Test Bank For South-Western Federal Taxation 2025 Individual Income Taxes 45th Edition by James C. Young, Annette Nellen

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TEST BANK FOR
South-Western Federal Taxation 2024/2026 Individual Income Taxes, 45th Edition
Chapter 1-20


chapter 1



Indicate whether the statement is true or false.

1. 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

2. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes
on the same income is allowed either a deduction or a credit for the foreign tax paid.
a. True
b. False

3. On occasion, Congress has to enact legislation that clarifies the tax law in order to change a result reached by the U.S.
Supreme Court.
a. True
b. False

4. No state may offer an income tax amnesty program more than once.
a. True
b. False

5. When interest is charged on a deficiency, any part of a month counts as a full month.
a. True
b. False

6. Stealth taxes have the effect of generating additional taxes from all taxpayers.
a. True
b. False

7. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
a. True
b. False

8. The majority of IRS audits are handled by correspondence.
a. True
b. False

9. 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.

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a. True
b. False

10. The civil fraud penalty can entail large fines and possible incarceration.
a. True
b. False

11. As a matter of administrative convenience, the IRS would prefer to have Congress decrease (rather than increase) the
amount of the standard deduction allowed to individual taxpayers.
a. True
b. False

12. 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

13. There is a Federal excise tax on hotel occupancy.
a. True
b. False

14. Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.
a. True
b. False

15. Currently, the Federal corporate income tax is less progressive than the individual income tax.
a. True
b. False

16. The Federal excise tax on gasoline is an example of a proportional tax.
a. True
b. False

17. The tax law provides various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain
additional education. These provisions can be justified on both economic and equity grounds.
a. True
b. False

18. 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

19. In preparing a tax return, all questions on the return must be answered.
a. True
b. False


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20. 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

1. Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to
prepare returns for the client.
a. True
b. False

2. The formula for the Federal income tax on corporations is the same as that applicable to individuals.
a. True
b. False

3. The annual exclusion, currently $15,000, is available for gift and estate tax purposes.
a. True
b. False

4. 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

5. Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.
a. True
b. False

6. For state income tax purposes, a majority of states allow a deduction for Federal income taxes.
a. True
b. False

7. The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.
a. True
b. False

8. A state income tax can be imposed on nonresident taxpayers who earn income within the state on an itinerant basis.
a. True
b. False

9. A major advantage of a flat tax type of income tax is its simplicity.
a. True
b. False

10. Various tax provisions encourage the creation of certain types of retirement plans. Such provisions can be justified on
both economic and social grounds.
a. True
b. False
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11. One of the motivations for making a gift is to save on income taxes.
a. True
b. False

1. Some states use their state income tax return as a means of collecting unpaid sales and use taxes.
a. True
b. False

2. A calendar year taxpayer files his 2019 Federal income tax return on March 4, 2020. The return reflects an
overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2020. The
refund need not include interest.
a. True
b. False

3. 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




4. 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




5. A CPA firm in California sends many of its less complex tax returns to be prepared by a group of accountants in India.
If certain procedures are followed, this outsourcing of tax return preparation is proper.
a. True
b. False




6. The amount of the state excise taxes on gasoline varies from state to state.
a. True
b. False




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