TEST BANK
South-Western Federal Taxation 2025: Comprehensive,
48th Edition by Young Complete 30 Chapters
TEST BANK
Page51
,TABLE OF CONTENTS
5 5 5
Chapter51:5An5Introduction5to5Taxation5and5Understanding5the5Federal5Tax5Law5
Chapter52:5Working5with5the5Tax5Law5
Chapter53:5Tax5Formula5and5Tax5Determination5
Chapter54:5Gross5Income:5Concepts5and5Inclusions5
Chapter55:5Gross5Income:5Exclusions5
Chapter56:5Deductions5and5Losses:5In5General57-15Bad5Debts5
Chapter58:5Depreciation,5Cost5Recovery,5Amortization,5and5Depletion5
Chapter59:5Deductions:5Employee5and5Self-Employed-Related5Expenses5
Chapter510:5Deductions5and5Losses:5Certain5Itemized5Deductions5
Chapter511:5Investor5Losses5
Chapter512:5Tax5Credits5and5Payments5
Chapter513:5Property5Transactions:5Determination5of5Gain5or5Loss,5Basis5Considerations,5and5Nontaxab5
Chapter514:5Property5Transactions:5Capital5Gains5and5Losses,5§51231,5and5Recapture5Provisions5
Chapter515:5The5Deduction5for5Qualified5Business5Income5for5Noncorporate5Taxpayers5
Chapter516:5Accounting5Periods5and5Methods5
Chapter517:5Corporations:5Introduction5and5Operating5Rules5
Chapter518:5Corporations:5Organization5and5Capital5Structure5
Chapter519:5Corporations:5Distributions5Not5in5Complete5Liquidation5
Chapter520:5Corporations:5Distributions5in5Complete5Liquidation5and5an5Overview5of5Reorganizations5
Chapter521:5Partnerships:5Formation,5Operation,5and5Basis5
Chapter522:5Partnerships:5Distributions,5Transfer5of5Interests,5and5Terminations5
Chapter523:5S5Corporations5
Chapter524:5Taxes5in5the5Financial5Statements5
Chapter525:5Exempt5Entities5
Chapter526:5Multistate5Corporate5Taxation5
Chapter527:5Taxation5of5International5Transactions5
Chapter528:5Tax5Practice5and5Ethics5
Chapter529:5The5Federal5Gift5and5Estate5Taxes5
Chapter530:5Income5Taxation5of5Trusts5and5Estates
Page52
,Chapter5 015 20255 -5 Comprehensive
Answers are at the end of
5 5 5 5 5 5
each chapter5
Indicate5 whether5 the5 statement5 is5 true5 or5 false.
5 1.5If5more5IRS5audits5are5producing5a5higher5number5of5no5 change5results,5this5indicates5increased5compliance5on5the
5part5of5taxpayers.
True
False
5 2.5The5first5income5tax5on5individuals5(after5the5ratification5of5the5Sixteenth5Amendment5to5the5Constitution)5levied5tax5
rates5from5a5low5of51%5to5a5high5of56%.
True
False
5 3.5Stealth5taxes5have5the5effect5of5generating5additional5taxes5from5all5taxpayers.
True
False
5 4.5If5fraud5is5involved,5there5is5no5time5limit5on5the5assessment5of5a5deficiency5by5the5IRS.
True
False
5 5.5Under5state5amnesty5programs,5all5delinquent5and5unpaid5income5taxes5are5forgiven.
True
False
5 6.5 The5 Federal5 estate5 and5 gift5 taxes5 are5 examples5 of5 progressive5 rate5 taxes.
True
False
5 7.5The5IRS5is5required5to5redetermine5the5interest5rate5on5underpayments5and5overpayments5once5a5year.
True
False
5 8.5The5Federal5income5tax5on5individuals5generates5more5revenue5than5the5Federal5income5tax5on5corporations.
True
False
5 9.5To5mitigate5the5effect5of5the5annual5accounting5period5concept,5the5tax5law5permits5the5carryforward5of5excess5
charitable5contributions5of5a5particular5year5to5other5years.
True
False
5 10.5Unlike5FICA,5FUTA5requires5that5employers5comply5with5state5as5well5as5Federal5rules.
True
False
Page53
, Name: Class: Date:
Chapter5 015 20255 -5 Comprehensive
5 11.5If5a5special5agent5becomes5involved5in5the5audit5of5a5return,5this5indicates5that5the5IRS5suspects5that5fraud5is5in
volved.
True
False
5 12.5Two5persons5who5live5in5the5same5state5but5in5different5counties5may5not5be5subject5to5the5same5general5sales5t
ax5rate.
True
False
5 13.5Under5the5usual5state5inheritance5tax,5two5heirs,5a5cousin5and5a5son5of5the5deceased,5would5not5be5taxed5at5the
5same5rate.
True
False
5 14.5Various5tax5provisions5encourage5the5creation5of5certain5types5of5retirement5plans.5Such5provisions5can5be5ju
stified5on5both5economic5and5social5grounds.
True
False
5 15.5A5parent5employs5her5twin5daughters,5age517,5in5her5sole5proprietorship.5The5daughters5are5not5subject5to5FICA5c
overage.
True
False
5 16.5For5omissions5from5gross5income5in5excess5of525%5of5that5reported,5there5is5no5statute5of5limitations5on5ad
ditional5income5tax5assessments5by5the5IRS.
True
False
5 17.5Not5all5of5the5states5that5impose5a5general5sales5tax5also5have5a5use5tax.
True
False
5 18.5States5impose5either5a5state5income5tax5 or5a5general5sales5tax,5but5not5both5types5of5taxes.
True
False
5 19.5The5amount5of5the5state5excise5taxes5on5gasoline5varies5from5state5to5state.
True
False
5 20.5Upon5audit5by5the5IRS,5Faith5is5assessed5a5deficiency5of5$40,0005of5which5$25,0005is5attributable5to5negligence.
The520%5negligence5penalty5will5apply5to5$25,000.
True
False
Page54
South-Western Federal Taxation 2025: Comprehensive,
48th Edition by Young Complete 30 Chapters
TEST BANK
Page51
,TABLE OF CONTENTS
5 5 5
Chapter51:5An5Introduction5to5Taxation5and5Understanding5the5Federal5Tax5Law5
Chapter52:5Working5with5the5Tax5Law5
Chapter53:5Tax5Formula5and5Tax5Determination5
Chapter54:5Gross5Income:5Concepts5and5Inclusions5
Chapter55:5Gross5Income:5Exclusions5
Chapter56:5Deductions5and5Losses:5In5General57-15Bad5Debts5
Chapter58:5Depreciation,5Cost5Recovery,5Amortization,5and5Depletion5
Chapter59:5Deductions:5Employee5and5Self-Employed-Related5Expenses5
Chapter510:5Deductions5and5Losses:5Certain5Itemized5Deductions5
Chapter511:5Investor5Losses5
Chapter512:5Tax5Credits5and5Payments5
Chapter513:5Property5Transactions:5Determination5of5Gain5or5Loss,5Basis5Considerations,5and5Nontaxab5
Chapter514:5Property5Transactions:5Capital5Gains5and5Losses,5§51231,5and5Recapture5Provisions5
Chapter515:5The5Deduction5for5Qualified5Business5Income5for5Noncorporate5Taxpayers5
Chapter516:5Accounting5Periods5and5Methods5
Chapter517:5Corporations:5Introduction5and5Operating5Rules5
Chapter518:5Corporations:5Organization5and5Capital5Structure5
Chapter519:5Corporations:5Distributions5Not5in5Complete5Liquidation5
Chapter520:5Corporations:5Distributions5in5Complete5Liquidation5and5an5Overview5of5Reorganizations5
Chapter521:5Partnerships:5Formation,5Operation,5and5Basis5
Chapter522:5Partnerships:5Distributions,5Transfer5of5Interests,5and5Terminations5
Chapter523:5S5Corporations5
Chapter524:5Taxes5in5the5Financial5Statements5
Chapter525:5Exempt5Entities5
Chapter526:5Multistate5Corporate5Taxation5
Chapter527:5Taxation5of5International5Transactions5
Chapter528:5Tax5Practice5and5Ethics5
Chapter529:5The5Federal5Gift5and5Estate5Taxes5
Chapter530:5Income5Taxation5of5Trusts5and5Estates
Page52
,Chapter5 015 20255 -5 Comprehensive
Answers are at the end of
5 5 5 5 5 5
each chapter5
Indicate5 whether5 the5 statement5 is5 true5 or5 false.
5 1.5If5more5IRS5audits5are5producing5a5higher5number5of5no5 change5results,5this5indicates5increased5compliance5on5the
5part5of5taxpayers.
True
False
5 2.5The5first5income5tax5on5individuals5(after5the5ratification5of5the5Sixteenth5Amendment5to5the5Constitution)5levied5tax5
rates5from5a5low5of51%5to5a5high5of56%.
True
False
5 3.5Stealth5taxes5have5the5effect5of5generating5additional5taxes5from5all5taxpayers.
True
False
5 4.5If5fraud5is5involved,5there5is5no5time5limit5on5the5assessment5of5a5deficiency5by5the5IRS.
True
False
5 5.5Under5state5amnesty5programs,5all5delinquent5and5unpaid5income5taxes5are5forgiven.
True
False
5 6.5 The5 Federal5 estate5 and5 gift5 taxes5 are5 examples5 of5 progressive5 rate5 taxes.
True
False
5 7.5The5IRS5is5required5to5redetermine5the5interest5rate5on5underpayments5and5overpayments5once5a5year.
True
False
5 8.5The5Federal5income5tax5on5individuals5generates5more5revenue5than5the5Federal5income5tax5on5corporations.
True
False
5 9.5To5mitigate5the5effect5of5the5annual5accounting5period5concept,5the5tax5law5permits5the5carryforward5of5excess5
charitable5contributions5of5a5particular5year5to5other5years.
True
False
5 10.5Unlike5FICA,5FUTA5requires5that5employers5comply5with5state5as5well5as5Federal5rules.
True
False
Page53
, Name: Class: Date:
Chapter5 015 20255 -5 Comprehensive
5 11.5If5a5special5agent5becomes5involved5in5the5audit5of5a5return,5this5indicates5that5the5IRS5suspects5that5fraud5is5in
volved.
True
False
5 12.5Two5persons5who5live5in5the5same5state5but5in5different5counties5may5not5be5subject5to5the5same5general5sales5t
ax5rate.
True
False
5 13.5Under5the5usual5state5inheritance5tax,5two5heirs,5a5cousin5and5a5son5of5the5deceased,5would5not5be5taxed5at5the
5same5rate.
True
False
5 14.5Various5tax5provisions5encourage5the5creation5of5certain5types5of5retirement5plans.5Such5provisions5can5be5ju
stified5on5both5economic5and5social5grounds.
True
False
5 15.5A5parent5employs5her5twin5daughters,5age517,5in5her5sole5proprietorship.5The5daughters5are5not5subject5to5FICA5c
overage.
True
False
5 16.5For5omissions5from5gross5income5in5excess5of525%5of5that5reported,5there5is5no5statute5of5limitations5on5ad
ditional5income5tax5assessments5by5the5IRS.
True
False
5 17.5Not5all5of5the5states5that5impose5a5general5sales5tax5also5have5a5use5tax.
True
False
5 18.5States5impose5either5a5state5income5tax5 or5a5general5sales5tax,5but5not5both5types5of5taxes.
True
False
5 19.5The5amount5of5the5state5excise5taxes5on5gasoline5varies5from5state5to5state.
True
False
5 20.5Upon5audit5by5the5IRS,5Faith5is5assessed5a5deficiency5of5$40,0005of5which5$25,0005is5attributable5to5negligence.
The520%5negligence5penalty5will5apply5to5$25,000.
True
False
Page54
