South-Western Federal Taxation 2025:
Individual Income Taxes, 48th Edition by James Young Complete All Chapters A+
Chapter 01 20252 Individuals
Answers2at2the2end2of2each2chapter
Indicate whether the statement is2 true or false.
1. Sales made over the internet are not2exempt2from the application of a general sales (or use) tax.
a. True
b. False
2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
The220% negligence penalty will apply to $25,000.
a. True
b. False
3. Ultimately, most taxes are paid by individuals.
a. True
b. False
4. Even if property tax rates are not2changed, the amount of ad valorem2taxes imposed on realty may not remainthe same.
a. True
b. False
5. The principal objective of the FUTA2tax2is to provide some measure of retirement security.
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance onthe2
part of taxpayers.
a. True
b. False
7. A safe2 and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state2 thatlev
ies no such taxes.
a. True
b. False
8. A2calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects2an overpay
ment2of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The refund need not2
include interest.
a. True
b. False
9. A tax2 cut enacted by Congress that contains a sunset provision will make2the tax cut temporary.
a. True
b. False
Page 1
,Name: Class: Date:
Chapter 01 2025 Individuals
10. For Federal income tax2purposes, there never has been a general amnesty period.
a. True
b. False
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who2is subject2to both foreign and U.S. income taxe
s on the2same income is allowed either a deduction or a credit2for the foreign tax paid.
a. True
b. False
12. Because it2is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gain inthe
year the installment sale occurs.
a. True
b. False
13. The2amount of a taxpayer’s2itemized deductions will increase the chance2of being audited by the IRS.
a. True
b. False
14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has2not2
made a taxable gift.
a. True
b. False
15. For omissions from gross income in excess of 25% of that2reported, there is no2statute of limitations on ad
ditional income tax assessments by the IRS.
a. True
b. False
16. Stealth taxes have2the effect2of generating additional taxes from all taxpayers.
a. True
b. False
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the propert
y, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no2gain is recognized due2to the application of t
he wherewithal to2pay concept.
a. True
b. False
18. An inheritance2tax is a tax2on a decedent’s right to2pass property at death.
a. True
b. False
19. When interest2is charged on a deficiency, any part2of a month counts as2a full month.
a. True
b. False
Page 2
,Name: Class: Date:
Chapter 01 2025 Individuals
20. The majority of IRS audits are handled by correspondence.
a. True
b. False
21. The ratification of the Sixteenth Amendment2to the2U.S. Constitution was necessary to2validate the Federal inc
ome tax on corporations.
a. True
b. False
22. One of the major reasons for the enactment of the Federal estate tax2 was to prevent2large amounts of wealth fr
om being accumulated within a family unit.
a. True
b. False
23. Under state amnesty programs, all delinquent2and unpaid income2taxes are forgiven.
a. True
b. False
24. In preparing an income tax2return, the use of a client’s2estimates is not permitted.
a. True
b. False
25. The Federal estate and gift taxes are examples of progressive rate taxes.
a. True
b. False
26. During any month in which both the failure to2file penalty and the failure to pay penalty apply, the2failure to filepenalt
y is increased by the amount of the failure2to pay penalty.
a. True
b. False
27. For the negligence2penalty to apply, the underpayment must be caused by intentional disregard of rules2andre
gulations without intent to defraud.
a. True
b. False
28. Under Clint’s2will, all of his property passes2to either the Lutheran Church or to2his spouse. No Federal estate tax
will be due on Clint’s death.
a. True
b. False
29. For state2income tax2purposes, some2states allow a credit2for dependents rather than a deduction.
a. True
b. False
Page 3
, Name: Class: Date:
Chapter 01 2025 Individuals
30. If a special agent becomes involved in the audit of a return, this indicates that the IRS suspects that fraud isinvolved.
a. True
b. False
31. As a matter of administrative convenience, the IRS would prefer to have Congress decrease (rather than in
crease) the amount of the standard deduction allowed to individual taxpayers.
a. True
b. False
32. The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.
a. True
b. False
33. Some states use their state2income tax2return as a means of collecting unpaid use tax.
a. True
b. False
34. An office audit by the IRS takes place2at2the office of the taxpayer.
a. True
b. False
35. The IRS is required to redetermine the interest2rate on underpayments and overpayments once a year.
a. True
b. False
36. The IRS agent2auditing the return will issue an RAR2even if the taxpayer owes no additional taxes.
a. True
b. False
37. When a state decouples from a Federal tax2provision, it2means that2this provision will not apply for state incometax2purposes.
a. True
b. False
38. If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments beginson
the date the return is filed.
a. True
b. False
39. The annual exclusion, currently $18,000, is available for gift and estate tax purposes.
a. True
b. False
Page 4
Individual Income Taxes, 48th Edition by James Young Complete All Chapters A+
Chapter 01 20252 Individuals
Answers2at2the2end2of2each2chapter
Indicate whether the statement is2 true or false.
1. Sales made over the internet are not2exempt2from the application of a general sales (or use) tax.
a. True
b. False
2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
The220% negligence penalty will apply to $25,000.
a. True
b. False
3. Ultimately, most taxes are paid by individuals.
a. True
b. False
4. Even if property tax rates are not2changed, the amount of ad valorem2taxes imposed on realty may not remainthe same.
a. True
b. False
5. The principal objective of the FUTA2tax2is to provide some measure of retirement security.
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance onthe2
part of taxpayers.
a. True
b. False
7. A safe2 and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state2 thatlev
ies no such taxes.
a. True
b. False
8. A2calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects2an overpay
ment2of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The refund need not2
include interest.
a. True
b. False
9. A tax2 cut enacted by Congress that contains a sunset provision will make2the tax cut temporary.
a. True
b. False
Page 1
,Name: Class: Date:
Chapter 01 2025 Individuals
10. For Federal income tax2purposes, there never has been a general amnesty period.
a. True
b. False
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who2is subject2to both foreign and U.S. income taxe
s on the2same income is allowed either a deduction or a credit2for the foreign tax paid.
a. True
b. False
12. Because it2is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gain inthe
year the installment sale occurs.
a. True
b. False
13. The2amount of a taxpayer’s2itemized deductions will increase the chance2of being audited by the IRS.
a. True
b. False
14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has2not2
made a taxable gift.
a. True
b. False
15. For omissions from gross income in excess of 25% of that2reported, there is no2statute of limitations on ad
ditional income tax assessments by the IRS.
a. True
b. False
16. Stealth taxes have2the effect2of generating additional taxes from all taxpayers.
a. True
b. False
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the propert
y, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no2gain is recognized due2to the application of t
he wherewithal to2pay concept.
a. True
b. False
18. An inheritance2tax is a tax2on a decedent’s right to2pass property at death.
a. True
b. False
19. When interest2is charged on a deficiency, any part2of a month counts as2a full month.
a. True
b. False
Page 2
,Name: Class: Date:
Chapter 01 2025 Individuals
20. The majority of IRS audits are handled by correspondence.
a. True
b. False
21. The ratification of the Sixteenth Amendment2to the2U.S. Constitution was necessary to2validate the Federal inc
ome tax on corporations.
a. True
b. False
22. One of the major reasons for the enactment of the Federal estate tax2 was to prevent2large amounts of wealth fr
om being accumulated within a family unit.
a. True
b. False
23. Under state amnesty programs, all delinquent2and unpaid income2taxes are forgiven.
a. True
b. False
24. In preparing an income tax2return, the use of a client’s2estimates is not permitted.
a. True
b. False
25. The Federal estate and gift taxes are examples of progressive rate taxes.
a. True
b. False
26. During any month in which both the failure to2file penalty and the failure to pay penalty apply, the2failure to filepenalt
y is increased by the amount of the failure2to pay penalty.
a. True
b. False
27. For the negligence2penalty to apply, the underpayment must be caused by intentional disregard of rules2andre
gulations without intent to defraud.
a. True
b. False
28. Under Clint’s2will, all of his property passes2to either the Lutheran Church or to2his spouse. No Federal estate tax
will be due on Clint’s death.
a. True
b. False
29. For state2income tax2purposes, some2states allow a credit2for dependents rather than a deduction.
a. True
b. False
Page 3
, Name: Class: Date:
Chapter 01 2025 Individuals
30. If a special agent becomes involved in the audit of a return, this indicates that the IRS suspects that fraud isinvolved.
a. True
b. False
31. As a matter of administrative convenience, the IRS would prefer to have Congress decrease (rather than in
crease) the amount of the standard deduction allowed to individual taxpayers.
a. True
b. False
32. The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.
a. True
b. False
33. Some states use their state2income tax2return as a means of collecting unpaid use tax.
a. True
b. False
34. An office audit by the IRS takes place2at2the office of the taxpayer.
a. True
b. False
35. The IRS is required to redetermine the interest2rate on underpayments and overpayments once a year.
a. True
b. False
36. The IRS agent2auditing the return will issue an RAR2even if the taxpayer owes no additional taxes.
a. True
b. False
37. When a state decouples from a Federal tax2provision, it2means that2this provision will not apply for state incometax2purposes.
a. True
b. False
38. If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments beginson
the date the return is filed.
a. True
b. False
39. The annual exclusion, currently $18,000, is available for gift and estate tax purposes.
a. True
b. False
Page 4
