Test Bank for South-Western Federal Taxation 2026: Comprehensive, 49th Edition by James C Young, Persellin

Test Bank for South-Western Federal Taxation 2026: Comprehensive 49e by James C. Young




Chap 01 - 2026
Indicate whether the statement is true or false.
____ 1. Some states use their state income tax return as a means of collecting unpaid use tax.
a. True
b. False
ANSWER: True

____ 2. A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.
a. True
b. False
ANSWER: False

____ 3. Sally’s neighbor often brags that his employer often pays him in cash “off the books” to save him taxes. Sally is
tired of hearing this and contacts the IRS to report the neighbor. If this tip results in taxes collected by the IRS,
Sally will likely receive an award of a portion of the tax and penalties collected.
a. True
b. False
ANSWER: True

____ 4. Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.
a. True
b. False
ANSWER: False

____ 5. For Federal income tax purposes, there never has been a general amnesty period.
a. True
b. False
ANSWER: True

____ 6. States impose either a state income tax or a general sales tax, but not both types of taxes.
a. True
b. False
ANSWER: False

____ 7. The Federal estate and gift taxes are examples of progressive rate taxes.
a. True
b. False
ANSWER: True

____ 8. The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam Smith’s canon (principle)
of certainty.
a. True
b. False
ANSWER: False




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,Name: _________________________________ Class: ____________________ Date: _____________


____ 9. Two persons who live in the same state but in different counties may not be subject to the same general sales tax
rate.
a. True
b. False
ANSWER: True

____ 10. There is a Federal excise tax on hotel occupancy.
a. True
b. False
ANSWER: False

____ 11. If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments begins on
the date the return is filed.
a. True
b. False
ANSWER: False

____ 12. The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on
business use personalty.
a. True
b. False
ANSWER: True

____ 13. The majority of IRS audits are handled by correspondence.
a. True
b. False
ANSWER: True

____ 14. Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.
a. True
b. False
ANSWER: True

____ 15. The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal
income tax on corporations.
a. True
b. False
ANSWER: False

____ 16. For individual taxpayers, the interest rate for income tax refunds (overpayments) is the same as that applicable to
assessments (underpayments).
a. True
b. False
ANSWER: True

____ 17. 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.
a. True
b. False
ANSWER: True


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,Name: _________________________________ Class: ____________________ Date: _____________


____ 18. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gain in
the year the installment sale occurs.
a. True
b. False
ANSWER: False

____ 19. In preparing a tax return, all questions on the return must be answered.
a. True
b. False
ANSWER: False

____ 20. The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.
a. True
b. False
ANSWER: True

____ 21. The value added tax (VAT) has not had wide acceptance in the international community.
a. True
b. False
ANSWER: False

____ 22. A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received
and not when earned is consistent with generally accepted accounting principles.
a. True
b. False
ANSWER: False

____ 23. When Congress enacts a tax cut that is phased in over a period of years, revenue neutrality is achieved.
a. True
b. False
ANSWER: False

____ 24. The formula for the Federal income tax on corporations is the same as that applicable to individuals.
a. True
b. False
ANSWER: False

____ 25. One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from
being accumulated within a family unit.
a. True
b. False
ANSWER: True

____ 26. A parent employs her twin daughters, age 17, in her sole proprietorship. The daughters are not subject to FICA
coverage.
a. True
b. False
ANSWER: True




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, Name: _________________________________ Class: ____________________ Date: _____________


____ 27. If an income tax return is not filed by a taxpayer, there is no statute of limitations on assessments of tax by the
IRS.
a. True
b. False
ANSWER: True

____ 28. 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.
a. True
b. False
ANSWER: True

____ 29. A flat tax is an example of a proportional rate tax.
a. True
b. False
ANSWER: True

____ 30. The estate tax and gift tax are unified in the sense that they use the same rate schedule and share the same unified
tax credit.
a. True
b. False
ANSWER: True

____ 31. Under the wherewithal to pay concept, a taxpayer who receives property as a gift is required to recognize income
in the year of receipt.
a. True
b. False
ANSWER: False

____ 32. The Federal income tax includes provisions that are designed to encourage certain activities deemed to be socially
desirable.
a. True
b. False
ANSWER: True

____ 33. The concept of tax equity is objective and not subject to debate.
a. True
b. False
ANSWER: False

____ 34. The IRS issues Revenue Rulings to provide guidance to taxpayers on specific tax questions.
a. True
b. False
ANSWER: True

____ 35. A taxpayer who disagrees with an IRS assessment may bypass the Tax Court and go directly to a U.S. District
Court.
a. True
b. False
ANSWER: True


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