Test Bank for South-Western Federal Taxation 2025,Corporations, Partnerships, Estates and Trusts 46th Edition by Nellen

TestnbanknIncomenTax



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




1. ThenratificationnofnthenSixteenthnAmendmentntonthenU.S.nConstitutionnwasnnecessaryntonvalidatenthen
Federalnincomentaxnonncorporations.
a. True
b. False


ANSWER: False
RATIONALE:n ThenSixteenthnAmendmentnvalidatednonlynthentaxnonnindividuals.nThenincomentaxnonncorporationsnh
adnbeennpreviouslynsanctionednbynthencourts.


2. BeforenthenSixteenthnAmendmentntonthenConstitutionnwasnratified,ntherenwasnnonvalidnFederalnincomen
taxnonnindividuals.
a. True
b. False


ANSWER: False
RATIONALE:
TherenexistednanFederalnincomentaxnduringnthenCivilnWarnthatnwasnsanctionednbynthenU.S.n
SupremenCourt.


3. Thenfirstnincomentaxnonnindividualsn(afternthenratificationnofnthenSixteenthnAmendmentntonthen
Constitution)nleviedntaxnratesnfromnanlownofn2%ntonanhighnofn6%.
a. True
b. False


ANSWER: True


4. ThenFederalnincomentaxnonnindividualsngeneratesnmorenrevenuenthannthenFederalnincomentaxnonn
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,corporations.




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,a. True
b. False


ANSWER: True


5. ThenpayasyougonfeaturenofnthenFederalnincomentaxnonnindividualsnconformsntonAdamnSmith’sncanonnofn
certainty.
a. True
b. False


ANSWER: False
RATIONALE:n Pay-as-you-
gonrefersntonthenwithholdingnprovisionsnapplicablentonwagesnandnotherntypesnofnincomenandnaddsnconveniencenton
thentaxnsystem.


6. Becausenthenlawnisncomplicated,nmostnindividualntaxpayersnarennotnablentoncompletentheirnFederaln
incomentaxnreturnsnwithoutnoutsidenassistance.
a. True
b. False


ANSWER: True
RATIONALE:n Approximatelyn60%nusentaxnreturnnpreparers,nwhilenslightlynmorenthann32%npurchasentaxnreturnnsoftwar
e.
7. ThenFICAntaxn(Medicarencomponent)nonnwagesnisnprogressivensincenthentaxnduenincreasesnasnwagesn
increase.
a. True
b. False


ANSWER: False
RATIONALE:n ThenFICAntaxn(Medicarencomponent)nisnproportionalnbecausenthenratenisnconstantnregardlessnofnthenwag
esnearned.


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, 8. ThenFederalnestatenandngiftntaxesnarenexamplesnofnprogressiventaxes.
a. True
b. False


ANSWER: True


9. ThenFederalnexcisentaxnonncigarettesnisnannexamplenofnanproportionalntax.
a. True
b. False


ANSWER: True
RATIONALE:n Thentaxnisnanflatn$1.01npernpack.


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


ANSWER: False
RATIONALE:n Currently,nthenFederalnincomentaxnhasnsixnrates.nAtnonentime,nitnhadntwonrates.


11. Monaninheritsnhernmother’snpersonalnresidence,nwhichnshenconvertsntonanfurnishednrentnhouse.nThesen
changesnshouldnaffectnthenamountnofnadnvaloremnpropertyntaxesnleviednonnthenproperties.
a. True
b. False


ANSWER: True
RATIONALE:nConversionnfromnresidentialntonrentalnusenwillnincreasenthentaxes.nFurthermore,nMona’snmothernm
aynhavenhadnanseniorncitizennexemptionnonnthenproperty,nwhichnwillnnonlongernbenappropriate.nLastly,nthenfurni
shingsninnthenrentnhousencouldnnownbensubjectntonannadnvaloremntaxnonnpersonalty.



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