TEST BANK
South-Western Federal Taxation 2025: Essentials of Taxation:
Individuals and Business Entities
ANNETTE NELLEN, ANDREW CUCCIA, MARK PERSELLIN, JAMES YOUNG
28th Edition
,TABLE OF CONTENTS
Chapter 1: An lntroduction to Taxation and Understanding the Federal Tax
Law Chapter 2: Working with the Tax Law
Chapter 3: Tax Formula and Tax Determination
Chapter 4: Gross Income: Concepts and
Inclusions Chapter 5: Gross Income: Exclusions
Chapter 6: Deductions and Losses: In General 7-1 Bad Debts
Chapter It Depreciation, Cost Recovery, Amortization, and
Depletion
Chapter 9: Deductions: Employee and Self-Employed-Related
Expenses Chapter l 0: Deductions and Losses: Certain Itemized
Deductions Chapter 11: Investor Losses
Chapter 12: Tax Credits and Payments
Chapter 13: Property Transactions: Determination of Gain or Loss, Basis Considerations. and
Nontaxab Chapter 14: Propc1tyTransactions: Capital Gains aod Losses,§ 1231. and Recapture
Provisions Chapter 15: The Deduction for Qualified Business Income for Noncorporate Taxpayers
Chapter 16: Accounting Periods and Methods
Chapter 17: Corporations: Introduction and Operating Rules
Chapter 18: Corporations: Organization and Capital
Stnrcture
Chapter 19: Corporations: Distributions Not in Complete Liquidation
Chapter 20: Corporatio11s: Distributions in Complete Liquidation and an Overview of
Reorganizations Chapter 21: Partnerships: Formation, Operation. and Basis
Chapter 22: Partnerships: Distributions,Transfer of Interests. and
Terminations Chapter 23: S Corporations
Chapter 24: Taxes in the Financial Statements
Chapter 25: Exempt Entities
Chapter 26: lvfultistate Corporate Taxation
Chapter 27: Taxation of lntemational
Transactions Chapter 28: Tax Practice and
Ethics
Chapter 29: The Federal Gift and Estate Taxes
Chapter 30: Income Taxation ofTrusts and
Estates
Page2
,Chapter 01 2025 - Comprehensive
Indicate whether the statement is true or
false.
1. If more IRS audits are producing a higher number of no change results, this indicates increased
compliance on the part of taxpayers.
True
False
2. The first income tax on individuals (after the ratification of the Sixteenth Amendment to the
Constitution) levied tax rates from a low of 1% to a high of 6%.
True
False
3. Stealth taxes have the effect of generating additional taxes from all taxpayers.
True
False
4. If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.
True
False
5. Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.
True
False
6. The Federal estate and gift taxes are examples of progressive rate taxes.
True
False
7. The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.
True
False
8. The Federal income tax on individuals generates more revenue than the Federal income tax on
corporations.
True
False
9. To mitigate the effect of the annual accounting period concept, the tax law permits the
carryforward of excess charitable contributions of a particular year to other years.
True
False
10. Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.
True
False
Page 1
, Name: Class: Date:
Chapter 01 2025 -
11. If a special agent becomes involved in the audit of a return, this indicates that the IRS suspects
that fraud is involved.
True
False
12. Two persons who live in the same state but in different counties may not be subject to the
same general sales tax rate.
True
False
13. Under the usual state inheritance tax, two heirs, a cousin and a son of the deceased, would not
be taxed at the same rate.
True
False
14. Various tax provisions encourage the creation of certain types of retirement plans. Such
provisions can be justified on both economic and social grounds.
True
False
15. A parent employs her twin daughters, age 17, in her sole proprietorship. The daughters are not
subject to FICA coverage.
True
False
16. For omissions from gross income in excess of 25% of that reported, there is no statute of
limitations on additional income tax assessments by the IRS.
True
False
17. Not all of the states that impose a general sales tax also have a use tax.
True
False
18. States impose either a state income tax or a general sales tax, but not both types of taxes.
True
False
19. The amount of the state excise taxes on gasoline varies from state to state.
True
False
20. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to
negligence.
The 20% negligence penalty will apply to $25,000. True
False
Page 2
South-Western Federal Taxation 2025: Essentials of Taxation:
Individuals and Business Entities
ANNETTE NELLEN, ANDREW CUCCIA, MARK PERSELLIN, JAMES YOUNG
28th Edition
,TABLE OF CONTENTS
Chapter 1: An lntroduction to Taxation and Understanding the Federal Tax
Law Chapter 2: Working with the Tax Law
Chapter 3: Tax Formula and Tax Determination
Chapter 4: Gross Income: Concepts and
Inclusions Chapter 5: Gross Income: Exclusions
Chapter 6: Deductions and Losses: In General 7-1 Bad Debts
Chapter It Depreciation, Cost Recovery, Amortization, and
Depletion
Chapter 9: Deductions: Employee and Self-Employed-Related
Expenses Chapter l 0: Deductions and Losses: Certain Itemized
Deductions Chapter 11: Investor Losses
Chapter 12: Tax Credits and Payments
Chapter 13: Property Transactions: Determination of Gain or Loss, Basis Considerations. and
Nontaxab Chapter 14: Propc1tyTransactions: Capital Gains aod Losses,§ 1231. and Recapture
Provisions Chapter 15: The Deduction for Qualified Business Income for Noncorporate Taxpayers
Chapter 16: Accounting Periods and Methods
Chapter 17: Corporations: Introduction and Operating Rules
Chapter 18: Corporations: Organization and Capital
Stnrcture
Chapter 19: Corporations: Distributions Not in Complete Liquidation
Chapter 20: Corporatio11s: Distributions in Complete Liquidation and an Overview of
Reorganizations Chapter 21: Partnerships: Formation, Operation. and Basis
Chapter 22: Partnerships: Distributions,Transfer of Interests. and
Terminations Chapter 23: S Corporations
Chapter 24: Taxes in the Financial Statements
Chapter 25: Exempt Entities
Chapter 26: lvfultistate Corporate Taxation
Chapter 27: Taxation of lntemational
Transactions Chapter 28: Tax Practice and
Ethics
Chapter 29: The Federal Gift and Estate Taxes
Chapter 30: Income Taxation ofTrusts and
Estates
Page2
,Chapter 01 2025 - Comprehensive
Indicate whether the statement is true or
false.
1. If more IRS audits are producing a higher number of no change results, this indicates increased
compliance on the part of taxpayers.
True
False
2. The first income tax on individuals (after the ratification of the Sixteenth Amendment to the
Constitution) levied tax rates from a low of 1% to a high of 6%.
True
False
3. Stealth taxes have the effect of generating additional taxes from all taxpayers.
True
False
4. If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.
True
False
5. Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.
True
False
6. The Federal estate and gift taxes are examples of progressive rate taxes.
True
False
7. The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.
True
False
8. The Federal income tax on individuals generates more revenue than the Federal income tax on
corporations.
True
False
9. To mitigate the effect of the annual accounting period concept, the tax law permits the
carryforward of excess charitable contributions of a particular year to other years.
True
False
10. Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.
True
False
Page 1
, Name: Class: Date:
Chapter 01 2025 -
11. If a special agent becomes involved in the audit of a return, this indicates that the IRS suspects
that fraud is involved.
True
False
12. Two persons who live in the same state but in different counties may not be subject to the
same general sales tax rate.
True
False
13. Under the usual state inheritance tax, two heirs, a cousin and a son of the deceased, would not
be taxed at the same rate.
True
False
14. Various tax provisions encourage the creation of certain types of retirement plans. Such
provisions can be justified on both economic and social grounds.
True
False
15. A parent employs her twin daughters, age 17, in her sole proprietorship. The daughters are not
subject to FICA coverage.
True
False
16. For omissions from gross income in excess of 25% of that reported, there is no statute of
limitations on additional income tax assessments by the IRS.
True
False
17. Not all of the states that impose a general sales tax also have a use tax.
True
False
18. States impose either a state income tax or a general sales tax, but not both types of taxes.
True
False
19. The amount of the state excise taxes on gasoline varies from state to state.
True
False
20. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to
negligence.
The 20% negligence penalty will apply to $25,000. True
False
Page 2
