Page 1
,TABLE OF CONTENTS v# v#
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law Cha
v# v# v# v# v# v# v# v# v# v# v# v#
pter 2: Working with the Tax Law
v# v# v# v# v# v#
Chapter 03: Tax Formula and Tax Determination Chap
v# v# v# v# v# v# v#
ter 04: Gross Income: Concepts and Inclusions Chapter
v# v# v# v# v# v# v# v#
05: Gross Income: Exclusions
v# v# v#
Chapter 06: Deductions and Losses: In General
v# v# v# v# v# v#
Chapter 07: Deductions and Losses: Certain Business Expenses Chapt
v# v# v# v# v# v# v# v #
er 08: Depreciation, Cost Recovery, Amortization, and Depletion Chapter 0
v# v# v# v# v# v# v# v# v#
9: Deductions: Employee and Self-Employed-
v# v# v# v#
Related Expense Chapter 10: Deductions and Losses: Certain Itemized De
v# v# v# v# v# v# v# v# v#
ductions Chapter 11: Investor Losses v # v# v# v#
Chapter 12: Alternative Minimum Tax v# v# v# v#
Chapter 13: Tax Credits and Payment Procedures
v# v# v# v# v# v#
Chapter 14: Property Transactions: Determination of Gain or Loss and Cha
v# v# v# v# v# v# v# v# v# v#
pter 15: Property Transactions: Nontaxable Exchanges
v# v# v# v# v#
Chapter 16: Property Transactions: Capital Gains and Losses Chapter
v# v# v# v# v# v# v# v# v
17: Property Transactions: 1231 and Recapture Provisions Chapter 1
# v# v# v# v# v# v# v# v#
8: Accounting Periods and Methods
v# v# v# v#
Chapter 19: Deferred Compensation Chapter v# v# v# v#
v# 20: Corporations and Partnerships
v# v# v#
Page 2
, Chapter 01 2025 Individuals
v # v # v #
Answers at the end of each chapter
7% 7% 7% 7% 7% 7%
Indicate whether the statement is true or false.
v # v# v # v # v # v# v#
v# 1. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
v# v# v# v# v# 7% v# 7% 7% v# v# v# v# v# v# v# v# v#
a. True
b. False
v # 2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
v# v# 7% v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# 7%
The 20% negligence penalty will apply to $25,000.
7% v# v# v# v# v# v#
a. True
b. False
v # 3. Ultimately, most taxes are paid by individuals.
v# v# 7% v# v# v# v#
a. True
b. False
4. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not re
v# v# v# v# v# v# v# v# 7% v# v# v# v# v# v# v# v# v# v# v# v#
m ainthe same.
v# v#
a. True
b. False
v # 5. The principal objective of the FUTA tax is to provide some measure of retirement security.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased complianc
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
e onthe part of taxpayers.
v# v# v# v#
a. True
b. False
7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a sta
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
te that levies no such taxes.
v# v# 7% v# v# v#
a. True
b. False
v 8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an o
# v
# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
verpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The refu
7% v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
nd need not include interest.
v# v# v# v#
a. True
b. False
v# 9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
v# v# v# v# v# v# v# v# v# v # v# v# v# v# v# v# v#
a. True
b. False
Page 3
, Name: Class: Date: v #
Chapter 01 2025 Individuals
v # v # v #
v# 10. For Federal income tax purposes, there never has been a general amnesty period.
v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income
v # v# v# v# v# v# v# v# v# v# v# v# v# v# v# 7% v# v# v# v# v# v#
taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gai
v# v# v# 7% v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
n inthe year the installment sale occurs.
v# v# v# v# v# v#
a. True
b. False
v# 13. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José ha
v # v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
s not made a taxable gift.
v# 7% v# v# v#
a. True
b. False
15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations o
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
n additional income tax assessments by the IRS.
v# v# v# v# v# v# v# v#
a. True
b. False
v# 16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the a
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
pplication of the wherewithal to pay concept. v# v# v# v# v# v#
a. True
b. False
v# 18. An inheritance tax is a tax on a decedent’s right to pass property at death.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
v# 19. When interest is charged on a deficiency, any part of a month counts as a full month.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
Page 4
,TABLE OF CONTENTS v# v#
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law Cha
v# v# v# v# v# v# v# v# v# v# v# v#
pter 2: Working with the Tax Law
v# v# v# v# v# v#
Chapter 03: Tax Formula and Tax Determination Chap
v# v# v# v# v# v# v#
ter 04: Gross Income: Concepts and Inclusions Chapter
v# v# v# v# v# v# v# v#
05: Gross Income: Exclusions
v# v# v#
Chapter 06: Deductions and Losses: In General
v# v# v# v# v# v#
Chapter 07: Deductions and Losses: Certain Business Expenses Chapt
v# v# v# v# v# v# v# v #
er 08: Depreciation, Cost Recovery, Amortization, and Depletion Chapter 0
v# v# v# v# v# v# v# v# v#
9: Deductions: Employee and Self-Employed-
v# v# v# v#
Related Expense Chapter 10: Deductions and Losses: Certain Itemized De
v# v# v# v# v# v# v# v# v#
ductions Chapter 11: Investor Losses v # v# v# v#
Chapter 12: Alternative Minimum Tax v# v# v# v#
Chapter 13: Tax Credits and Payment Procedures
v# v# v# v# v# v#
Chapter 14: Property Transactions: Determination of Gain or Loss and Cha
v# v# v# v# v# v# v# v# v# v#
pter 15: Property Transactions: Nontaxable Exchanges
v# v# v# v# v#
Chapter 16: Property Transactions: Capital Gains and Losses Chapter
v# v# v# v# v# v# v# v# v
17: Property Transactions: 1231 and Recapture Provisions Chapter 1
# v# v# v# v# v# v# v# v#
8: Accounting Periods and Methods
v# v# v# v#
Chapter 19: Deferred Compensation Chapter v# v# v# v#
v# 20: Corporations and Partnerships
v# v# v#
Page 2
, Chapter 01 2025 Individuals
v # v # v #
Answers at the end of each chapter
7% 7% 7% 7% 7% 7%
Indicate whether the statement is true or false.
v # v# v # v # v # v# v#
v# 1. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
v# v# v# v# v# 7% v# 7% 7% v# v# v# v# v# v# v# v# v#
a. True
b. False
v # 2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
v# v# 7% v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# 7%
The 20% negligence penalty will apply to $25,000.
7% v# v# v# v# v# v#
a. True
b. False
v # 3. Ultimately, most taxes are paid by individuals.
v# v# 7% v# v# v# v#
a. True
b. False
4. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not re
v# v# v# v# v# v# v# v# 7% v# v# v# v# v# v# v# v# v# v# v# v#
m ainthe same.
v# v#
a. True
b. False
v # 5. The principal objective of the FUTA tax is to provide some measure of retirement security.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased complianc
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
e onthe part of taxpayers.
v# v# v# v#
a. True
b. False
7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a sta
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
te that levies no such taxes.
v# v# 7% v# v# v#
a. True
b. False
v 8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an o
# v
# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
verpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The refu
7% v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
nd need not include interest.
v# v# v# v#
a. True
b. False
v# 9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
v# v# v# v# v# v# v# v# v# v # v# v# v# v# v# v# v#
a. True
b. False
Page 3
, Name: Class: Date: v #
Chapter 01 2025 Individuals
v # v # v #
v# 10. For Federal income tax purposes, there never has been a general amnesty period.
v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income
v # v# v# v# v# v# v# v# v# v# v# v# v# v# v# 7% v# v# v# v# v# v#
taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gai
v# v# v# 7% v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
n inthe year the installment sale occurs.
v# v# v# v# v# v#
a. True
b. False
v# 13. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José ha
v # v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
s not made a taxable gift.
v# 7% v# v# v#
a. True
b. False
15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations o
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
n additional income tax assessments by the IRS.
v# v# v# v# v# v# v# v#
a. True
b. False
v# 16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the a
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
pplication of the wherewithal to pay concept. v# v# v# v# v# v#
a. True
b. False
v# 18. An inheritance tax is a tax on a decedent’s right to pass property at death.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
a. True
b. False
v# 19. When interest is charged on a deficiency, any part of a month counts as a full month.
v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v# v#
Page 4
