Test Bank for Income Tax Fundamentals 2024, 42nd Edition by Whittenburg.pdf

TestxbankxIncomexTax




CHAPTER 1: AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FEDERAL TAX LAW
x x x x x x x x x x x




1. ThexratificationxofxthexSixteenthxAmendmentxtoxthexU.S.xConstitutionxwasxnecessaryxtoxvalidatexthexF
ederalxincomextaxxonxcorporations.
a. True
b. False


ANSWER: False
RATIONALE:x ThexSixteenthxAmendmentxvalidatedxonlyxthextaxxonxindividuals.xThexincomextaxxonxcorporationsxha
dxbeenxpreviouslyxsanctionedxbyxthexcourts.


2. BeforexthexSixteenthxAmendmentxtoxthexConstitutionxwasxratified,xtherexwasxnoxvalidxFederalxincomext
axxonxindividuals.
a. True
b. False


ANSWER: False
RATIONALE:
TherexexistedxaxFederalxincomextaxxduringxthexCivilxWarxthatxwasxsanctionedxbyxthexU.S.xS
upremexCourt.


3. Thexfirstxincomextaxxonxindividualsx(afterxthexratificationxofxthexSixteenthxAmendmentxtoxthexC
onstitution)xleviedxtaxxratesxfromxaxlowxofx2%xtoxaxhighxofx6%.
a. True
b. False


ANSWER: True


4. ThexFederalxincomextaxxonxindividualsxgeneratesxmorexrevenuexthanxthexFederalxincomextaxxonxc
1

,TestxbankxIncomexTax
orporations.




2

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a. True
b. False


ANSWER: True


5. ThexpayasyougoxfeaturexofxthexFederalxincomextaxxonxindividualsxconformsxtoxAdamxSmith’sxcanonxofxc
ertainty.
a. True
b. False


ANSWER: False
RATIONALE:x Pay-as-you-
goxrefersxtoxthexwithholdingxprovisionsxapplicablextoxwagesxandxotherxtypesxofxincomexandxaddsxconveniencextoxt
hextaxxsystem.


6. Becausexthexlawxisxcomplicated,xmostxindividualxtaxpayersxarexnotxablextoxcompletextheirxFederalxi
ncomextaxxreturnsxwithoutxoutsidexassistance.
a. True
b. False


ANSWER: True
RATIONALE:x Approximatelyx60%xusextaxxreturnxpreparers,xwhilexslightlyxmorexthanx32%xpurchasextaxxreturnxsoftware.
7. ThexFICAxtaxx(Medicarexcomponent)xonxwagesxisxprogressivexsincexthextaxxduexincreasesxasxwagesxi
ncrease.
a. True
b. False


ANSWER: False
RATIONALE:x ThexFICAxtaxx(Medicarexcomponent)xisxproportionalxbecausexthexratexisxconstantxregardlessxofxthexwagesx
earned.



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, TestxbankxIncomexTax



8. ThexFederalxestatexandxgiftxtaxesxarexexamplesxofxprogressivextaxes.
a. True
b. False


ANSWER: True


9. ThexFederalxexcisextaxxonxcigarettesxisxanxexamplexofxaxproportionalxtax.
a. True
b. False


ANSWER: True
RATIONALE:x Thextaxxisxaxflatx$1.01xperxpack.


10. Currently,xthexFederalxincomextaxxisxlessxprogressivexthanxitxeverxhasxbeenxinxthexpast.
a. True
b. False


ANSWER: False
RATIONALE:x Currently,xthexFederalxincomextaxxhasxsixxrates.xAtxonextime,xitxhadxtwoxrates.


11. Monaxinheritsxherxmother’sxpersonalxresidence,xwhichxshexconvertsxtoxaxfurnishedxrentxhouse.xThesexc
hangesxshouldxaffectxthexamountxofxadxvaloremxpropertyxtaxesxleviedxonxthexproperties.
a. True
b. False


ANSWER: True
RATIONALE:xConversionxfromxresidentialxtoxrentalxusexwillxincreasexthextaxes.xFurthermore,xMona’sxmotherx
mayxhavexhadxaxseniorxcitizenxexemptionxonxthexproperty,xwhichxwillxnoxlongerxbexappropriate.xLastly,xthexf
urnishingsxinxthexrentxhousexcouldxnowxbexsubjectxtoxanxadxvaloremxtaxxonxpersonalty.



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