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




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Chap 01 - 2026

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
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




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,Name: Class: Date:

Chap 01 - 2026

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
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




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, Name: Class: Date:

Chap 01 - 2026

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
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




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