Pageb31
,TABLEOFCONTENTS
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law Cha p
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ter 2: Working with the Tax Law
b3 b3 b3 b3 b3 b3
Chapter 03: Tax Formula and Tax Determination Chap
b3 b3 v# b3 b3 b3 b 3 b
3ter 04: Gross Income: Concepts and Inclusions Chapter
b3 b3 b3 b3 b3 b3 b3
b3 05: Gross Income: Exclusions
b3 b3 b3
Chapter 06: Deductions and Losses: In General
b3 b3 b3 b3 b3 b3
Chapter 07: Deductions and Losses: Certain Business Expenses
b3 b3 b3 b3 b3 b3 b3
Chapt
b3 er 08: Depreciation, Cost Recovery, Amortization, and Depletion Chapter 0
b3 b3 b3 v# b3 b3 b3 b3 b3 b3
9: Deductions: Employee and Self-Employed-
b3 b3 b3 b3
Related Expense Chapter 10: Deductions and Losses: Certain Itemized De
b3 b3 b3 b3 b3 b3 b3 b3 b3 b 3
ductions Chapter 11: Investor Losses b 3 b3 b3 b3
Chapter 12: Alternative Minimum Tax
b3 b3 b3 b3
Chapter 13: Tax Credits and Payment Procedures
b3 b3 v# b3 b3 b3
Chapter 14: Property Transactions: Determination of Gain or Loss and Cha p
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ter 15: Property Transactions: Nontaxable Exchanges
b3 b3 b3 b3 b3
Chapter 16: Property Transactions: Capital Gains and Losses Chapter 1
b3 b3 b3 b3 b3 b3 b3 b3 b3
7: Property Transactions: 1231 and Recapture Provisions Chapter 1 8:
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b3 Accounting Periods and Methods b3 b3 b3
Chapter 19: Deferred Compensation Chapter
b3 b3 b3 b3 b3
20: Corporations and Partnerships
b3 b3 b3
Pageb32
, Chapter 01 2025 Individuals
b 3 b 3 b 3
Answers at the end of each chapter
7% 7% 7% 7% 7% 7%
Indicate whether the statement is true or false.
b3 b3 b3 b3 b3 b3 b3
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
b3 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
b3 3. Ultimately, most taxes are paid by individuals.
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a. True
b. False
4. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may
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not re m ainthe same.
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a. True
b. False
b3 5. The principal objective of the FUTA tax is to provide some measure of retirement security.
b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3 b3 b3
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased comp
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
lianc e onthe part of taxpayers.
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a. True
b. False
7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b
a sta te that levies no such taxes.
3 b3 b3 b3 b3 v# b3 b3
a. True
b. False
8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an
b3 v# b3 b3 b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 v# b3 b3
o verpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.
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The refu nd need not include interest.
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a. True
b. False
9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
b3 b3 v#b3 b3 b3 b3 b3 b3 b3 b3 b 3 b 3 b3 b3 b3 b3 v# b3
a. True
b. False
Pageb33
, Name: Class: Date:b 3
Chapter 01 2025 Individuals
b 3 b 3 b 3
10. For Federal income tax purposes, there never has been a general amnesty period.
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a. True
b. False
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. i
b3 b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ncome taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 v#
a. True
b. False
12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize
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a gai n inthe year the installment sale occurs.
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a. True
b. False
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
14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. J
b3 b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
osé ha s not made a taxable gift.
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a. True
b. False
15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitati
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 v# b3
ons o n additional income tax assessments by the IRS.
b3 b3 b3 b3 b3 v# b3 b3 b3
a. True
b. False
16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3
a. True
b. False
b 317. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis o
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f the property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized d
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ue to the a pplication of the wherewithal to pay concept.
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a. True
b. False
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
Pageb34
,TABLEOFCONTENTS
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law Cha p
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ter 2: Working with the Tax Law
b3 b3 b3 b3 b3 b3
Chapter 03: Tax Formula and Tax Determination Chap
b3 b3 v# b3 b3 b3 b 3 b
3ter 04: Gross Income: Concepts and Inclusions Chapter
b3 b3 b3 b3 b3 b3 b3
b3 05: Gross Income: Exclusions
b3 b3 b3
Chapter 06: Deductions and Losses: In General
b3 b3 b3 b3 b3 b3
Chapter 07: Deductions and Losses: Certain Business Expenses
b3 b3 b3 b3 b3 b3 b3
Chapt
b3 er 08: Depreciation, Cost Recovery, Amortization, and Depletion Chapter 0
b3 b3 b3 v# b3 b3 b3 b3 b3 b3
9: Deductions: Employee and Self-Employed-
b3 b3 b3 b3
Related Expense Chapter 10: Deductions and Losses: Certain Itemized De
b3 b3 b3 b3 b3 b3 b3 b3 b3 b 3
ductions Chapter 11: Investor Losses b 3 b3 b3 b3
Chapter 12: Alternative Minimum Tax
b3 b3 b3 b3
Chapter 13: Tax Credits and Payment Procedures
b3 b3 v# b3 b3 b3
Chapter 14: Property Transactions: Determination of Gain or Loss and Cha p
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ter 15: Property Transactions: Nontaxable Exchanges
b3 b3 b3 b3 b3
Chapter 16: Property Transactions: Capital Gains and Losses Chapter 1
b3 b3 b3 b3 b3 b3 b3 b3 b3
7: Property Transactions: 1231 and Recapture Provisions Chapter 1 8:
b3 b3 b3 b3 b3 b3 b3 b3 b 3
b3 Accounting Periods and Methods b3 b3 b3
Chapter 19: Deferred Compensation Chapter
b3 b3 b3 b3 b3
20: Corporations and Partnerships
b3 b3 b3
Pageb32
, Chapter 01 2025 Individuals
b 3 b 3 b 3
Answers at the end of each chapter
7% 7% 7% 7% 7% 7%
Indicate whether the statement is true or false.
b3 b3 b3 b3 b3 b3 b3
1. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
a. True
b. False
b3 2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
The 20% negligence penalty will apply to $25,000.
b3 b3 b3 b3 b3 b3 b3
a. True
b. False
b3 3. Ultimately, most taxes are paid by individuals.
b3 b3 b3 v# b3 b3 b3
a. True
b. False
4. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
not re m ainthe same.
b3 b3 b3 b3
a. True
b. False
b3 5. The principal objective of the FUTA tax is to provide some measure of retirement security.
b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3 b3 b3
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased comp
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
lianc e onthe part of taxpayers.
b3 b3 b3 b3 b3
a. True
b. False
7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b
a sta te that levies no such taxes.
3 b3 b3 b3 b3 v# b3 b3
a. True
b. False
8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an
b3 v# b3 b3 b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 v# b3 b3
o verpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
The refu nd need not include interest.
b3 b3 b3 b3 b3 b3
a. True
b. False
9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
b3 b3 v#b3 b3 b3 b3 b3 b3 b3 b3 b 3 b 3 b3 b3 b3 b3 v# b3
a. True
b. False
Pageb33
, Name: Class: Date:b 3
Chapter 01 2025 Individuals
b 3 b 3 b 3
10. For Federal income tax purposes, there never has been a general amnesty period.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
a. True
b. False
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. i
b3 b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ncome taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 v#
a. True
b. False
12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
a gai n inthe year the installment sale occurs.
b3 b3 b3 b3 b3 b3 b3 b3 b3
a. True
b. False
13. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
a. True
b. False
14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. J
b3 b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
osé ha s not made a taxable gift.
b3 b3 b3 b3 b3 b3 b3
a. True
b. False
15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitati
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 v# b3
ons o n additional income tax assessments by the IRS.
b3 b3 b3 b3 b3 v# b3 b3 b3
a. True
b. False
16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3
a. True
b. False
b 317. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis o
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
f the property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized d
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ue to the a pplication of the wherewithal to pay concept.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
a. True
b. False
18. An inheritance tax is a tax on a decedent’s right to pass property at death.
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
a. True
b. False
Pageb34
