South-Western Federal Taxation 2025 Test Bank – Corporations, Partnerships, Estates & Trusts 48th Edition.pdf

TestmbankmIncomemTax



CHAPTER 1: AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FEDERAL TAX LAW
m m m m m m m m m m m




1. ThemratificationmofmthemSixteenthmAmendmentmtomthemU.S.mConstitutionmwasmnecessarymtomvalidatem
themFederalmincomemtaxmonmcorporations.
a. True
b. False



ANSWER: False

RATIONALE:m ThemSixteenthmAmendmentmvalidatedmonlymthemtaxmonmindividuals.mThemincomemtaxmonmcorporatio
nsmhadmbeenmpreviouslymsanctionedmbymthemcourts.


2. BeforemthemSixteenthmAmendmentmtomthemConstitutionmwasmratified,mtheremwasmnomvalidmFederalminc
omemtaxmonmindividuals.
a. True

b. False


ANSWER: False

RATIONALE:
TheremexistedmamFederalmincomemtaxmduring mthemCivilmWarmthatmwasmsanctionedmbymthem
U.S.mSuprememCourt.


3. Themfirstmincomemtaxmonmindividualsm(after mthemratificationmofmthemSixteenthmAmendmentmtom
themConstitution)mleviedmtaxmratesmfrommamlowmofm2%mtomamhighmofm6%.
a. True
b. False



ANSWER: True


4. ThemFederalmincomemtaxmonmindividualsmgeneratesmmoremrevenuemthanmthemFederalmincomemtax
1

,m onmcorporations.




2

,a. True

b. False


ANSWER: True



5. ThempayasyougomfeaturemofmthemFederalmincomemtaxmonmindividualsmconformsmtomAdammSmith’smcano
nmofmcertainty.

a. True
b. False


ANSWER: False

RATIONALE:m Pay-as-you-
gomrefersmtomthemwithholding mprovisionsmapplicablemtomwagesmandmother mtypesmofmincomemandmaddsmconvenienc
emtomthemtaxmsystem.


6. Becausemthemlawmismcomplicated,mmostmindividualmtaxpayersmaremnotmablemtomcompletemtheir mFed
eralmincomemtaxmreturnsmwithoutmoutsidemassistance.
a. True

b. False


ANSWER: True

RATIONALE:m Approximatelym60%musemtaxmreturnmpreparers,mwhilemslightlymmoremthanm32%mpurchasemtaxmreturnmsof
tware.
7. ThemFICAmtaxm(Medicaremcomponent)monmwagesmismprogressivemsincemthemtaxmduemincreasesmasmw
agesmincrease.
a. True

b. False


ANSWER: False

RATIONALE:m ThemFICAmtaxm(Medicaremcomponent)mismproportional mbecausemthemratemismconstantmregardlessmofmthem
wagesmearned.


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, 8. ThemFederalmestatemandmgiftmtaxesmaremexamplesmofmprogressivemtaxes.

a. True
b. False



ANSWER: True


9. ThemFederalmexcisemtaxmonmcigarettesmismanmexamplemofmamproportional mtax.
a. True
b. False



ANSWER: True

RATIONALE:m Themtaxmismamflatm$1.01mpermpack.


10. Currently,mthemFederalmincomemtaxmismlessmprogressivemthanmitmever mhasmbeenminmthempast.
a. True

b. False


ANSWER: False
RATIONALE:m Currently,mthemFederalmincomemtaxmhasmsixmrates.mAtmonemtime,mitmhadmtwomrates.



11. Monaminheritsmher mmother’smpersonalmresidence,mwhichmshemconvertsmtomamfurnishedmrentmhouse.mTh
esemchangesmshouldmaffectmthemamountmofmadmvaloremmpropertymtaxesmleviedmonmthemproperties.
a. True

b. False


ANSWER: True

RATIONALE:mConversionmfrommresidential mtomrentalmusemwillmincreasemthemtaxes.mFurthermore,mMona’smmothe
rmmaymhavemhadmamsenior mcitizenmexemptionmonmthemproperty,mwhichmwillmnomlonger mbemappropriate.mLastly,m
themfurnishingsminmthemrentmhousemcouldmnowmbemsubjectmtomanmadmvaloremmtaxmonmpersonalty.



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