Chapter 1
Introduction to Taxation
True-False: Insert T for True and F for False before the questions.
_____ 1. Both sales and use taxes are collected in the state in which the sale takes place.
ANSWER: False
LO: 1.1
DIFFICULTY: Easy
_____ 2. The person giving the gift pays the gift tax.
ANSWER: True
LO: 1.1
DIFFICULTY: Easy
_____ 3. The value added tax is a type of consumption tax.
ANSWER: True
LO: 1.1
DIFFICULTY: Easy
,_____ 4. A flat tax generally would be considered a regressive tax.
ANSWER: False
LO: 1.2.
DIFFICULTY: Easy
_____ 5. Adam Smith’s four canons of taxation are Equity, Certainty, Economy and
Convenience.
ANSWER: True
LO: 1.3
DIFFICULTY: Easy
_____ 6. The 16th Amendment to the US Constitution that provided for an income tax was
ratified in 1913.
ANSWER: True
LO: 1.4
DIFFICULTY: Easy
_____ 7. The first codification of the Internal Revenue Code took place in 1954.
ANSWER: False
LO: 1.4
DIFFICULTY: Easy
,_____ 8. There are three basic taxable entities: the individual, the fiduciary, and the C
corporation.
ANSWER: True
LO: 1.5
DIFFICULTY: Easy
_____ 9. All interest paid to a taxpayer must be included in gross income.
ANSWER: False
LO: 1.5
DIFFICULTY: Moderate
_____ 10 A taxpayer’s filing status determines the basic standard deduction allowed.
ANSWER: True
LO: 1.5
DIFFICULTY: Easy
_____ 11. A married person filing a separate return has the lowest standard deduction
amount.
ANSWER: False
LO: 1.5
DIFFICULTY: Easy
, _____ 12. The lowest tax rate on the tax rate schedules for taxable incomes is the same for
individuals and C corporations.
ANSWER: False
LO: 1.5
DIFFICULTY: Easy
_____ 13. Only corporations are allowed to carry their net operating losses both backwards
and forwards.
ANSWER: False
LO: 1.5
DIFFICULTY: Easy
_____ 14. The alternative minimum tax is a tax determined on a broadened definition of
income with no deductions permitted.
ANSWER: False
LO: 1.5
DIFFICULTY: Easy
_____ 15. All limited liability companies (LLCs) can file their tax returns as partnerships,
or electively, as corporations.
ANSWER: False
LO: 1.6
DIFFICULTY: Easy
Introduction to Taxation
True-False: Insert T for True and F for False before the questions.
_____ 1. Both sales and use taxes are collected in the state in which the sale takes place.
ANSWER: False
LO: 1.1
DIFFICULTY: Easy
_____ 2. The person giving the gift pays the gift tax.
ANSWER: True
LO: 1.1
DIFFICULTY: Easy
_____ 3. The value added tax is a type of consumption tax.
ANSWER: True
LO: 1.1
DIFFICULTY: Easy
,_____ 4. A flat tax generally would be considered a regressive tax.
ANSWER: False
LO: 1.2.
DIFFICULTY: Easy
_____ 5. Adam Smith’s four canons of taxation are Equity, Certainty, Economy and
Convenience.
ANSWER: True
LO: 1.3
DIFFICULTY: Easy
_____ 6. The 16th Amendment to the US Constitution that provided for an income tax was
ratified in 1913.
ANSWER: True
LO: 1.4
DIFFICULTY: Easy
_____ 7. The first codification of the Internal Revenue Code took place in 1954.
ANSWER: False
LO: 1.4
DIFFICULTY: Easy
,_____ 8. There are three basic taxable entities: the individual, the fiduciary, and the C
corporation.
ANSWER: True
LO: 1.5
DIFFICULTY: Easy
_____ 9. All interest paid to a taxpayer must be included in gross income.
ANSWER: False
LO: 1.5
DIFFICULTY: Moderate
_____ 10 A taxpayer’s filing status determines the basic standard deduction allowed.
ANSWER: True
LO: 1.5
DIFFICULTY: Easy
_____ 11. A married person filing a separate return has the lowest standard deduction
amount.
ANSWER: False
LO: 1.5
DIFFICULTY: Easy
, _____ 12. The lowest tax rate on the tax rate schedules for taxable incomes is the same for
individuals and C corporations.
ANSWER: False
LO: 1.5
DIFFICULTY: Easy
_____ 13. Only corporations are allowed to carry their net operating losses both backwards
and forwards.
ANSWER: False
LO: 1.5
DIFFICULTY: Easy
_____ 14. The alternative minimum tax is a tax determined on a broadened definition of
income with no deductions permitted.
ANSWER: False
LO: 1.5
DIFFICULTY: Easy
_____ 15. All limited liability companies (LLCs) can file their tax returns as partnerships,
or electively, as corporations.
ANSWER: False
LO: 1.6
DIFFICULTY: Easy
