Test bank for south western federal taxation comprehensive volume

TestlbanklIncomelTax



CHAPTER1: AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FEDERAL TAX LAW
l l l l l l l l l l l




1. ThelratificationloflthelSixteenthlAmendmentltolthelU.S.lConstitutionlwaslnecessaryltolvalidatelthelFede
rallincomeltaxlonlcorporations.
a. True
b. False


ANSWER: False
RATIONALE:l ThelSixteenthlAmendmentlvalidatedlonlyltheltaxlonlindividuals.lThelincomeltaxlonlcorporationslhadlb
eenlpreviouslylsanctionedlbylthelcourts.


2. BeforelthelSixteenthlAmendmentltolthelConstitutionlwaslratified,ltherelwaslnolvalidlFederallincomeltaxlo
nlindividuals.
a. True
b. False


ANSWER: False
RATIONALE:
TherelexistedlalFederallincomeltaxlduringlthelCivillWarlthatlwaslsanctionedlbylthelU.S.lSupr
emelCourt.


3. Thelfirstlincomeltaxlonlindividualsl(afterlthelratificationloflthelSixteenthlAmendmentltolthelCons
titution)lleviedltaxlrateslfromlallowlofl2%ltolalhighlofl6%.
a. True
b. False


ANSWER: True


4. ThelFederallincomeltaxlonlindividualslgenerateslmorelrevenuelthanlthelFederallincomeltaxlonlcorp
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,orations.




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,a. True
b. False


ANSWER: True


5. ThelpayasyougolfeatureloflthelFederallincomeltaxlonlindividualslconformsltolAdamlSmith’slcanonloflcerta
inty.
a. True
b. False


ANSWER: False
RATIONALE:l Pay-as-you-
golrefersltolthelwithholdinglprovisionslapplicableltolwageslandlotherltypesloflincomelandladdslconvenienceltoltheltaxl
system.


6. Becauselthellawlislcomplicated,lmostlindividualltaxpayerslarelnotlableltolcompleteltheirlFederallinco
meltaxlreturnslwithoutloutsidelassistance.
a. True
b. False


ANSWER: True
RATIONALE:l Approximatelyl60%luseltaxlreturnlpreparers,lwhilelslightlylmorelthanl32%lpurchaseltaxlreturnlsoftware.
7. ThelFICAltaxl(Medicarelcomponent)lonlwageslislprogressivelsinceltheltaxlduelincreaseslaslwageslincre
ase.
a. True
b. False


ANSWER: False
RATIONALE:l ThelFICAltaxl(Medicarelcomponent)lislproportionallbecauselthelratelislconstantlregardlessloflthelwagesl
earned.



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, 8. ThelFederallestatelandlgiftltaxeslarelexamplesloflprogressiveltaxes.
a. True
b. False


ANSWER: True


9. ThelFederallexciseltaxlonlcigaretteslislanlexampleloflalproportionalltax.
a. True
b. False


ANSWER: True
RATIONALE:l Theltaxlislalflatl$1.01lperlpack.


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


ANSWER: False
RATIONALE:l Currently,lthelFederallincomeltaxlhaslsixlrates.lAtloneltime,litlhadltwolrates.


11. Monalinheritslherlmother’slpersonallresidence,lwhichlshelconvertsltolalfurnishedlrentlhouse.lTheselchan
geslshouldlaffectlthelamountlofladlvaloremlpropertyltaxeslleviedlonlthelproperties.
a. True
b. False


ANSWER: True
RATIONALE:lConversionlfromlresidentialltolrentalluselwilllincreaseltheltaxes.lFurthermore,lMona’slmotherlmaylhav
elhadlalseniorlcitizenlexemptionlonlthelproperty,lwhichlwilllnollongerlbelappropriate.lLastly,lthelfurnishingslinlthel
rentlhouselcouldlnowlbelsubjectltolanladlvaloremltaxlonlpersonalty.



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