,Test Bank For South-Western Federal Taxation 2022: Individual Income Taxes
Chapter 01_An_Introduction_to_Taxation_and_Understanding_the_Federal_Tax_Law
Chapter 01_An_Introduction_to_Taxation
and_Understanding_the_Federal_Tax_Law
1. A calendar year taxpayer files his 2020 Federal income tax retur
A calendar year taxpayer files his 2020 Federal income tax return on
March 4, 2021. The return reflects an overpayment of $6,000, and the
taxpayer requests a refund of this amount. The refund is paid on May
16, 2021. The refund need not include interest.
*a. True
b. False
2. A characteristic of FICA tax is that:...
A characteristic of FICA tax is that:
a. It does not apply when one spouse works for the other spouse.
b. It is imposed only on the employer.
c. It provides a modest source of income in the event of loss of
employment.
*d. None of these.
3. A characteristic of FUTA is that:...
A characteristic of FUTA is that:
a. It is imposed on both employer and employee.
b. It is imposed solely on the employee.
*c. Compliance requires following guidelines issued by both state
and Federal regulatory authorities.
d. It is applicable to spouses of employees but not to any
children under age 18.
4. A characteristic of the fraud penalties is:...
A characteristic of the fraud penalties is:
a. When negligence and civil fraud apply to a deficiency, the
negligence penalty predominates.
*b. When criminal fraud can result in a fine and a prison
sentence.
c. When the criminal fraud penalty is 75% of the deficiency
attributable to the fraud.
d. When the IRS has the same burden of proof in the case of
criminal fraud as with civil fraud.
5. A CPA firm in California sends many of its less complex tax retu
A CPA firm in California sends many of its less complex tax returns to
be prepared by a group of accountants in India. If certain procedures
are followed, this outsourcing of tax return preparation is proper.
1
,Test Bank For South-Western Federal Taxation 2022: Individual Income Taxes
Chapter 01_An_Introduction_to_Taxation_and_Understanding_the_Federal_Tax_Law
*a. True
b. False
6. A fixture will be subject to the ad valorem tax on personalty ra
A fixture will be subject to the ad valorem tax on personalty rather
than the ad valorem tax on realty.
a. True
*b. False
7. A lack of compliance in the payment of use taxes can be resolved
A lack of compliance in the payment of use taxes can be resolved by several means.
In this regard, comment on the following:
Registration
a. of
automobiles.
Reporting of
Internet
purchases
b.
on state
income tax
returns.
Correct Answer(s):
8. A landlord leases property upon which the tenant makes improveme
A landlord leases property upon which the tenant makes improvements. The
improvements are significant and are not made in lieu of rent. At the end of the
lease, the value of the improvements are not income to the landlord. This rule is an
example of:
a. A clear reflection of income result.
b. The tax benefit rule.
c. The arm’s length concept.
*d. The wherewithal to pay concept.
9. Allowing a tax credit for certain solar energy property can be j
Allowing a tax credit for certain solar energy property can be justified:
a. As helping small businesses.
b. As promoting administrative feasibility.
2
, Test Bank For South-Western Federal Taxation 2022: Individual Income Taxes
Chapter 01_An_Introduction_to_Taxation_and_Understanding_the_Federal_Tax_Law
*c. As promoting a government policy to use alternative energy
sources.
d. Based on the wherewithal to pay concept.
11. An excise tax is often used to try to influence behavior.
An excise tax is often used to try to influence behavior.
*a. True
b. False
12. An inheritance tax is a tax on a decedentâ™s right to pass prop
An inheritance tax is a tax on a decedent’s right to pass property at
death.
a. True
*b. False
13. An office audit by the IRS takes place at the office of the taxp
An office audit by the IRS takes place at the office of the taxpayer.
a. True
*b. False
14. Antonio dies with an estate worth $20 million. Under his will, $
Antonio dies with an estate worth $20 million. Under his will, $10 million passes to
his wife and $10 million goes to his church. What is Antonio’s Federal estate tax
result?
Correct Answer(s):
15. A parent employs his twin daughters, age 17, in his sole proprie
A parent employs his twin daughters, age 17, in his sole
proprietorship. The daughters are not subject to FICA coverage.
*a. True
b. False
16. A provision in the law that compels accrual basis taxpayers to p
A provision in the law that compels accrual basis taxpayers to pay a
tax on prepaid income in the year received and not when earned is
consistent with generally accepted accounting principles.
a. True
*b. False
3
Chapter 01_An_Introduction_to_Taxation_and_Understanding_the_Federal_Tax_Law
Chapter 01_An_Introduction_to_Taxation
and_Understanding_the_Federal_Tax_Law
1. A calendar year taxpayer files his 2020 Federal income tax retur
A calendar year taxpayer files his 2020 Federal income tax return on
March 4, 2021. The return reflects an overpayment of $6,000, and the
taxpayer requests a refund of this amount. The refund is paid on May
16, 2021. The refund need not include interest.
*a. True
b. False
2. A characteristic of FICA tax is that:...
A characteristic of FICA tax is that:
a. It does not apply when one spouse works for the other spouse.
b. It is imposed only on the employer.
c. It provides a modest source of income in the event of loss of
employment.
*d. None of these.
3. A characteristic of FUTA is that:...
A characteristic of FUTA is that:
a. It is imposed on both employer and employee.
b. It is imposed solely on the employee.
*c. Compliance requires following guidelines issued by both state
and Federal regulatory authorities.
d. It is applicable to spouses of employees but not to any
children under age 18.
4. A characteristic of the fraud penalties is:...
A characteristic of the fraud penalties is:
a. When negligence and civil fraud apply to a deficiency, the
negligence penalty predominates.
*b. When criminal fraud can result in a fine and a prison
sentence.
c. When the criminal fraud penalty is 75% of the deficiency
attributable to the fraud.
d. When the IRS has the same burden of proof in the case of
criminal fraud as with civil fraud.
5. A CPA firm in California sends many of its less complex tax retu
A CPA firm in California sends many of its less complex tax returns to
be prepared by a group of accountants in India. If certain procedures
are followed, this outsourcing of tax return preparation is proper.
1
,Test Bank For South-Western Federal Taxation 2022: Individual Income Taxes
Chapter 01_An_Introduction_to_Taxation_and_Understanding_the_Federal_Tax_Law
*a. True
b. False
6. A fixture will be subject to the ad valorem tax on personalty ra
A fixture will be subject to the ad valorem tax on personalty rather
than the ad valorem tax on realty.
a. True
*b. False
7. A lack of compliance in the payment of use taxes can be resolved
A lack of compliance in the payment of use taxes can be resolved by several means.
In this regard, comment on the following:
Registration
a. of
automobiles.
Reporting of
Internet
purchases
b.
on state
income tax
returns.
Correct Answer(s):
8. A landlord leases property upon which the tenant makes improveme
A landlord leases property upon which the tenant makes improvements. The
improvements are significant and are not made in lieu of rent. At the end of the
lease, the value of the improvements are not income to the landlord. This rule is an
example of:
a. A clear reflection of income result.
b. The tax benefit rule.
c. The arm’s length concept.
*d. The wherewithal to pay concept.
9. Allowing a tax credit for certain solar energy property can be j
Allowing a tax credit for certain solar energy property can be justified:
a. As helping small businesses.
b. As promoting administrative feasibility.
2
, Test Bank For South-Western Federal Taxation 2022: Individual Income Taxes
Chapter 01_An_Introduction_to_Taxation_and_Understanding_the_Federal_Tax_Law
*c. As promoting a government policy to use alternative energy
sources.
d. Based on the wherewithal to pay concept.
11. An excise tax is often used to try to influence behavior.
An excise tax is often used to try to influence behavior.
*a. True
b. False
12. An inheritance tax is a tax on a decedentâ™s right to pass prop
An inheritance tax is a tax on a decedent’s right to pass property at
death.
a. True
*b. False
13. An office audit by the IRS takes place at the office of the taxp
An office audit by the IRS takes place at the office of the taxpayer.
a. True
*b. False
14. Antonio dies with an estate worth $20 million. Under his will, $
Antonio dies with an estate worth $20 million. Under his will, $10 million passes to
his wife and $10 million goes to his church. What is Antonio’s Federal estate tax
result?
Correct Answer(s):
15. A parent employs his twin daughters, age 17, in his sole proprie
A parent employs his twin daughters, age 17, in his sole
proprietorship. The daughters are not subject to FICA coverage.
*a. True
b. False
16. A provision in the law that compels accrual basis taxpayers to p
A provision in the law that compels accrual basis taxpayers to pay a
tax on prepaid income in the year received and not when earned is
consistent with generally accepted accounting principles.
a. True
*b. False
3
