TESTj BANKj FOR
j South-WesternjFederaljTaxationj2025:jIndividualjIncomejTaxesj48ejYoung
Chapterj1-20
Chapterj 01j2025jIndividuals
AnswersjIncluded
Indicatej whetherj thej statementj isj truej orj false.
1.jSalesjmadejoverjthejinternetjarejnotjexemptjfromjthejapplicationjofjajgeneraljsalesj(orjuse)jtax.
a. True
b. False
2.jUponjauditjbyjthejIRS,jFaithjisjassessedjajdeficiencyjofj$40,000jofjwhichj$25,000jisjattributablejtojnegligence.
Thej20%jnegligencejpenaltyjwilljapplyjtoj$25,000.
a. True
b. False
3.jUltimately,jmostjtaxesjarejpaidjbyjindividuals.
a. True
b. False
4.jEvenjifjpropertyjtaxjratesjarejnotjchanged,jthejamountjofjadjvaloremjtaxesjimposedjonjrealtyjmayjnotjremainjthej
same.
a. True
b. False
5.jThejprincipaljobjectivejofjthejFUTAjtaxjisjtojprovidejsomejmeasurejofjretirementjsecurity.
a. True
b. False
6.jIfjmorejIRSjauditsjarejproducingjajhigherjnumberjofjnoj changejresults,jthisjindicatesjincreasedjcompliancejonjthe
jpartjofjtaxpayers.
a. True
b. False
7.jAjsafejandjeasyjwayjforjajtaxpayerjtojavoidjlocaljandjstatejsalesjtaxesjisjtojmakejthejpurchasejinjajstatejthatjlevi
esjnojsuchjtaxes.
a. True
b. False
8.jAjcalendarjyearjtaxpayerjfilesjhisj2023jFederaljincomejtaxjreturnjonjMarchj4,j2024.jThejreturnjreflectsjanjoverp
aymentjofj$6,000,jandjthejtaxpayerjrequestsjajrefundjofjthisjamount.jThejrefundjisjpaidjonjMayj16,j2024.jThejrefu
ndjneedjnotjincludejinterest.
a.j True
b.jFalse
9.jAjtaxjcutjenactedjbyjCongressjthatjcontainsjajsunsetj provisionjwilljmakejthejtaxjcutjtemporary.
a.j True
b.jFalse
,10.jForjFederaljincomejtaxjpurposes,jtherejneverjhasjbeenjajgeneraljamnestyjperiod.
a. True
b. False
11.jTojlessenjorjeliminatejthejeffectjofjmultiplejtaxation,jajtaxpayerjwhojisjsubjectjtojbothjforeignjandjU.S.jincomejtax
esjonjthejsamejincomejisjallowedjeitherjajdeductionjorjajcreditjforjthejforeignjtaxjpaid.
a. True
b. False
12.jBecausejitjisjconsistentjwithjthejwherewithaljtojpayjconcept,jthejtaxjlawjrequiresjajsellerjtojrecognizejajgainjinjthej
yearjthejinstallmentjsalejoccurs.
a. True
b. False
13.jThejamountjofjajtaxpayer’sjitemizedjdeductionsjwilljincreasejthejchancejofjbeingjauditedjbyjthejIRS.
a. True
b. False
14.jInj2024,jJosé,jajwidower,jsellsjlandj(fairjmarketjvaluejofj$100,000)jtojhisjdaughter,jLinda,jforj$50,000.jJoséjhasjnotj
madejajtaxablejgift.
a. True
b. False
15.jForjomissionsjfromjgrossjincomejinjexcessjofj25%jofjthatjreported,jtherejisjnojstatutejofjlimitationsjonjadd
itionaljincomejtaxjassessmentsjbyjthejIRS.
a. True
b. False
16.jStealthjtaxesjhavejthejeffectjofjgeneratingjadditionaljtaxesjfromjalljtaxpayers.
a. True
b. False
17.jJason’sjbusinessjwarehousejisjdestroyedjbyjfire.jBecausejthejinsurancejproceedsjexceedjthejbasisjofjthejproperty,j
ajgainjresults.jIfjJasonjshortlyjreinvestsjthejproceedsjinjajnewjwarehouse,jnojgainjisjrecognizedjduejtojthejapplicati
onjofjthejwherewithaljtojpayjconcept.
a. True
b. False
18.jAnjinheritancejtaxjisjajtaxjonjajdecedent’sjrightjtojpassjpropertyjatjdeath.
a.j True
b.jFalse
19.jWhenjinterestjisjchargedjonjajdeficiency,janyjpartjofjajmonthjcountsjasjajfulljmonth.
a.j True
b.jFalse
,Name: Class: Date:
Chapterj01j2025jIndividuals
20.jThejmajorityjofjIRSjauditsjarejhandledjbyjcorrespondence.
a. True
b. False
21.jThejratificationjofjthejSixteenthjAmendmentjtojthejU.S.jConstitutionjwasjnecessaryjtojvalidatejthejFederaljinc
omejtaxjonjcorporations.
a. True
b. False
22.jOnejofjthejmajorjreasonsjforjthejenactmentjofjthejFederaljestatejtaxjwasjtojpreventjlargejamountsjofjwealthjfro
mjbeingjaccumulatedjwithinjajfamilyjunit.
a. True
b. False
23.jUnderjstatejamnestyjprograms,jalljdelinquentjandjunpaidjincomejtaxesjarejforgiven.
a. True
b. False
24.jInjpreparingjanjincomejtaxjreturn,jthejusejofjajclient’sjestimatesjisjnotjpermitted.
a. True
b. False
25.jThejFederalj estatejandjgiftj taxesjarejexamplesj ofj progressivej ratej taxes.
a. True
b. False
26.jDuringjanyjmonthjinjwhichjbothjthejfailurejtojfilejpenaltyjandjthejfailurejtojpayjpenaltyjapply,jthejfailurejtojfilejpen
altyjisjincreasedjbyjthejamountjofjthejfailurejtojpayjpenalty.
a. True
b. False
27.jForjthejnegligencejpenaltyjtojapply,jthejunderpaymentjmustjbejcausedjbyjintentionaljdisregardjofjrulesjandjre
gulationsjwithoutjintentjtojdefraud.
a. True
b. False
28.jUnderjClint’sjwill,jalljofjhisjpropertyjpassesjtojeitherjthejLutheranjChurchjorjtojhisjspouse.jNojFederaljestatejtaxj
willjbejduejonjClint’sjdeath.
a. True
b. False
29.jForjstatejincomejtaxjpurposes,jsomejstatesjallowjajcreditjforjdependentsjratherjthanjajdeduction.
a. True
b. False
Pagej3
, Name: Class: Date:
Chapterj01j2025jIndividuals
30.jIfjajspecialjagentjbecomesjinvolvedjinjthejauditjofjajreturn,jthisjindicatesjthatjthejIRSjsuspectsjthatjfraudjisjinv
olved.
a. True
b. False
31.jAsjajmatterjofjadministrativejconvenience,jthejIRSjwouldjpreferjtojhavejCongressjdecreasej(ratherjthanjin
crease)jthejamountjofjthejstandardjdeductionjallowedjtojindividualjtaxpayers.
a. True
b. False
32.jThejFederaljincomejtaxjonjindividualsjgeneratesjmorejrevenuejthanjthejFederaljincomejtaxjonjcorporations.
a. True
b. False
33.jSomejstatesjusejtheirjstatejincomejtaxjreturnjasjajmeansjofjcollectingjunpaidjusejtax.
a. True
b. False
34.jAnjofficejauditjbyjthejIRSjtakesjplacejatjthejofficejofjthejtaxpayer.
a. True
b. False
35.jThejIRSjisjrequiredjtojredeterminejthejinterestjratejonjunderpaymentsjandjoverpaymentsjoncejajyear.
a. True
b. False
36.jThejIRSjagentjauditingjthejreturnjwilljissuejanjRARjevenjifjthejtaxpayerjowesjnojadditionaljtaxes.
a. True
b. False
37.jWhenjajstatejdecouplesjfromjajFederaljtaxjprovision,jitjmeansjthatjthisjprovisionjwilljnotjapplyjforjstatejincomejtaxj
purposes.
a. True
b. False
38.jIfjajtaxpayerjfilesjearlyj(i.e.,jbeforejthejduejdatejofjthejreturn),jthejstatutejofjlimitationsjonjassessmentsjbeginsjonjt
hejdatejthejreturnjisjfiled.
a. True
b. False
39.jThejannualjexclusion,jcurrentlyj$18,000,jisjavailablejforjgiftjandjestatejtaxjpurposes.
a. True
b. False
Pagej4
j South-WesternjFederaljTaxationj2025:jIndividualjIncomejTaxesj48ejYoung
Chapterj1-20
Chapterj 01j2025jIndividuals
AnswersjIncluded
Indicatej whetherj thej statementj isj truej orj false.
1.jSalesjmadejoverjthejinternetjarejnotjexemptjfromjthejapplicationjofjajgeneraljsalesj(orjuse)jtax.
a. True
b. False
2.jUponjauditjbyjthejIRS,jFaithjisjassessedjajdeficiencyjofj$40,000jofjwhichj$25,000jisjattributablejtojnegligence.
Thej20%jnegligencejpenaltyjwilljapplyjtoj$25,000.
a. True
b. False
3.jUltimately,jmostjtaxesjarejpaidjbyjindividuals.
a. True
b. False
4.jEvenjifjpropertyjtaxjratesjarejnotjchanged,jthejamountjofjadjvaloremjtaxesjimposedjonjrealtyjmayjnotjremainjthej
same.
a. True
b. False
5.jThejprincipaljobjectivejofjthejFUTAjtaxjisjtojprovidejsomejmeasurejofjretirementjsecurity.
a. True
b. False
6.jIfjmorejIRSjauditsjarejproducingjajhigherjnumberjofjnoj changejresults,jthisjindicatesjincreasedjcompliancejonjthe
jpartjofjtaxpayers.
a. True
b. False
7.jAjsafejandjeasyjwayjforjajtaxpayerjtojavoidjlocaljandjstatejsalesjtaxesjisjtojmakejthejpurchasejinjajstatejthatjlevi
esjnojsuchjtaxes.
a. True
b. False
8.jAjcalendarjyearjtaxpayerjfilesjhisj2023jFederaljincomejtaxjreturnjonjMarchj4,j2024.jThejreturnjreflectsjanjoverp
aymentjofj$6,000,jandjthejtaxpayerjrequestsjajrefundjofjthisjamount.jThejrefundjisjpaidjonjMayj16,j2024.jThejrefu
ndjneedjnotjincludejinterest.
a.j True
b.jFalse
9.jAjtaxjcutjenactedjbyjCongressjthatjcontainsjajsunsetj provisionjwilljmakejthejtaxjcutjtemporary.
a.j True
b.jFalse
,10.jForjFederaljincomejtaxjpurposes,jtherejneverjhasjbeenjajgeneraljamnestyjperiod.
a. True
b. False
11.jTojlessenjorjeliminatejthejeffectjofjmultiplejtaxation,jajtaxpayerjwhojisjsubjectjtojbothjforeignjandjU.S.jincomejtax
esjonjthejsamejincomejisjallowedjeitherjajdeductionjorjajcreditjforjthejforeignjtaxjpaid.
a. True
b. False
12.jBecausejitjisjconsistentjwithjthejwherewithaljtojpayjconcept,jthejtaxjlawjrequiresjajsellerjtojrecognizejajgainjinjthej
yearjthejinstallmentjsalejoccurs.
a. True
b. False
13.jThejamountjofjajtaxpayer’sjitemizedjdeductionsjwilljincreasejthejchancejofjbeingjauditedjbyjthejIRS.
a. True
b. False
14.jInj2024,jJosé,jajwidower,jsellsjlandj(fairjmarketjvaluejofj$100,000)jtojhisjdaughter,jLinda,jforj$50,000.jJoséjhasjnotj
madejajtaxablejgift.
a. True
b. False
15.jForjomissionsjfromjgrossjincomejinjexcessjofj25%jofjthatjreported,jtherejisjnojstatutejofjlimitationsjonjadd
itionaljincomejtaxjassessmentsjbyjthejIRS.
a. True
b. False
16.jStealthjtaxesjhavejthejeffectjofjgeneratingjadditionaljtaxesjfromjalljtaxpayers.
a. True
b. False
17.jJason’sjbusinessjwarehousejisjdestroyedjbyjfire.jBecausejthejinsurancejproceedsjexceedjthejbasisjofjthejproperty,j
ajgainjresults.jIfjJasonjshortlyjreinvestsjthejproceedsjinjajnewjwarehouse,jnojgainjisjrecognizedjduejtojthejapplicati
onjofjthejwherewithaljtojpayjconcept.
a. True
b. False
18.jAnjinheritancejtaxjisjajtaxjonjajdecedent’sjrightjtojpassjpropertyjatjdeath.
a.j True
b.jFalse
19.jWhenjinterestjisjchargedjonjajdeficiency,janyjpartjofjajmonthjcountsjasjajfulljmonth.
a.j True
b.jFalse
,Name: Class: Date:
Chapterj01j2025jIndividuals
20.jThejmajorityjofjIRSjauditsjarejhandledjbyjcorrespondence.
a. True
b. False
21.jThejratificationjofjthejSixteenthjAmendmentjtojthejU.S.jConstitutionjwasjnecessaryjtojvalidatejthejFederaljinc
omejtaxjonjcorporations.
a. True
b. False
22.jOnejofjthejmajorjreasonsjforjthejenactmentjofjthejFederaljestatejtaxjwasjtojpreventjlargejamountsjofjwealthjfro
mjbeingjaccumulatedjwithinjajfamilyjunit.
a. True
b. False
23.jUnderjstatejamnestyjprograms,jalljdelinquentjandjunpaidjincomejtaxesjarejforgiven.
a. True
b. False
24.jInjpreparingjanjincomejtaxjreturn,jthejusejofjajclient’sjestimatesjisjnotjpermitted.
a. True
b. False
25.jThejFederalj estatejandjgiftj taxesjarejexamplesj ofj progressivej ratej taxes.
a. True
b. False
26.jDuringjanyjmonthjinjwhichjbothjthejfailurejtojfilejpenaltyjandjthejfailurejtojpayjpenaltyjapply,jthejfailurejtojfilejpen
altyjisjincreasedjbyjthejamountjofjthejfailurejtojpayjpenalty.
a. True
b. False
27.jForjthejnegligencejpenaltyjtojapply,jthejunderpaymentjmustjbejcausedjbyjintentionaljdisregardjofjrulesjandjre
gulationsjwithoutjintentjtojdefraud.
a. True
b. False
28.jUnderjClint’sjwill,jalljofjhisjpropertyjpassesjtojeitherjthejLutheranjChurchjorjtojhisjspouse.jNojFederaljestatejtaxj
willjbejduejonjClint’sjdeath.
a. True
b. False
29.jForjstatejincomejtaxjpurposes,jsomejstatesjallowjajcreditjforjdependentsjratherjthanjajdeduction.
a. True
b. False
Pagej3
, Name: Class: Date:
Chapterj01j2025jIndividuals
30.jIfjajspecialjagentjbecomesjinvolvedjinjthejauditjofjajreturn,jthisjindicatesjthatjthejIRSjsuspectsjthatjfraudjisjinv
olved.
a. True
b. False
31.jAsjajmatterjofjadministrativejconvenience,jthejIRSjwouldjpreferjtojhavejCongressjdecreasej(ratherjthanjin
crease)jthejamountjofjthejstandardjdeductionjallowedjtojindividualjtaxpayers.
a. True
b. False
32.jThejFederaljincomejtaxjonjindividualsjgeneratesjmorejrevenuejthanjthejFederaljincomejtaxjonjcorporations.
a. True
b. False
33.jSomejstatesjusejtheirjstatejincomejtaxjreturnjasjajmeansjofjcollectingjunpaidjusejtax.
a. True
b. False
34.jAnjofficejauditjbyjthejIRSjtakesjplacejatjthejofficejofjthejtaxpayer.
a. True
b. False
35.jThejIRSjisjrequiredjtojredeterminejthejinterestjratejonjunderpaymentsjandjoverpaymentsjoncejajyear.
a. True
b. False
36.jThejIRSjagentjauditingjthejreturnjwilljissuejanjRARjevenjifjthejtaxpayerjowesjnojadditionaljtaxes.
a. True
b. False
37.jWhenjajstatejdecouplesjfromjajFederaljtaxjprovision,jitjmeansjthatjthisjprovisionjwilljnotjapplyjforjstatejincomejtaxj
purposes.
a. True
b. False
38.jIfjajtaxpayerjfilesjearlyj(i.e.,jbeforejthejduejdatejofjthejreturn),jthejstatutejofjlimitationsjonjassessmentsjbeginsjonjt
hejdatejthejreturnjisjfiled.
a. True
b. False
39.jThejannualjexclusion,jcurrentlyj$18,000,jisjavailablejforjgiftjandjestatejtaxjpurposes.
a. True
b. False
Pagej4
