facilities.
d. Allowing a Federal income tax deduction for state and local sales taxes.
e. None of these.

Answer: A