, TESTBANK for South-Western Federal Taxation
2022 Comprehensive 45th Edition James C. Young
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
True / False
1. Because the law is complicated, most individual taxpayers are not able to complete their Federal
income tax returns without outside assistance.
a. True
b. False
ANSWER: True
2. 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
3. Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income
tax on individuals.
a. True
b. False
ANSWER: False
4. The first income tax on individuals (after the ratification of the Sixteenth Amendment to the
Constitution) levied tax rates from a low of 1% to a high of 6%.
a. True
b. False
ANSWER: True
5. The Federal income tax on individuals generates more revenue than the Federal income tax on
corporations.
a. True
b. False
ANSWER: True
6. 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
7. The Medicare component of the FICA tax (1.45% on wages) is progressive since the tax due increases
as wages increase.
a. True
b. False
ANSWER: False
8. The Federal estate and gift taxes are examples of progressive rate taxes.
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
a. True
b. False
ANSWER: True
9. The Federal excise tax on gasoline has a proportional effect on all taxpayers (that is, neither
progressive or regressive).
a. True
b. False
ANSWER: False
10. Currently, the Federal corporate income tax is less progressive than the individual income tax.
a. True
b. False
ANSWER: True
11. Mona inherits her mother’s personal residence, which she converts to a furnished rental house. These
changes should affect the amount of ad valorem property taxes levied on the properties.
a. True
b. False
ANSWER: True
12. 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
13. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not
remain the same.
a. True
b. False
ANSWER: True
14. 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
15. An excise tax is often used to try to influence behavior.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
16. There is a Federal excise tax on hotel occupancy.
a. True
b. False
ANSWER: False
17. The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the
United States.
a. True
b. False
ANSWER: False
18. The amount of the state excise taxes on gasoline varies from state to state.
a. True
b. False
ANSWER: True
19. Not all of the states that impose a general sales tax also have a use tax.
a. True
b. False
ANSWER: False
20. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
a. True
b. False
ANSWER: True
21. 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
22. States impose either a state income tax or a general sales tax, but not both types of taxes.
a. True
b. False
ANSWER: False
23. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a
state that levies no such taxes.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
24. On transfers by death, the Federal government relies on an estate tax, while states may impose an
estate tax, an inheritance tax, both taxes, or neither tax.
a. True
b. False
ANSWER: True
25. An inheritance tax is a tax on a decedent’s right to pass property at death.
a. True
b. False
ANSWER: False
26. 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
27. Under Clint’s will, all of his property passes to either the Lutheran Church or to his wife. No Federal
estate tax will be due on Clint’s death.
a. True
b. False
ANSWER: True
28. Under the usual state inheritance tax, two heirs, a cousin and a son of the deceased, would not be
taxed at the same rate.
a. True
b. False
ANSWER: True
29. The annual exclusion, currently $15,000, is available for gift and estate tax purposes.
a. True
b. False
ANSWER: False
30. In 2021, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for
$50,000. José has not made a taxable gift.
a. True
b. False
ANSWER: False
31. Julius, a married taxpayer, makes gifts to each of his six children. A maximum of twelve annual
exclusions could be allowed as to these gifts.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
ANSWER: True
32. One of the motivations for making a gift is to save on income taxes.
a. True
b. False
ANSWER: True
33. The formula for the Federal income tax on corporations is the same as that applicable to individuals.
a. True
b. False
ANSWER: False
34. A state income tax can be imposed on nonresident taxpayers who earn income within the state on an
itinerant basis.
a. True
b. False
ANSWER: True
35. For state income tax purposes, some states allow a credit for dependents rather than a deduction.
a. True
b. False
ANSWER: True
36. Some states use their state income tax return as a means of collecting unpaid sales and use taxes.
a. True
b. False
ANSWER: True
37. No state may offer an income tax amnesty program more than once.
a. True
b. False
ANSWER: False
38. For Federal income tax purposes, there never has been a general amnesty period.
a. True
b. False
ANSWER: True
39. Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
40. When a state decouples from a Federal tax provision, it means that this provision will not apply for
state income tax purposes.
a. True
b. False
ANSWER: True
41. The principal objective of the FUTA tax is to provide some measure of retirement security.
a. True
b. False
ANSWER: False
42. 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
43. A parent employs his twin daughters, age 17, in his sole proprietorship. The daughters are not subject
to FICA coverage.
a. True
b. False
ANSWER: True
44. Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.
a. True
b. False
ANSWER: True
45. A major advantage of a flat tax type of income tax is its simplicity.
a. True
b. False
ANSWER: True
46. The value added tax (VAT) has not had wide acceptance in the international community.
a. True
b. False
ANSWER: False
47. If more IRS audits are producing a higher number of no change results, this indicates increased
compliance on the part of taxpayers.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
48. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
a. True
b. False
ANSWER: True
49. An office audit by the IRS takes place at the office of the taxpayer.
a. True
b. False
ANSWER: False
50. The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.
a. True
b. False
ANSWER: True
51. If a special agent becomes involved in the audit of a return, this indicates that the IRS suspects that
fraud is involved.
a. True
b. False
ANSWER: True
52. 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
53. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations
on additional income tax assessments by the IRS.
a. True
b. False
ANSWER: False
54. 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
55. If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
56. The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.
a. True
b. False
ANSWER: False
57. A calendar year taxpayer files his 2020 Federal income tax return on March 4, 2021. The return
reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid
on May 16, 2021. The refund need not include interest.
a. True
b. False
ANSWER: True
58. 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
59. During any month in which both the failure to file penalty and the failure to pay penalty apply, the
failure to file penalty is increased by the amount of the failure to pay penalty.
a. True
b. False
ANSWER: False
60. When interest is charged on a deficiency, any part of a month counts as a full month.
a. True
b. False
ANSWER: False
61. For the negligence penalty to apply, the underpayment must be caused by intentional disregard of
rules and regulations without intent to defraud.
a. True
b. False
ANSWER: True
62. 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
63. If a tax deficiency is attributable to fraud, the negligence penalty will not be imposed.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 8
2022 Comprehensive 45th Edition James C. Young
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
True / False
1. Because the law is complicated, most individual taxpayers are not able to complete their Federal
income tax returns without outside assistance.
a. True
b. False
ANSWER: True
2. 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
3. Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income
tax on individuals.
a. True
b. False
ANSWER: False
4. The first income tax on individuals (after the ratification of the Sixteenth Amendment to the
Constitution) levied tax rates from a low of 1% to a high of 6%.
a. True
b. False
ANSWER: True
5. The Federal income tax on individuals generates more revenue than the Federal income tax on
corporations.
a. True
b. False
ANSWER: True
6. 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
7. The Medicare component of the FICA tax (1.45% on wages) is progressive since the tax due increases
as wages increase.
a. True
b. False
ANSWER: False
8. The Federal estate and gift taxes are examples of progressive rate taxes.
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
a. True
b. False
ANSWER: True
9. The Federal excise tax on gasoline has a proportional effect on all taxpayers (that is, neither
progressive or regressive).
a. True
b. False
ANSWER: False
10. Currently, the Federal corporate income tax is less progressive than the individual income tax.
a. True
b. False
ANSWER: True
11. Mona inherits her mother’s personal residence, which she converts to a furnished rental house. These
changes should affect the amount of ad valorem property taxes levied on the properties.
a. True
b. False
ANSWER: True
12. 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
13. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not
remain the same.
a. True
b. False
ANSWER: True
14. 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
15. An excise tax is often used to try to influence behavior.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
16. There is a Federal excise tax on hotel occupancy.
a. True
b. False
ANSWER: False
17. The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the
United States.
a. True
b. False
ANSWER: False
18. The amount of the state excise taxes on gasoline varies from state to state.
a. True
b. False
ANSWER: True
19. Not all of the states that impose a general sales tax also have a use tax.
a. True
b. False
ANSWER: False
20. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
a. True
b. False
ANSWER: True
21. 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
22. States impose either a state income tax or a general sales tax, but not both types of taxes.
a. True
b. False
ANSWER: False
23. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a
state that levies no such taxes.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
24. On transfers by death, the Federal government relies on an estate tax, while states may impose an
estate tax, an inheritance tax, both taxes, or neither tax.
a. True
b. False
ANSWER: True
25. An inheritance tax is a tax on a decedent’s right to pass property at death.
a. True
b. False
ANSWER: False
26. 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
27. Under Clint’s will, all of his property passes to either the Lutheran Church or to his wife. No Federal
estate tax will be due on Clint’s death.
a. True
b. False
ANSWER: True
28. Under the usual state inheritance tax, two heirs, a cousin and a son of the deceased, would not be
taxed at the same rate.
a. True
b. False
ANSWER: True
29. The annual exclusion, currently $15,000, is available for gift and estate tax purposes.
a. True
b. False
ANSWER: False
30. In 2021, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for
$50,000. José has not made a taxable gift.
a. True
b. False
ANSWER: False
31. Julius, a married taxpayer, makes gifts to each of his six children. A maximum of twelve annual
exclusions could be allowed as to these gifts.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 4
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
ANSWER: True
32. One of the motivations for making a gift is to save on income taxes.
a. True
b. False
ANSWER: True
33. The formula for the Federal income tax on corporations is the same as that applicable to individuals.
a. True
b. False
ANSWER: False
34. A state income tax can be imposed on nonresident taxpayers who earn income within the state on an
itinerant basis.
a. True
b. False
ANSWER: True
35. For state income tax purposes, some states allow a credit for dependents rather than a deduction.
a. True
b. False
ANSWER: True
36. Some states use their state income tax return as a means of collecting unpaid sales and use taxes.
a. True
b. False
ANSWER: True
37. No state may offer an income tax amnesty program more than once.
a. True
b. False
ANSWER: False
38. For Federal income tax purposes, there never has been a general amnesty period.
a. True
b. False
ANSWER: True
39. Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 5
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
40. When a state decouples from a Federal tax provision, it means that this provision will not apply for
state income tax purposes.
a. True
b. False
ANSWER: True
41. The principal objective of the FUTA tax is to provide some measure of retirement security.
a. True
b. False
ANSWER: False
42. 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
43. A parent employs his twin daughters, age 17, in his sole proprietorship. The daughters are not subject
to FICA coverage.
a. True
b. False
ANSWER: True
44. Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.
a. True
b. False
ANSWER: True
45. A major advantage of a flat tax type of income tax is its simplicity.
a. True
b. False
ANSWER: True
46. The value added tax (VAT) has not had wide acceptance in the international community.
a. True
b. False
ANSWER: False
47. If more IRS audits are producing a higher number of no change results, this indicates increased
compliance on the part of taxpayers.
a. True
b. False
ANSWER: False
Copyright Cengage Learning. Powered by Cognero. Page 6
,Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
48. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
a. True
b. False
ANSWER: True
49. An office audit by the IRS takes place at the office of the taxpayer.
a. True
b. False
ANSWER: False
50. The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.
a. True
b. False
ANSWER: True
51. If a special agent becomes involved in the audit of a return, this indicates that the IRS suspects that
fraud is involved.
a. True
b. False
ANSWER: True
52. 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
53. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations
on additional income tax assessments by the IRS.
a. True
b. False
ANSWER: False
54. 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
55. If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.
a. True
b. False
ANSWER: True
Copyright Cengage Learning. Powered by Cognero. Page 7
, Name: Class: Date:
Ch 01 An Introduction to Taxation and Understanding the Federal Tax Law
56. The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.
a. True
b. False
ANSWER: False
57. A calendar year taxpayer files his 2020 Federal income tax return on March 4, 2021. The return
reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid
on May 16, 2021. The refund need not include interest.
a. True
b. False
ANSWER: True
58. 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
59. During any month in which both the failure to file penalty and the failure to pay penalty apply, the
failure to file penalty is increased by the amount of the failure to pay penalty.
a. True
b. False
ANSWER: False
60. When interest is charged on a deficiency, any part of a month counts as a full month.
a. True
b. False
ANSWER: False
61. For the negligence penalty to apply, the underpayment must be caused by intentional disregard of
rules and regulations without intent to defraud.
a. True
b. False
ANSWER: True
62. 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
63. If a tax deficiency is attributable to fraud, the negligence penalty will not be imposed.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 8
