TAX TEST 1: CHAPTERS 1-5
QUESTIONS WITH 100% CORRECT
ANSWERS [GRADED A+] LATEST
UPDATE
First Federal individual income tax enacted - ✔✔1861: repealed after Civil
War
New Federal individual income tax enacted - ✔✔1894: tax found to be
unconstitutional
First federal corporate income tax enacted - ✔✔1909
16th Amendment ratified - ✔✔1913: sanctioned both Federal individual
and corporate income taxes
Federal income tax- tax base - ✔✔Taxable income
Incidence of tax - ✔✔degree to which the tax burden is shared by
taxpayers
Property (ad valorem) taxes - ✔✔*Based on value of asset
*Imposed on realty or personalty
*Exclusive jurisdiction of states and local political subdivisions
*Deductible for Federal Income Tax purposes
Transaction taxes - ✔✔1. Excise taxes
2. General sales taxes
3. Severence taxes
Excise Taxes - ✔✔Federal, state and local
*restricted to specific items: gasoline, tobacco, liquor
*Hotel occupancy tax
*Rental car surcharge
©morren2026/2027.Year published 2026.
,General Sales Taxes - ✔✔States and local
States that impose sales taxes also impose____ - ✔✔Use tax: items
purchased in other states but used in their jurisdiction
States without sales or use taxes: - ✔✔Alaska, Delaware, Montana, New
Hampshire, Oregon
Severence Taxes - ✔✔Tax on natural resources extracted--important
revenue source for states rich in natural resources
Death taxes - ✔✔1. Estate Tax
2. Inheritance Tax
Estate tax - ✔✔Imposed on right to pass property at death
Inheritance tax - ✔✔Imposed on right to receive property from a decedent
Death taxes: Federal government - ✔✔Only estate taxes
Death taxes: State - ✔✔Inheritance taxes, estate taxes, or both
Federal estate tax: gross estate - ✔✔FMV of property decedent owned at
the time of death & property interests: life insurance proceeds paid to the
estate or to a beneficiary other than the estate if the deceased insured had
any ownership rights in the policy
Federal estate tax: deductions and credits allowed arriving at taxable estate
- ✔✔Marital deduction, funeral and admin expenses, certain taxes, debts
of decedent
Unified Transfer tax credit - ✔✔Reduces or eliminates estate tax liability
for certain estates
2017: 2,141,800 credit
State death tax: Inheritance taxed based on - ✔✔Relationship of heir to
decedent: More closely related, lower the tax
©morren2026/2027.Year published 2026.
, Federal Gift Tax - ✔✔Applies only to transfers not supported by full and
adequate consideration
Federal gift tax: taxable gift - ✔✔FMV of gift - annual exclusion - marital
deduction (if applicable)
Federal gift tax annual exclusion - ✔✔14,000 per donee (2017)
Gift splitting - ✔✔Married persons can make a special election to split
gifts: Increases number of annual exclusions and allows use of non donor
spouse's unified transfer tax credit
Unified transfer tax credit - ✔✔Applies to taxable gifts and the Federal
estate tax
Taxable gift form - ✔✔709
Income taxes - ✔✔Federal, most state, and some local
Pay as you go procedures - ✔✔Attempt to assure tax collection
1. Withholding requirements for employees
2. Estimated tax prepayments for all taxpayers
Corporate taxable income - ✔✔Income - deductions
Corporate income tax differences - ✔✔1. Doesn't require computing
adjusted gross income
2. Doesn't provide for standard deduction or personal or dependency
exemptions
3. All allowable deductions are business expenses
State income tax - ✔✔1. All states require some form of withholding
procedures
2. Most states use as the tax base the income determination made for
Federal income tax purposes: piggyback approach to state income taxation
States that do not impose income tax - ✔✔Alaska, Florida, Nevada, South
Dakota, Texas, Washington, Wyoming
©morren2026/2027.Year published 2026.
QUESTIONS WITH 100% CORRECT
ANSWERS [GRADED A+] LATEST
UPDATE
First Federal individual income tax enacted - ✔✔1861: repealed after Civil
War
New Federal individual income tax enacted - ✔✔1894: tax found to be
unconstitutional
First federal corporate income tax enacted - ✔✔1909
16th Amendment ratified - ✔✔1913: sanctioned both Federal individual
and corporate income taxes
Federal income tax- tax base - ✔✔Taxable income
Incidence of tax - ✔✔degree to which the tax burden is shared by
taxpayers
Property (ad valorem) taxes - ✔✔*Based on value of asset
*Imposed on realty or personalty
*Exclusive jurisdiction of states and local political subdivisions
*Deductible for Federal Income Tax purposes
Transaction taxes - ✔✔1. Excise taxes
2. General sales taxes
3. Severence taxes
Excise Taxes - ✔✔Federal, state and local
*restricted to specific items: gasoline, tobacco, liquor
*Hotel occupancy tax
*Rental car surcharge
©morren2026/2027.Year published 2026.
,General Sales Taxes - ✔✔States and local
States that impose sales taxes also impose____ - ✔✔Use tax: items
purchased in other states but used in their jurisdiction
States without sales or use taxes: - ✔✔Alaska, Delaware, Montana, New
Hampshire, Oregon
Severence Taxes - ✔✔Tax on natural resources extracted--important
revenue source for states rich in natural resources
Death taxes - ✔✔1. Estate Tax
2. Inheritance Tax
Estate tax - ✔✔Imposed on right to pass property at death
Inheritance tax - ✔✔Imposed on right to receive property from a decedent
Death taxes: Federal government - ✔✔Only estate taxes
Death taxes: State - ✔✔Inheritance taxes, estate taxes, or both
Federal estate tax: gross estate - ✔✔FMV of property decedent owned at
the time of death & property interests: life insurance proceeds paid to the
estate or to a beneficiary other than the estate if the deceased insured had
any ownership rights in the policy
Federal estate tax: deductions and credits allowed arriving at taxable estate
- ✔✔Marital deduction, funeral and admin expenses, certain taxes, debts
of decedent
Unified Transfer tax credit - ✔✔Reduces or eliminates estate tax liability
for certain estates
2017: 2,141,800 credit
State death tax: Inheritance taxed based on - ✔✔Relationship of heir to
decedent: More closely related, lower the tax
©morren2026/2027.Year published 2026.
, Federal Gift Tax - ✔✔Applies only to transfers not supported by full and
adequate consideration
Federal gift tax: taxable gift - ✔✔FMV of gift - annual exclusion - marital
deduction (if applicable)
Federal gift tax annual exclusion - ✔✔14,000 per donee (2017)
Gift splitting - ✔✔Married persons can make a special election to split
gifts: Increases number of annual exclusions and allows use of non donor
spouse's unified transfer tax credit
Unified transfer tax credit - ✔✔Applies to taxable gifts and the Federal
estate tax
Taxable gift form - ✔✔709
Income taxes - ✔✔Federal, most state, and some local
Pay as you go procedures - ✔✔Attempt to assure tax collection
1. Withholding requirements for employees
2. Estimated tax prepayments for all taxpayers
Corporate taxable income - ✔✔Income - deductions
Corporate income tax differences - ✔✔1. Doesn't require computing
adjusted gross income
2. Doesn't provide for standard deduction or personal or dependency
exemptions
3. All allowable deductions are business expenses
State income tax - ✔✔1. All states require some form of withholding
procedures
2. Most states use as the tax base the income determination made for
Federal income tax purposes: piggyback approach to state income taxation
States that do not impose income tax - ✔✔Alaska, Florida, Nevada, South
Dakota, Texas, Washington, Wyoming
©morren2026/2027.Year published 2026.
