Tax Final Exam with Guaranteed Pass
Solutions (2025-2026) Edition.
Which, if any, of the following statements best describes the history of the Federal income tax? -
Answer A
a.The Federal income tax on corporations was held by the U.S. Supreme Court to be allowable
under the U.S. Constitution.
b.It did not exist during the Civil War.
c.The Federal income tax on individuals was held by the U.S. Supreme Court to be allowable
under the U.S. Constitution.
d.Both the Federal income tax on individuals and on corporations was held by the U.S. Supreme
Court to be contrary to the U.S. Constitution.
Which, if any, of the following taxes are regressive (rather than progressive)? - Answer D
a.Federal individual income tax
b.Federal gift tax
c.Federal estate tax
d.State general sales tax
Which, if any, of the following transactions will increase a taxing jurisdiction's revenue from the
ad valorem tax imposed on real estate? - Answer D
a.A large property owner issues a conservation easement as to some of her land.
b.A resident dies and leaves his farm to his church.
c.A bankrupt motel is acquired by the Red Cross and is to be used to provide housing for
homeless persons.
d.A tax holiday issued 10 years ago has expired.
e.None of these choices are correct.
Which, if any, of the following transactions will decrease a taxing jurisdiction's ad valorem tax
revenue imposed on real estate? - Answer B
,d.A public school is razed and turned into a city park.
Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty? -
Answer A
a.The tax on automobiles sometimes considers the age of the vehicle.
b.Most states impose a tax on intangibles.
c.The tax on intangibles generates considerable revenue since it is difficult for taxpayers to
avoid.
d.Taxpayer compliance is greater for personal use property than for business use property.
Burt and Lisa are married and live in a common law state. They want to make gifts to their four
children in 2020. What is the maximum amount of the annual exclusion they will be allowed for
these gifts? - Answer D
a.$15,000.
b.$30,000.
c.$60,000.
d.$120,000
Property can be transferred within the family group by gift or at death. One motivation for
preferring the gift approach is: - Answer B
a.To avoid a future decline in value of the property transferred.
b.To take advantage of the per donee annual exclusion.
c.To take advantage of the higher unified transfer tax credit available under the gift tax.
d.To shift income to higher bracket donees.
Indicate which, if any, statement is incorrect. State income taxes: - Answer A
a.Cannot apply to visiting nonresidents.
b.Can decouple from the Federal version.
,a.The same date for filing as the Federal income tax.
b.Applying only to individuals but not to corporations.
c.No provision for withholding procedures.
d.Allowance of a deduction for Federal income taxes paid
A characteristic of FICA tax is that: - Answer D
a.It is imposed only on the employer.
b.It provides a modest source of income in the event of loss of employment.
c.It does not apply when one spouse works for the other spouse.
d.None of these choices are correct.
A characteristic of FUTA is that: - Answer B
a.It is imposed on both employer and employee.
b.Compliance requires following guidelines issued by both state and Federal regulatory
authorities.
c.It is applicable to spouses of employees but not to any children under age 18.
d.It is imposed solely on the employee.
The United States (either Federal, state, or local) does not impose: - Answer B
a.Severance taxes.
b.Export duties.
c.Custom duties.
d.Franchise taxes.
The proposed flat tax: - Answer A
a.Is a type of consumption tax.
, A VAT (value added tax): - Answer D
a.Has not proved popular outside of the United States.
b.Is not a tax on consumption.
c.Is used exclusively by third world (less developed) countries.
d.Is regressive in its effect.
Characteristics of the "fair tax" (i.e., national sales tax) include which, if any, of the following: -
Answer D
a.Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and
gift taxes.
b.Abolition of all Federal income taxes but retention of payroll taxes (including the self-
employment tax).
c.Abolition of the Federal individual (but not the corporate) income tax.
d.Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes.
In terms of probability, which of the following taxpayers would be least likely to be audited by
the IRS? - Answer A
a.Taxpayer is an employed electrician.
b.Taxpayer just received a $3 million personal injury award as a result of a lawsuit.
c.Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.
d.Taxpayer owns and operates a check-cashing service.
Which of the following is a characteristic of the audit process? - Answer B
a.Most taxpayer audits involve "special" agents.
b.Less important issues are handled by means of a correspondence audit.
c.If a taxpayer disagrees with the IRS auditor's finding, the only resort is to the courts.
d.Self-employed taxpayers are less likely to be selected for audit than employed taxpayers.
Solutions (2025-2026) Edition.
Which, if any, of the following statements best describes the history of the Federal income tax? -
Answer A
a.The Federal income tax on corporations was held by the U.S. Supreme Court to be allowable
under the U.S. Constitution.
b.It did not exist during the Civil War.
c.The Federal income tax on individuals was held by the U.S. Supreme Court to be allowable
under the U.S. Constitution.
d.Both the Federal income tax on individuals and on corporations was held by the U.S. Supreme
Court to be contrary to the U.S. Constitution.
Which, if any, of the following taxes are regressive (rather than progressive)? - Answer D
a.Federal individual income tax
b.Federal gift tax
c.Federal estate tax
d.State general sales tax
Which, if any, of the following transactions will increase a taxing jurisdiction's revenue from the
ad valorem tax imposed on real estate? - Answer D
a.A large property owner issues a conservation easement as to some of her land.
b.A resident dies and leaves his farm to his church.
c.A bankrupt motel is acquired by the Red Cross and is to be used to provide housing for
homeless persons.
d.A tax holiday issued 10 years ago has expired.
e.None of these choices are correct.
Which, if any, of the following transactions will decrease a taxing jurisdiction's ad valorem tax
revenue imposed on real estate? - Answer B
,d.A public school is razed and turned into a city park.
Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty? -
Answer A
a.The tax on automobiles sometimes considers the age of the vehicle.
b.Most states impose a tax on intangibles.
c.The tax on intangibles generates considerable revenue since it is difficult for taxpayers to
avoid.
d.Taxpayer compliance is greater for personal use property than for business use property.
Burt and Lisa are married and live in a common law state. They want to make gifts to their four
children in 2020. What is the maximum amount of the annual exclusion they will be allowed for
these gifts? - Answer D
a.$15,000.
b.$30,000.
c.$60,000.
d.$120,000
Property can be transferred within the family group by gift or at death. One motivation for
preferring the gift approach is: - Answer B
a.To avoid a future decline in value of the property transferred.
b.To take advantage of the per donee annual exclusion.
c.To take advantage of the higher unified transfer tax credit available under the gift tax.
d.To shift income to higher bracket donees.
Indicate which, if any, statement is incorrect. State income taxes: - Answer A
a.Cannot apply to visiting nonresidents.
b.Can decouple from the Federal version.
,a.The same date for filing as the Federal income tax.
b.Applying only to individuals but not to corporations.
c.No provision for withholding procedures.
d.Allowance of a deduction for Federal income taxes paid
A characteristic of FICA tax is that: - Answer D
a.It is imposed only on the employer.
b.It provides a modest source of income in the event of loss of employment.
c.It does not apply when one spouse works for the other spouse.
d.None of these choices are correct.
A characteristic of FUTA is that: - Answer B
a.It is imposed on both employer and employee.
b.Compliance requires following guidelines issued by both state and Federal regulatory
authorities.
c.It is applicable to spouses of employees but not to any children under age 18.
d.It is imposed solely on the employee.
The United States (either Federal, state, or local) does not impose: - Answer B
a.Severance taxes.
b.Export duties.
c.Custom duties.
d.Franchise taxes.
The proposed flat tax: - Answer A
a.Is a type of consumption tax.
, A VAT (value added tax): - Answer D
a.Has not proved popular outside of the United States.
b.Is not a tax on consumption.
c.Is used exclusively by third world (less developed) countries.
d.Is regressive in its effect.
Characteristics of the "fair tax" (i.e., national sales tax) include which, if any, of the following: -
Answer D
a.Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and
gift taxes.
b.Abolition of all Federal income taxes but retention of payroll taxes (including the self-
employment tax).
c.Abolition of the Federal individual (but not the corporate) income tax.
d.Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes.
In terms of probability, which of the following taxpayers would be least likely to be audited by
the IRS? - Answer A
a.Taxpayer is an employed electrician.
b.Taxpayer just received a $3 million personal injury award as a result of a lawsuit.
c.Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.
d.Taxpayer owns and operates a check-cashing service.
Which of the following is a characteristic of the audit process? - Answer B
a.Most taxpayer audits involve "special" agents.
b.Less important issues are handled by means of a correspondence audit.
c.If a taxpayer disagrees with the IRS auditor's finding, the only resort is to the courts.
d.Self-employed taxpayers are less likely to be selected for audit than employed taxpayers.
