TEST BANKh0
South-Western Federal Taxation 2025:
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Individual Income Taxes, 48th Edition
h0 h0 h0 h0
by James Young Complete Chapters 1 - 20
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Pageh01
,TABLE OF CONTENTS
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Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
Chapter 2: Working with the Tax Law
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Chapter 03: Tax Formula and Tax Determination
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Chapter 04: Gross Income: Concepts and Inclusions
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Chapter 05: Gross Income: Exclusions
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Chapter 06: Deductions and Losses: In General
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Chapter 07: Deductions and Losses: Certain Business Expenses
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Chapter 08: Depreciation, Cost Recovery, Amortization, and Depletion
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Chapter 09: Deductions: Employee and Self-Employed-Related Expense
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Chapter 10: Deductions and Losses: Certain Itemized Deductions
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Chapter 11: Investor Losses
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Chapter 12: Alternative Minimum Tax
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Chapter 13: Tax Credits and Payment Procedures
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Chapter 14: Property Transactions: Determination of Gain or Loss and
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Chapter 15: Property Transactions: Nontaxable Exchanges
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Chapter 16: Property Transactions: Capital Gains and Losses
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Chapter 17: Property Transactions: 1231 and Recapture Provisions
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Chapter 18: Accounting Periods and Methods
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Chapter 19: Deferred Compensation
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Chapter 20: Corporations and Partnerships
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Pageh02
, Chapter 01 2025 Individuals
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Answers at the end of each chapter
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Indicate whether the statement is true or false.
h0 h0 h0 h0 h0 h0 h0
h0 h0 1. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
The 20% negligence penalty will apply to $25,000.
h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 3. Ultimately, most taxes are paid by individuals.
h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
4. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not rem
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
ainthe same. 0h h0
a. True
b. False
h0 h0 5. The principal objective of the FUTA tax is to provide some measure of retirement security.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
onthe part of taxpayers.
0h h0 h0 h0
a. True
b. False
h0
7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a st
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
ate thatlevies no such taxes.
h0 0h h0 h0 h0
a. True
b. False
h0
8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an o
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verpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The refu
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 0h h0
nd need not include interest.
h0 h0 h0 h0
a. True
b. False
h0 h0 9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
Pageh03
, Name: Class: Date:h0
Chapter 01 2025 Individuals
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h0 h0 10. For Federal income tax purposes, there never has been a general amnesty period.
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a. True
b. False
h0
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.
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a. True
b. False
h0
12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gai
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n inthe year the installment sale occurs.
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a. True
b. False
h0 h0 13. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
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a. True
b. False
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14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José ha
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
s not made a taxable gift.
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a. True
b. False
h0
15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
on additional income tax assessments by the IRS.
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a. True
b. False
h0 h0 16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the a
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
pplication of the wherewithal to pay concept.
h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 18. An inheritance tax is a tax on a decedent’s right to pass property at death.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 19. When interest is charged on a deficiency, any part of a month counts as a full month.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
Pageh04
South-Western Federal Taxation 2025:
h0 h0 h0
Individual Income Taxes, 48th Edition
h0 h0 h0 h0
by James Young Complete Chapters 1 - 20
h0 h0 h0h0 h0 h0 h0 h0
Pageh01
,TABLE OF CONTENTS
h0 h0 h0
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
Chapter 2: Working with the Tax Law
h0 h0 h0 h0 h0 h0 h0
Chapter 03: Tax Formula and Tax Determination
h0 h0 h0 h0 h0 h0 h0
Chapter 04: Gross Income: Concepts and Inclusions
h0 h0 h0 h0 h0 h0 h0
Chapter 05: Gross Income: Exclusions
h0 h0 h0 h0 h0
Chapter 06: Deductions and Losses: In General
h0 h0 h0 h0 h0 h0 h0
Chapter 07: Deductions and Losses: Certain Business Expenses
h0 h0 h0 h0 h0 h0 h0 h0
Chapter 08: Depreciation, Cost Recovery, Amortization, and Depletion
h0 h0 h0 h0 h0 h0 h0 h0
Chapter 09: Deductions: Employee and Self-Employed-Related Expense
h0 h0 h0 h0 h0 h0 h0
Chapter 10: Deductions and Losses: Certain Itemized Deductions
h0 h0 h0 h0 h0 h0 h0 h0
Chapter 11: Investor Losses
h0 h0 h0 h0
Chapter 12: Alternative Minimum Tax
h0 h0 h0 h0 h0
Chapter 13: Tax Credits and Payment Procedures
h0 h0 h0 h0 h0 h0 h0
Chapter 14: Property Transactions: Determination of Gain or Loss and
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
Chapter 15: Property Transactions: Nontaxable Exchanges
h0 h0 h0 h0 h0 h0
Chapter 16: Property Transactions: Capital Gains and Losses
h0 h0 h0 h0 h0 h0 h0 h0
Chapter 17: Property Transactions: 1231 and Recapture Provisions
h0 h0 h0 h0 h0 h0 h0 h0
Chapter 18: Accounting Periods and Methods
h0 h0 h0 h0 h0 h0
Chapter 19: Deferred Compensation
h0 h0 h0 h0
Chapter 20: Corporations and Partnerships
h0 h0 h0 h0
Pageh02
, Chapter 01 2025 Individuals
h0 h0 h0
Answers at the end of each chapter
h0 h0 h0 h0 h0 h0
Indicate whether the statement is true or false.
h0 h0 h0 h0 h0 h0 h0
h0 h0 1. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
The 20% negligence penalty will apply to $25,000.
h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 3. Ultimately, most taxes are paid by individuals.
h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
4. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not rem
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
ainthe same. 0h h0
a. True
b. False
h0 h0 5. The principal objective of the FUTA tax is to provide some measure of retirement security.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
onthe part of taxpayers.
0h h0 h0 h0
a. True
b. False
h0
7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a st
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
ate thatlevies no such taxes.
h0 0h h0 h0 h0
a. True
b. False
h0
8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an o
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
verpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The refu
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 0h h0
nd need not include interest.
h0 h0 h0 h0
a. True
b. False
h0 h0 9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
Pageh03
, Name: Class: Date:h0
Chapter 01 2025 Individuals
h0 h0 h0
h0 h0 10. For Federal income tax purposes, there never has been a general amnesty period.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gai
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
n inthe year the installment sale occurs.
h0 0h h0 h0 h0 h0 h0
a. True
b. False
h0 h0 13. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
14. In 2024, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José ha
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
s not made a taxable gift.
h0 h0 h0 h0 h0
a. True
b. False
h0
15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
on additional income tax assessments by the IRS.
h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the a
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
pplication of the wherewithal to pay concept.
h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 18. An inheritance tax is a tax on a decedent’s right to pass property at death.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
h0 h0 19. When interest is charged on a deficiency, any part of a month counts as a full month.
h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0 h0
a. True
b. False
Pageh04
