TEST BANK
Ch. 1
Introduction to Taxation
True-False: Insert T for True and F for False before the_ questions.
_____ 1. Both sales and use taxes are collected in the_ state in which the_ sale takes place.
ANS: False
LO: 1.1
DIF: Easy
_____ 2. The_ person giving the_ gift pays the_ gift tax.
ANS: True
LO: 1.1
DIF: Easy
_____ 3. The_ value added tax is a type of consumption tax.
ANS: True
LO: 1.1
DIF: Easy
_____ 4. A flat tax generally would be considered a regressive tax.
ANS: False
1
,TEST BANK
LO: 1.2.
DIF: Easy
_____ 5. Adam Smith’s four canons of taxation are Equity, Certainty, Economy and Convenience.
ANS: True
LO: 1.3
DIF: Easy
_____ 6. The_ 16th Amendment to the_ US Constitution that provided for an income tax was ratified in 1913.
ANS: True
LO: 1.4
DIF: Easy
_____ 7. The_ first codification of the_ Internal Revenue Code took place in 1954.
ANS: False
LO: 1.4
DIF: Easy
_____ 8. There are three basic taxable entities: the_ individual, the_ fiduciary, and the_ C corporation.
ANS: True
LO: 1.5
DIF: Easy
_____ 9. All interest paid to a taxpayer must be included in gross income.
2
,TEST BANK
ANS: False
LO: 1.5
DIF: Moderate
_____ 10 A taxpayer’s filing status determines the_ basic standard deduction allowed.
ANS: True
LO: 1.5
DIF: Easy
_____ 11. A married person filing a separate return has the_ lowest standard deduction amount.
ANS: False
LO: 1.5
DIF: Easy
_____ 12. The_ lowest tax rate on the_ tax rate schedules for taxable incomes is the_ same for individuals
and C corporations.
ANS: False
LO: 1.5
DIF: Easy
_____ 13. Only corporations are allowed to carry their net operating losses both backwards and forwards.
ANS: False
LO: 1.5
DIF: Easy
3
, TEST BANK
_____ 14. The_ alternative minimum tax is a tax determined on a broadened definition of income with no
deductions permitted.
ANS: False
LO: 1.5
DIF: Easy
_____ 15. All limited liability companies (LLCs) can file their tax returns as partnerships, or electively, as
corporations.
ANS: False
LO: 1.6
DIF: Easy
_____ 16. Partnerships and S corporations are flow-through entities.
ANS: True
LO: 1.6
DIF: Easy
Short-Answer Questions: Provide a brief written answer to each of the_ following questions.
1. Name and describe two other types of taxes other than the_ income tax. Give example of each.
ANSWER Wealth taxes are those taxes levied on the_ value of property owned by a taxpayer. Examples
include real estate taxes, tangible taxes, intangible taxes, and inventory taxes.
Wealth transfer taxes are those taxes levied on the_ value of property transferred to another. Examples are
the_ gift, estate, and inheritance taxes. Consumption taxes are taxes levied on the_ value of goods or services
that are purchased for consumption. Examples include sales, use, excise, and value added taxes.
LO: 1.1
DIF: Easy
4
Ch. 1
Introduction to Taxation
True-False: Insert T for True and F for False before the_ questions.
_____ 1. Both sales and use taxes are collected in the_ state in which the_ sale takes place.
ANS: False
LO: 1.1
DIF: Easy
_____ 2. The_ person giving the_ gift pays the_ gift tax.
ANS: True
LO: 1.1
DIF: Easy
_____ 3. The_ value added tax is a type of consumption tax.
ANS: True
LO: 1.1
DIF: Easy
_____ 4. A flat tax generally would be considered a regressive tax.
ANS: False
1
,TEST BANK
LO: 1.2.
DIF: Easy
_____ 5. Adam Smith’s four canons of taxation are Equity, Certainty, Economy and Convenience.
ANS: True
LO: 1.3
DIF: Easy
_____ 6. The_ 16th Amendment to the_ US Constitution that provided for an income tax was ratified in 1913.
ANS: True
LO: 1.4
DIF: Easy
_____ 7. The_ first codification of the_ Internal Revenue Code took place in 1954.
ANS: False
LO: 1.4
DIF: Easy
_____ 8. There are three basic taxable entities: the_ individual, the_ fiduciary, and the_ C corporation.
ANS: True
LO: 1.5
DIF: Easy
_____ 9. All interest paid to a taxpayer must be included in gross income.
2
,TEST BANK
ANS: False
LO: 1.5
DIF: Moderate
_____ 10 A taxpayer’s filing status determines the_ basic standard deduction allowed.
ANS: True
LO: 1.5
DIF: Easy
_____ 11. A married person filing a separate return has the_ lowest standard deduction amount.
ANS: False
LO: 1.5
DIF: Easy
_____ 12. The_ lowest tax rate on the_ tax rate schedules for taxable incomes is the_ same for individuals
and C corporations.
ANS: False
LO: 1.5
DIF: Easy
_____ 13. Only corporations are allowed to carry their net operating losses both backwards and forwards.
ANS: False
LO: 1.5
DIF: Easy
3
, TEST BANK
_____ 14. The_ alternative minimum tax is a tax determined on a broadened definition of income with no
deductions permitted.
ANS: False
LO: 1.5
DIF: Easy
_____ 15. All limited liability companies (LLCs) can file their tax returns as partnerships, or electively, as
corporations.
ANS: False
LO: 1.6
DIF: Easy
_____ 16. Partnerships and S corporations are flow-through entities.
ANS: True
LO: 1.6
DIF: Easy
Short-Answer Questions: Provide a brief written answer to each of the_ following questions.
1. Name and describe two other types of taxes other than the_ income tax. Give example of each.
ANSWER Wealth taxes are those taxes levied on the_ value of property owned by a taxpayer. Examples
include real estate taxes, tangible taxes, intangible taxes, and inventory taxes.
Wealth transfer taxes are those taxes levied on the_ value of property transferred to another. Examples are
the_ gift, estate, and inheritance taxes. Consumption taxes are taxes levied on the_ value of goods or services
that are purchased for consumption. Examples include sales, use, excise, and value added taxes.
LO: 1.1
DIF: Easy
4
