TEST BANK FOR South-Western Federal Taxation 2025: Individual Income Taxes, 48th Edition by James Young (All Chapters) Latest 2024 A++

Chapter2 012 20252 Individuals

Answers2at2the2end2of2each2chapter

Indicate2 whether2 the2 statement2 is2 true2 or2 false.
2 2 1.2Sales2made2over2the2internet2are2not2exempt2from2the2application2of2a2general2sales2(or2use)2tax.
a. True
b. False

2 2 2.2Upon2audit2by2the2IRS,2Faith2is2assessed2a2deficiency2of2$40,0002of2which2$25,0002is2attributable2to2negligence.
The220%2negligence2penalty2will2apply2to2$25,000.
a. True
b. False

2 2 3.2Ultimately,2most2taxes2are2paid2by2individuals.
a. True
b. False

2 2 4.2Even2if2property2tax2rates2are2not2changed,2the2amount2of2 ad2 valorem2taxes2imposed2on2realty2may2not2remain2the2same.
a. True
b. False

2 2 5.2The2principal2objective2of2the2FUTA2tax2is2to2provide2some2measure2of2retirement2security.
a. True
b. False
2

2 6.2If2more2IRS2audits2are2producing2a2higher2number2of2no2change2results,2this2indicates2increased2compliance2on2the2

part2of2taxpayers.
a. True
b. False
2

27.2 A2safe2and2easy2way2 for2a2taxpayer2to2avoid2local2and2state2sales2 taxes2is2to2make2the2purchase2in2a2state2 that2lev
ies2no2such2taxes.
a. True
b. False
2

2 8.2A2calendar2year2taxpayer2files2his220232Federal2income2tax2return2on2March24,22024.2The2return2reflects2an2overpay

ment2of2$6,000,2and2the2taxpayer2requests2a2refund2of2this2amount.2The2refund2is2paid2on2May216,22024.2The2refund2need2not2
include2interest.
a. True
b. False

2 2 9.2 A2tax2cut2enacted2by2Congress2that2contains2a2 sunset2 provision2will2make2the2tax2cut2temporary.
a. True
b. False



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Chapter2 012 20252 Individuals

2 2 10.2For2Federal2income2tax2purposes,2there2never2has2been2a2general2amnesty2period.
a. True
b. False
2

2 11.2To2lessen2or2eliminate2the2effect2of2multiple2taxation,2a2taxpayer2who2is2subject2to2both2foreign2and2U.S.2income2taxe

s2on2the2same2income2is2allowed2either2a2deduction2or2a2credit2for2the2foreign2tax2paid.
a. True
b. False
2

2 12.2Because2it2is2consistent2with2the2wherewithal2to2pay2concept,2the2tax2law2requires2a2seller2to2recognize2a2gain2in2the2

year2the2installment2sale2occurs.
a. True
b. False

2 2 13.2The2amount2of2a2taxpayer’s2itemized2deductions2will2increase2the2chance2of2being2audited2by2the2IRS.
a. True
b. False
2

2 14.2In22024,2José,2a2widower,2sells2land2(fair2market2value2of2$100,000)2to2his2daughter,2Linda,2for2$50,000.2José2has2not2

made2a2taxable2gift.
a. True
b. False
2

2 15.2For2omissions2from2gross2income2in2excess2of225%2of2that2reported,2there2is2no2statute2of2limitations2on2ad
ditional2income2tax2assessments2by2the2IRS.
a. True
b. False

2 2 16.2Stealth2taxes2have2the2effect2of2generating2additional2taxes2from2all2taxpayers.
a. True
b. False
2

2 17.2Jason’s2business2warehouse2is2destroyed2by2fire.2Because2the2insurance2proceeds2exceed2the2basis2of2the2propert

y,2a2gain2results.2If2Jason2shortly2reinvests2the2proceeds2in2a2new2warehouse,2no2gain2is2recognized2due2to2the2application2of2t
he2wherewithal2to2pay2concept.
a. True
b. False

2 2 18.2An2inheritance2tax2is2a2tax2on2a2decedent’s2right2to2pass2property2at2death.
a. True
b. False

2 2 19.2When2interest2is2charged2on2a2deficiency,2any2part2of2a2month2counts2as2a2full2month.
a. True
b. False
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2 2 20.2The2majority2of2IRS2audits2are2handled2by2correspondence.
a. True
b. False
2

2 21.2The2ratification2of2the2Sixteenth2Amendment2to2the2U.S.2Constitution2was2necessary2to2validate2the2Federal2inc

ome2tax2on2corporations.
a. True
b. False
2

222.2One2of2the2major2reasons2for2the2enactment2of2the2Federal2estate2tax2was2to2prevent2large2amounts2of2wealth2fr
om2being2accumulated2within2a2family2unit.
a. True
b. False

2 2 23.2Under2state2amnesty2programs,2all2delinquent2and2unpaid2income2taxes2are2forgiven.
a. True
b. False

2 2 24.2In2preparing2an2income2tax2return,2the2use2of2a2client’s2estimates2is2 not2permitted.
a. True
b. False

2 2 25.2 The2 Federal2 estate2 and2 gift2 taxes2 are2 examples2 of2 progressive2 rate2 taxes.
a. True
b. False
2

2 26.2During2any2month2in2which2both2the2failure2to2file2penalty2and2the2failure2to2pay2penalty2apply,2the2failure2to2file2penalt

y2is2increased2by2the2amount2of2the2failure2to2pay2penalty.
a. True
b. False
2

2 27.2For2the2negligence2penalty2to2apply,2the2underpayment2must2be2caused2by2intentional2disregard2of2rules2and2re

gulations2without2intent2to2defraud.
a. True
b. False
2

2 28.2Under2Clint’s2will,2all2of2his2property2passes2to2either2the2Lutheran2Church2or2to2his2spouse.2No2Federal2estate2tax2

will2be2due2on2Clint’s2death.
a. True
b. False

2 2 29.2For2state2income2tax2purposes,2some2states2allow2a2credit2for2dependents2rather2than2a2deduction.
a. True
b. False

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2 2 30.2If2a2special2agent2becomes2involved2in2the2audit2of2a2return,2this2indicates2that2the2IRS2suspects2that2fraud2is2involved.
a. True
b. False
2

2 31.2As2a2matter2of2administrative2convenience,2the2IRS2would2prefer2to2have2Congress2decrease2(rather2than2in

crease)2the2amount2of2the2standard2deduction2allowed2to2individual2taxpayers.
a. True
b. False

2 2 32.2The2Federal2income2tax2on2individuals2generates2more2revenue2than2the2Federal2income2tax2on2corporations.
a. True
b. False

2 2 33.2Some2states2use2their2state2income2tax2return2as2a2means2of2collecting2unpaid2use2tax.
a. True
b. False

2 2 34.2An2office2audit2by2the2IRS2takes2place2at2the2office2of2the2taxpayer.
a. True
b. False

2 2 35.2The2IRS2is2required2to2redetermine2the2interest2rate2on2underpayments2and2overpayments2once2a2year.
a. True
b. False

2 2 36.2The2IRS2agent2auditing2the2return2will2issue2an2RAR2even2if2the2taxpayer2owes2no2additional2taxes.
a. True
b. False

2 2 37.2When2a2state2decouples2from2a2Federal2tax2provision,2it2means2that2this2provision2will2not2apply2for2state2income2tax2purposes.
a. True
b. False
2

38.2If2a2taxpayer2files2early2(i.e.,2before2the2due2date2of2the2return),2the2statute2of2limitations2on2assessments2begins2on2
2

the2date2the2return2is2filed.
a. True
b. False

2 2 39.2The2annual2exclusion,2currently2$18,000,2is2available2for2gift2and2estate2tax2purposes.
a. True
b. False




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Chapter2 012 20252 Individuals

2

40.2The2Medicare2component2of2the2FICA2tax2(1.45%2on2wages)2is2 progressive2 because2 the2 tax2 due2 increases2 as2w
2

ages2increase.
a. True
b. False

2 2 41.2Bracket2creep2will2not2exist2if2there2is2only2a2single2(flat)2tax2rate2for2the2income2tax.
a. True
b. False
2

42.2On2transfers2by2death,2the2Federal2government2relies2on2an2estate2tax,2while2states2may2impose2an2estate2tax,2an2i
2

nheritance2tax,2both2taxes,2or2neither2tax.
a. True
b. False
2

2 43.2Julius,2a2married2taxpayer,2makes2gifts2to2each2of2his2six2children.2A2maximum2of2twelve2annual2exclusions2could2be2all

owed2as2to2these2gifts.
a. True
b. False

2 2 44.2The2objective2of2pay-as-you-go2 (paygo)2is2to2improve2administrative2feasibility.
a. True
b. False

2 2 45.2When2Congress2enacts2a2tax2cut2that2is2phased2in2over2a2period2of2years,2revenue2neutrality2is2achieved.
a. True
b. False

2 2 46.2Currently,2the2tax2base2for2the2Social2Security2component2of2the2FICA2is2not2limited2to2a2dollar2amount.
a. True
b. False

2 2 47.2The2formula2for2the2Federal2income2tax2on2corporations2is2the2same2as2that2applicable2to2individuals.
a. True
b. False
2

48.2Mona2inherits2her2mother’s2personal2residence,2which2she2converts2to2a2furnished2rental2house.2These2changes2sh
2

ould2affect2the2amount2of2ad2valorem2property2taxes2levied2on2the2properties.
a. True
b. False
2

2 49.2To2mitigate2the2effect2of2the2annual2accounting2period2concept,2the2tax2law2permits2the2carryforward2of2excess2cha

ritable2contributions2of2a2particular2year2to2other2years.
a. True
b. False

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2 2 50.2The2civil2fraud2penalty2can2entail2large2fines2and2possible2incarceration.
a. True
b. False

2 2 51.2A2major2advantage2of2a2flat2tax2type2of2income2tax2is2its2simplicity.
a. True
b. False

2 2 52.2In2cases2of2doubt,2courts2have2held2that2tax2relief2provisions2should2be2broadly2construed2in2favor2of2taxpayers.
a. True
b. False
2

2 53.2Various2tax2provisions2encourage2the2creation2of2certain2types2of2retirement2plans.2Such2provisions2can2be2jus
tified2on2both2economic2and2social2grounds.
a. True
b. False
2

2 54.2A2CPA2firm2in2California2sends2many2of2its2less2complex2tax2returns2to2be2prepared2by2a2group2of2accountants2in2India

.2If2certain2procedures2are2followed,2this2outsourcing2of2tax2return2preparation2is2proper.
a. True
b. False

2 2 55.2Not2all2of2the2states2that2impose2a2general2sales2tax2also2have2a2use2tax.
a. True
b. False

2 2 56.2 A2fixture2 will2be2subject2to2the2 ad2 valorem2 tax2 on2 personalty2 rather2 than2 the2 ad2 valorem2 tax2 on2 realty.
a. True
b. False

2 2 57.2Before2the2Sixteenth2Amendment2to2the2Constitution2was2ratified,2there2was2no2valid2Federal2income2tax2on2individuals.
a. True
b. False

2 2 58.2The2amount2of2the2state2excise2taxes2on2gasoline2varies2from2state2to2state.
a. True
b. False

2 2 59.2A2state2income2tax2can2be2imposed2on2nonresident2taxpayers2who2earn2income2within2the2state2on2an2itinerant2basis.
a. True
b. False




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