TEST BANK bb
South-Western Federal Taxation 2025:
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Individual Income Taxes, 48th Edition
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by James Young Complete Chapters 1 - 20
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Page 1
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,TABLE OF CONTENTS
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Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law
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Chapter 2: Working with the Tax Law
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Chapter 03: Tax Formula and Tax Determination
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Chapter 04: Gross Income: Concepts and Inclusions
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Chapter 05: Gross Income: Exclusions
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Chapter 06: Deductions and Losses: In General
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Chapter 07: Deductions and Losses: Certain Business Expenses
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Chapter 08: Depreciation, Cost Recovery, Amortization, and Depletion
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Chapter 09: Deductions: Employee and Self-Employed-Related Expense
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Chapter 10: Deductions and Losses: Certain Itemized Deductions
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Chapter 11: Investor Losses
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Chapter 12: Alternative Minimum Tax
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Chapter 13: Tax Credits and Payment Procedures
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Chapter 14: Property Transactions: Determination of Gain or Loss and
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Chapter 15: Property Transactions: Nontaxable Exchanges
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Chapter 16: Property Transactions: Capital Gains and Losses
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Chapter 17: Property Transactions: 1231 and Recapture Provisions
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Chapter 18: Accounting Periods and Methods
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Chapter 19: Deferred Compensation
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Chapter 20: Corporations and Partnerships
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Page 2
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, Chapter 01 2025 Individuals
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Answers at the end of each chapter
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Indicate whether the statement is true or
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false.
b b
bb b b 1. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
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a. True
b. False
bb b b 2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
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The 20% negligence penalty will apply to $25,000.
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a. True
b. False
bb b b 3. Ultimately, most taxes are paid by individuals.
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a. True
b. False
bb b b 4. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not remainthe
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb b
same.
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a. True
b. False
bb b b 5. The principal objective of the FUTA tax is to provide some measure of retirement security.
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a. True
b. False
bb b b 6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance onthe
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part of taxpayers.
bb bb bb
a. True
b. False
bb b b 7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
thatlevies no such taxes.
bb b bb bb bb
a. True
b. False
bb b b 8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an
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overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The
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refund need not include interest.
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a. True
b. False
bb b b 9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
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a. True
b. False
Page 3
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, Name: Class: Date: bb
Chapter 01 2025 Individuals
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bb b b 10. For Federal income tax purposes, there never has been a general amnesty period.
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a. True
b. False
bb b b 11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes on
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the same income is allowed either a deduction or a credit for the foreign tax paid.
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a. True
b. False
bb b b 12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gain inthe
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year the installment sale occurs.
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a. True
b. False
bb b b 13. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
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a. True
b. False
bb b b 14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
taxable gift.
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a. True
b. False
bb b b 15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations on
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
additional income tax assessments by the IRS.
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a. True
b. False
bb b b 16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
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a. True
b. False
bb b b 17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the property,
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a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the application
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of the wherewithal to pay concept.
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a. True
b. False
bb b b 18. An inheritance tax is a tax on a decedent’s right to pass property at death.
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a. True
b. False
bb b b 19. When interest is charged on a deficiency, any part of a month counts as a full month.
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a. True
b. False
Page 4 bb
South-Western Federal Taxation 2025:
bb bb bb
Individual Income Taxes, 48th Edition
bb bb bb bb
by James Young Complete Chapters 1 - 20
bb bb bb bb bb bb bb bb
Page 1
bb
,TABLE OF CONTENTS
bb bb bb
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law
bb bb bb bb bb bb bb bb bb bb bb bb
Chapter 2: Working with the Tax Law
bb bb bb bb bb bb bb
Chapter 03: Tax Formula and Tax Determination
bb bb bb bb bb bb bb
Chapter 04: Gross Income: Concepts and Inclusions
bb bb bb bb bb bb bb
Chapter 05: Gross Income: Exclusions
bb bb bb bb bb
Chapter 06: Deductions and Losses: In General
bb bb bb bb bb bb bb
Chapter 07: Deductions and Losses: Certain Business Expenses
bb bb bb bb bb bb bb bb
Chapter 08: Depreciation, Cost Recovery, Amortization, and Depletion
bb bb bb bb bb bb bb bb
Chapter 09: Deductions: Employee and Self-Employed-Related Expense
bb bb bb bb bb bb bb
Chapter 10: Deductions and Losses: Certain Itemized Deductions
bb bb bb bb bb bb bb bb
Chapter 11: Investor Losses
bb bb bb bb
Chapter 12: Alternative Minimum Tax
bb bb bb bb bb
Chapter 13: Tax Credits and Payment Procedures
bb bb bb bb bb bb bb
Chapter 14: Property Transactions: Determination of Gain or Loss and
bb bb bb bb bb bb bb bb bb bb
Chapter 15: Property Transactions: Nontaxable Exchanges
bb bb bb bb bb bb
Chapter 16: Property Transactions: Capital Gains and Losses
bb bb bb bb bb bb bb bb
Chapter 17: Property Transactions: 1231 and Recapture Provisions
bb bb bb bb bb bb bb bb
Chapter 18: Accounting Periods and Methods
bb bb bb bb bb bb
Chapter 19: Deferred Compensation
bb bb bb bb
Chapter 20: Corporations and Partnerships
bb bb bb bb
Page 2
bb
, Chapter 01 2025 Individuals
bb bb bb
Answers at the end of each chapter
bb bb bb bb bb bb
Indicate whether the statement is true or
b b b b b b b b b b b b
false.
b b
bb b b 1. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
bb b b 2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
The 20% negligence penalty will apply to $25,000.
bb bb bb bb bb bb bb
a. True
b. False
bb b b 3. Ultimately, most taxes are paid by individuals.
bb bb bb bb bb bb bb
a. True
b. False
bb b b 4. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not remainthe
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb b
same.
bb
a. True
b. False
bb b b 5. The principal objective of the FUTA tax is to provide some measure of retirement security.
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
bb b b 6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance onthe
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb b
part of taxpayers.
bb bb bb
a. True
b. False
bb b b 7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
thatlevies no such taxes.
bb b bb bb bb
a. True
b. False
bb b b 8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb b
refund need not include interest.
bb bb bb bb bb
a. True
b. False
bb b b 9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
Page 3
bb
, Name: Class: Date: bb
Chapter 01 2025 Individuals
bb bb bb
bb b b 10. For Federal income tax purposes, there never has been a general amnesty period.
bb bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
bb b b 11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes on
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
the same income is allowed either a deduction or a credit for the foreign tax paid.
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
bb b b 12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gain inthe
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb b
year the installment sale occurs.
bb bb bb bb bb
a. True
b. False
bb b b 13. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
bb b b 14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
taxable gift.
bb bb
a. True
b. False
bb b b 15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations on
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
additional income tax assessments by the IRS.
bb bb bb bb bb bb bb
a. True
b. False
bb b b 16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
bb b b 17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the property,
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the application
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
of the wherewithal to pay concept.
bb bb bb bb bb bb
a. True
b. False
bb b b 18. An inheritance tax is a tax on a decedent’s right to pass property at death.
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
bb b b 19. When interest is charged on a deficiency, any part of a month counts as a full month.
bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb bb
a. True
b. False
Page 4 bb
