,Test Bank For Concepts in Federal Taxation 2020
Chapter 01 Federal Income Taxation An Overview
Chapter 01 Federal Income Taxation An Overview
1. A tax is an enforced contribution used to finance the functions
A tax is an enforced contribution used to finance the functions of
government.
*a. True
b. False
2. Adam Smith identified efficiency, certainty, convenience, and ec
Adam Smith identified efficiency, certainty, convenience, and economy
as the four basic requirements for a good tax system.
a. True
*b. False
3. Congress is required to ensure that the tax law has the followin
Congress is required to ensure that the tax law has the following
characteristics: equality, certainty, convenience, and economy.
a. True
*b. False
4. Horizontal equity exists when two similarly situated taxpayers a
Horizontal equity exists when two similarly situated taxpayers are
taxed the same.
*a. True
b. False
5. The marginal tax rate is the rate of tax that will be paid on th
The marginal tax rate is the rate of tax that will be paid on the next
dollar of income or the rate of tax that will be saved by the next
dollar of deduction.
*a. True
b. False
6. A regressive tax rate structure is defined as a tax in which the
A regressive tax rate structure is defined as a tax in which the
average tax rate decreases as the tax base increases.
*a. True
b. False
7. Employers are required to pay a federal unemployment tax of 6.2%
Employers are required to pay a federal unemployment tax of 6.2% of the
first $10,000 in wages to each employee less a credit of up to 5.4% of
state unemployment taxes paid.
1
,Test Bank For Concepts in Federal Taxation 2020
Chapter 01 Federal Income Taxation An Overview
a. True
*b. False
8. A deferral is like an exclusion in that it does not have a curre
A deferral is like an exclusion in that it does not have a current tax
effect. However, it differs in that an exclusion is never subject to
tax, whereas a deferral will be subject to tax at some point of time in
the future.
*a. True
b. False
9. An annual loss results from an excess of allowable deductions fo
An annual loss results from an excess of allowable deductions for a tax
year over the reported income for the year.
*a. True
b. False
10. Self-employed people are required to make quarterly payments of
Self-employed people are required to make quarterly payments of their
estimated tax liability.
*a. True
b. False
11. The statute of limitations is three years, and it runs for six y
The statute of limitations is three years, and it runs for six years if
a taxpayer omits gross income in excess of 25% of the gross income
reported on the return. There is no statute of limitations if the
taxpayer willfully defrauds the government.
*a. True
b. False
12. Gifts to qualified charitable organizations may be deducted as a
Gifts to qualified charitable organizations may be deducted as a
charitable contribution, but it may not exceed 60% of a taxpayer’s
adjusted gross income.
*a. True
b. False
13. Tax avoidance occurs when a taxpayer uses fraudulent methods or
Tax avoidance occurs when a taxpayer uses fraudulent methods or
deceptive behavior to hide actual tax liability.
a. True
2
, Test Bank For Concepts in Federal Taxation 2020
Chapter 01 Federal Income Taxation An Overview
*b. False
14. All tax practitioners are governed by the AICPA's Code of Profes
All tax practitioners are governed by the AICPA’s Code of Professional
Conduct.
a. True
*b. False
15. A CPA may prepare tax returns using estimates provided by the ta
A CPA may prepare tax returns using estimates provided by the taxpayer
if it is impracticable to obtain exact data and the estimates are
reasonable.
*a. True
b. False
16. According to the IRS definition, which of the following is not a
According to the IRS definition, which of the following is not a characteristic of a tax?
a. The payment to the governmental authority is required by law.
*b. The payment relates to the receipt of a specific benefit.
c. The payment is required pursuant to the legislative power to tax.
d. The purpose of requiring the payment is to provide revenue to be used for public or
governmental purposes.
17. Which of the following payments would not be considered a tax?..
Which of the following payments would not be considered a tax?
a. An assessment based on the selling price of the vehicle
*b. A local assessment for new sewers based on the amount of water used
c. A local assessment for schools based on the value of the taxpayer's property
d. A surcharge based on the amount of income tax already calculated
18. Based on the definition given in Chapter 1 of the text, which of
Based on the definition given in Chapter 1 of the text, which of the following is a tax?
I. A registration fee paid to the state to get a car license plate
II. Two percent special sales tax for funding public education
III. A special property tax assessment for installing sidewalks in the taxpayer's
neighborhood
IV. An income tax imposed by Chicago on persons living or working within the
city limits
a. Only statement I is correct.
b. Only statement III is correct.
3
Chapter 01 Federal Income Taxation An Overview
Chapter 01 Federal Income Taxation An Overview
1. A tax is an enforced contribution used to finance the functions
A tax is an enforced contribution used to finance the functions of
government.
*a. True
b. False
2. Adam Smith identified efficiency, certainty, convenience, and ec
Adam Smith identified efficiency, certainty, convenience, and economy
as the four basic requirements for a good tax system.
a. True
*b. False
3. Congress is required to ensure that the tax law has the followin
Congress is required to ensure that the tax law has the following
characteristics: equality, certainty, convenience, and economy.
a. True
*b. False
4. Horizontal equity exists when two similarly situated taxpayers a
Horizontal equity exists when two similarly situated taxpayers are
taxed the same.
*a. True
b. False
5. The marginal tax rate is the rate of tax that will be paid on th
The marginal tax rate is the rate of tax that will be paid on the next
dollar of income or the rate of tax that will be saved by the next
dollar of deduction.
*a. True
b. False
6. A regressive tax rate structure is defined as a tax in which the
A regressive tax rate structure is defined as a tax in which the
average tax rate decreases as the tax base increases.
*a. True
b. False
7. Employers are required to pay a federal unemployment tax of 6.2%
Employers are required to pay a federal unemployment tax of 6.2% of the
first $10,000 in wages to each employee less a credit of up to 5.4% of
state unemployment taxes paid.
1
,Test Bank For Concepts in Federal Taxation 2020
Chapter 01 Federal Income Taxation An Overview
a. True
*b. False
8. A deferral is like an exclusion in that it does not have a curre
A deferral is like an exclusion in that it does not have a current tax
effect. However, it differs in that an exclusion is never subject to
tax, whereas a deferral will be subject to tax at some point of time in
the future.
*a. True
b. False
9. An annual loss results from an excess of allowable deductions fo
An annual loss results from an excess of allowable deductions for a tax
year over the reported income for the year.
*a. True
b. False
10. Self-employed people are required to make quarterly payments of
Self-employed people are required to make quarterly payments of their
estimated tax liability.
*a. True
b. False
11. The statute of limitations is three years, and it runs for six y
The statute of limitations is three years, and it runs for six years if
a taxpayer omits gross income in excess of 25% of the gross income
reported on the return. There is no statute of limitations if the
taxpayer willfully defrauds the government.
*a. True
b. False
12. Gifts to qualified charitable organizations may be deducted as a
Gifts to qualified charitable organizations may be deducted as a
charitable contribution, but it may not exceed 60% of a taxpayer’s
adjusted gross income.
*a. True
b. False
13. Tax avoidance occurs when a taxpayer uses fraudulent methods or
Tax avoidance occurs when a taxpayer uses fraudulent methods or
deceptive behavior to hide actual tax liability.
a. True
2
, Test Bank For Concepts in Federal Taxation 2020
Chapter 01 Federal Income Taxation An Overview
*b. False
14. All tax practitioners are governed by the AICPA's Code of Profes
All tax practitioners are governed by the AICPA’s Code of Professional
Conduct.
a. True
*b. False
15. A CPA may prepare tax returns using estimates provided by the ta
A CPA may prepare tax returns using estimates provided by the taxpayer
if it is impracticable to obtain exact data and the estimates are
reasonable.
*a. True
b. False
16. According to the IRS definition, which of the following is not a
According to the IRS definition, which of the following is not a characteristic of a tax?
a. The payment to the governmental authority is required by law.
*b. The payment relates to the receipt of a specific benefit.
c. The payment is required pursuant to the legislative power to tax.
d. The purpose of requiring the payment is to provide revenue to be used for public or
governmental purposes.
17. Which of the following payments would not be considered a tax?..
Which of the following payments would not be considered a tax?
a. An assessment based on the selling price of the vehicle
*b. A local assessment for new sewers based on the amount of water used
c. A local assessment for schools based on the value of the taxpayer's property
d. A surcharge based on the amount of income tax already calculated
18. Based on the definition given in Chapter 1 of the text, which of
Based on the definition given in Chapter 1 of the text, which of the following is a tax?
I. A registration fee paid to the state to get a car license plate
II. Two percent special sales tax for funding public education
III. A special property tax assessment for installing sidewalks in the taxpayer's
neighborhood
IV. An income tax imposed by Chicago on persons living or working within the
city limits
a. Only statement I is correct.
b. Only statement III is correct.
3
