Page 1
br
,TABLEOF CONTENTS br
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law Chapter
br br br br br br br br br br br br rb
2:WorkingwiththeTaxLaw
rb br rb rb br
Chapter 03: Tax Formula and Tax Determination Chapter
br br 2 br br br br br
04: Gross Income: Concepts and Inclusions Chapter05:G
br br br br br br rb rb
rossIncome:Exclusions rb rb
Chapter 06: Deductions and Losses: In General
br br br br br br
Chapter 07: Deductions and Losses: Certain Business Expenses Chapter
br br br br br br br b r br
08: Depreciation, Cost Recovery, Amortization, and Depletion Chapter 09:
br br br br br br br br br
Deductions: Employee and Self-Employed- br br br
Related Expense Chapter 10: Deductions and Losses: Certain Itemized De
br br br br br br br br br
ductions Chapter 11: Investor Losses br br br br
Chapter 12: Alternative Minimum Tax
br br br br
Chapter 13: Tax Credits and Payment Procedures
br br 2 br br 2
Chapter 14: Property Transactions: Determination of Gain or Loss and Cha
br br br br br br br br br br
pter 15: Property Transactions: Nontaxable Exchanges
br br br br br
Chapter 16: Property Transactions: Capital Gains and Losses Chapte
br br br br br br br br
r 17: Property Transactions: 1231 and Recapture Provisions Chapter
br br br br br br br br br
18:AccountingPeriodsandMethods
br br br br
Chapter19:DeferredCompensation Chapterrb rb br br br
20: Corporations and Partnerships
br br br
Page 2
br
, Chapter 01 20252 Individuals
br br br
Answers2at2the2end2of2each2chapter
Indicate whether the statement is2 true or false.
br br br br br br br
1. Sales made over the internet are not2exempt2from the application of a general sales (or use) tax.
b
r br br br br br br br br br br br br br br br br
a. True
b. False
2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
b
r br br br br br br br br br br br br br br br br br br br
The220% negligence penalty will apply to $25,000. br br br br br br
a. True
b. False
3. Ultimately, most taxes are paid by individuals.
rb br br br br br br br
a. True
b. False
4. Even if property tax rates are not2changed, the amount of ad valorem2taxes imposed on realty may not remainthe same.
b
r br br br br br br br br br br br br br br br br br br br
a. True
b. False
5. The principal objective of the FUTA2tax2is to provide some measure of retirement security.
b
r br br br br br br br br br br br br br
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance onthe2
br br br br br br br br br br br br br br br br br br br b r
part of taxpayers.
br br
a. True
b. False
7. A safe2and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state2thatlev ies
b
r br br br br br br br br br br br br br br br br br br br br br br br br
no such taxes.
br br
a. True
b. False
8. A2calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects2an overpay me
br br br br br br br br br br br br br br br br br br br br
nt2of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The refund need not2 inc
br br br br br br br br br br br br br br br br br br br br br b r
lude interest. br
a. True
b. False
9. A tax2cut enacted by Congress that contains a sunset provision will make2the tax cut temporary.
b
r br br br br br br br br br br br br br br br
a. True
b. False
Page 3 br
, Name: Class: Date: br
Chapter 01 2025 Individuals
br br br
10. For Federal income tax2purposes, there never has been a general amnesty period.
br br br br br br br br br br br br br
a. True
b. False
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who2is subject2to both foreign and U.S. income taxe s
br br br br br br br br br br br br br br br br br br br br br br
on the2same income is allowed either a deduction or a credit2for the foreign tax paid.
br br br br br br br br br br br br br br
a. True
b. False
12. Because it2is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gain inthe y
br br br br br br br br br br br br br br br br br br br br br br
ear the installment sale occurs.
br br br br
a. True
b. False
13. The2amount of a taxpayer’s2itemized deductions will increase the chance2of being audited by the IRS.
br br br br br br br br br br br br br br br
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 has2not2
br br br br br br br br br br br br br br br br br br br br br b r
made a taxable gift. br br br
a. True
b. False
15. For omissions from gross income in excess of 25% of that2reported, there is no2statute of limitations on ad di
br br br br br br br br br br br br br br br br br br br br
tional income tax assessments by the IRS.
br br br br br br
a. True
b. False
16. Stealth taxes have2the effect2of generating additional taxes from all taxpayers.
b
r br br br br br br br br br br
a. True
b. False
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the propert y,
brbr br br br br br br br br br br br br br br br br br br br
a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no2gain is recognized due2to the application of t he
br br br br br br br br br br br br br br br br br br br br br br
wherewithal to2pay concept. br br
a. True
b. False
18. An inheritance2tax is a tax2on a decedent’s right to2pass property at death.
br br br br br br br br br br br br br
a. True
b. False
19. When interest2is charged on a deficiency, any part2of a month counts as2a full month.
br br br br br br br br br br br br br br br
a. True
b. False
Page 4 br
br
,TABLEOF CONTENTS br
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law Chapter
br br br br br br br br br br br br rb
2:WorkingwiththeTaxLaw
rb br rb rb br
Chapter 03: Tax Formula and Tax Determination Chapter
br br 2 br br br br br
04: Gross Income: Concepts and Inclusions Chapter05:G
br br br br br br rb rb
rossIncome:Exclusions rb rb
Chapter 06: Deductions and Losses: In General
br br br br br br
Chapter 07: Deductions and Losses: Certain Business Expenses Chapter
br br br br br br br b r br
08: Depreciation, Cost Recovery, Amortization, and Depletion Chapter 09:
br br br br br br br br br
Deductions: Employee and Self-Employed- br br br
Related Expense Chapter 10: Deductions and Losses: Certain Itemized De
br br br br br br br br br
ductions Chapter 11: Investor Losses br br br br
Chapter 12: Alternative Minimum Tax
br br br br
Chapter 13: Tax Credits and Payment Procedures
br br 2 br br 2
Chapter 14: Property Transactions: Determination of Gain or Loss and Cha
br br br br br br br br br br
pter 15: Property Transactions: Nontaxable Exchanges
br br br br br
Chapter 16: Property Transactions: Capital Gains and Losses Chapte
br br br br br br br br
r 17: Property Transactions: 1231 and Recapture Provisions Chapter
br br br br br br br br br
18:AccountingPeriodsandMethods
br br br br
Chapter19:DeferredCompensation Chapterrb rb br br br
20: Corporations and Partnerships
br br br
Page 2
br
, Chapter 01 20252 Individuals
br br br
Answers2at2the2end2of2each2chapter
Indicate whether the statement is2 true or false.
br br br br br br br
1. Sales made over the internet are not2exempt2from the application of a general sales (or use) tax.
b
r br br br br br br br br br br br br br br br br
a. True
b. False
2. Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.
b
r br br br br br br br br br br br br br br br br br br br
The220% negligence penalty will apply to $25,000. br br br br br br
a. True
b. False
3. Ultimately, most taxes are paid by individuals.
rb br br br br br br br
a. True
b. False
4. Even if property tax rates are not2changed, the amount of ad valorem2taxes imposed on realty may not remainthe same.
b
r br br br br br br br br br br br br br br br br br br br
a. True
b. False
5. The principal objective of the FUTA2tax2is to provide some measure of retirement security.
b
r br br br br br br br br br br br br br
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance onthe2
br br br br br br br br br br br br br br br br br br br b r
part of taxpayers.
br br
a. True
b. False
7. A safe2and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state2thatlev ies
b
r br br br br br br br br br br br br br br br br br br br br br br br br
no such taxes.
br br
a. True
b. False
8. A2calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects2an overpay me
br br br br br br br br br br br br br br br br br br br br
nt2of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.The refund need not2 inc
br br br br br br br br br br br br br br br br br br br br br b r
lude interest. br
a. True
b. False
9. A tax2cut enacted by Congress that contains a sunset provision will make2the tax cut temporary.
b
r br br br br br br br br br br br br br br br
a. True
b. False
Page 3 br
, Name: Class: Date: br
Chapter 01 2025 Individuals
br br br
10. For Federal income tax2purposes, there never has been a general amnesty period.
br br br br br br br br br br br br br
a. True
b. False
11. To lessen or eliminate the effect of multiple taxation, a taxpayer who2is subject2to both foreign and U.S. income taxe s
br br br br br br br br br br br br br br br br br br br br br br
on the2same income is allowed either a deduction or a credit2for the foreign tax paid.
br br br br br br br br br br br br br br
a. True
b. False
12. Because it2is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gain inthe y
br br br br br br br br br br br br br br br br br br br br br br
ear the installment sale occurs.
br br br br
a. True
b. False
13. The2amount of a taxpayer’s2itemized deductions will increase the chance2of being audited by the IRS.
br br br br br br br br br br br br br br br
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 has2not2
br br br br br br br br br br br br br br br br br br br br br b r
made a taxable gift. br br br
a. True
b. False
15. For omissions from gross income in excess of 25% of that2reported, there is no2statute of limitations on ad di
br br br br br br br br br br br br br br br br br br br br
tional income tax assessments by the IRS.
br br br br br br
a. True
b. False
16. Stealth taxes have2the effect2of generating additional taxes from all taxpayers.
b
r br br br br br br br br br br
a. True
b. False
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the propert y,
brbr br br br br br br br br br br br br br br br br br br br
a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no2gain is recognized due2to the application of t he
br br br br br br br br br br br br br br br br br br br br br br
wherewithal to2pay concept. br br
a. True
b. False
18. An inheritance2tax is a tax2on a decedent’s right to2pass property at death.
br br br br br br br br br br br br br
a. True
b. False
19. When interest2is charged on a deficiency, any part2of a month counts as2a full month.
br br br br br br br br br br br br br br br
a. True
b. False
Page 4 br
