Test Bank for South-Western Federal Taxation 2025: Comprehensive, 48th Edition by James C. Young | Complete Chapters

Test Bank for South-Western Federal Taxation 2025: Comprehensive 48th Edition by
James C. Young

Chapter 01 2025 - Comprehensive
Answers Included ✅
Indicate whether the statement is true or false.
1. 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

2. The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied
tax rates from a low of 1% to a high of 6%.
a. True
b. False

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

4. If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.
a. True
b. False

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

6. The Federal estate and gift taxes are examples of progressive rate 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. The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.
a. True
b. False

9. 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

10. Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.
a. True
b. False




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Chapter 01 2025 - Comprehensive

11. 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

12. Two persons who live in the same state but in different counties may not be subject to the same general sales
tax rate.
a. True
b. False

13. Under the usual state inheritance tax, two heirs, a cousin and a son of the deceased, would not be taxed at the
same rate.
a. True
b. False

14. 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

15. A parent employs her twin daughters, age 17, in her sole proprietorship. The daughters are not subject to FICA
coverage.
a. True
b. False

16. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations on
additional income tax assessments by the IRS.
a. True
b. False

17. Not all of the states that impose a general sales tax also have a use tax.
a. True
b. False

18. States impose either a state income tax or a general sales tax, but not both types of taxes.
a. True
b. False

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

20. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
The 20% negligence penalty will apply to $25,000.
a. True
b. False

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Chapter 01 2025 - Comprehensive

21. The annual exclusion, currently $18,000, is available for gift and estate tax purposes.
a. True
b. False

22. In preparing an income tax return, the use of a client’s estimates is not permitted.
a. True
b. False

23. The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal
income tax on corporations.
a. True
b. False

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

25. The value added tax (VAT) has not had wide acceptance in the international community.
a. True
b. False

26. An inheritance tax is a tax on a decedent’s right to pass property at death.
a. True
b. False

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

28. The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on
business use personalty.
a. True
b. False

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

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




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Chapter 01 2025 - Comprehensive

31. For individual taxpayers, the interest rate for income tax refunds (overpayments) is the same as that applicable
to assessments (underpayments).
a. True
b. False

32. During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure to file
penalty is increased by the amount of the failure to pay penalty.
a. True
b. False

33. 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 taxable gift.
a. True
b. False

34. Mona inherits her mother’s personal residence, which she converts to a furnished rental house. These changes
should affect the amount of ad valorem property taxes levied on the properties.
a. True
b. False

35. If an income tax return is not filed by a taxpayer, there is no statute of limitations on assessments of tax by the
IRS.
a. True
b. False

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

37. 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

38. The Medicare component of the FICA tax (1.45% on wages) is progressive as the tax due increases as wages
increase.
a. True
b. False

39. The Federal excise tax on gasoline has a proportional effect on all taxpayers (that is, neither progressive or
regressive).
a. True
b. False




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