Test Bank For South-Western Federal Taxation
2026: Comprehensive 49th Edition by James Young
1
,Test bank Income Tax
CHAPTER 1: AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FEDERAL TAX LAW
1. The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the
Federal income tax on corporations.
a. True
b. False
ANSWER: False
RATIONALE: The Sixteenth Amendment validated only the tax on individuals. The income tax on corporations
had been previously sanctioned by the courts.
2. Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income
tax on individuals.
a. True
b. False
ANSWER: False
RATIONALE: There existed a Federal income tax during the Civil War that was sanctioned by the U.S.
Supreme Court.
3. The first income tax on individuals (after the ratification of the Sixteenth Amendment to the
Constitution) levied tax rates from a low of 2% to a high of 6%.
a. True
b. False
ANSWER: True
4. The Federal income tax on individuals generates more revenue than the Federal income tax on
corporations.
2
,a. True
b. False
ANSWER: True
5. The payasyougo feature of the Federal income tax on individuals conforms to Adam Smith’s canon of
certainty.
a. True
b. False
ANSWER: False
RATIONALE: Pay-as-you-go refers to the withholding provisions applicable to wages and other types of income
and adds convenience to the tax system.
6. Because the law is complicated, most individual taxpayers are not able to complete their Federal
income tax returns without outside assistance.
a. True
b. False
ANSWER: True
RATIONALE: Approximately 60% use tax return preparers, while slightly more than 32% purchase tax return
software.
7. The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages
increase.
a. True
b. False
ANSWER: False
RATIONALE: The FICA tax (Medicare component) is proportional because the rate is constant regardless of the
wages earned.
3
, 8. The Federal estate and gift taxes are examples of progressive taxes.
a. True
b. False
ANSWER: True
9. The Federal excise tax on cigarettes is an example of a proportional tax.
a. True
b. False
ANSWER: True
RATIONALE: The tax is a flat $1.01 per pack.
10. Currently, the Federal income tax is less progressive than it ever has been in the past.
a. True
b. False
ANSWER: False
RATIONALE: Currently, the Federal income tax has six rates. At one time, it had two rates.
11. Mona inherits her mother’s personal residence, which she converts to a furnished rent house. These
changes should affect the amount of ad valorem property taxes levied on the properties.
a. True
b. False
ANSWER: True
RATIONALE: Conversion from residential to rental use will increase the taxes. Furthermore, Mona’s mother
may have had a senior citizen exemption on the property, which will no longer be appropriate. Lastly, the
furnishings in the rent house could now be subject to an ad valorem tax on personalty.
4
2026: Comprehensive 49th Edition by James Young
1
,Test bank Income Tax
CHAPTER 1: AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FEDERAL TAX LAW
1. The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the
Federal income tax on corporations.
a. True
b. False
ANSWER: False
RATIONALE: The Sixteenth Amendment validated only the tax on individuals. The income tax on corporations
had been previously sanctioned by the courts.
2. Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income
tax on individuals.
a. True
b. False
ANSWER: False
RATIONALE: There existed a Federal income tax during the Civil War that was sanctioned by the U.S.
Supreme Court.
3. The first income tax on individuals (after the ratification of the Sixteenth Amendment to the
Constitution) levied tax rates from a low of 2% to a high of 6%.
a. True
b. False
ANSWER: True
4. The Federal income tax on individuals generates more revenue than the Federal income tax on
corporations.
2
,a. True
b. False
ANSWER: True
5. The payasyougo feature of the Federal income tax on individuals conforms to Adam Smith’s canon of
certainty.
a. True
b. False
ANSWER: False
RATIONALE: Pay-as-you-go refers to the withholding provisions applicable to wages and other types of income
and adds convenience to the tax system.
6. Because the law is complicated, most individual taxpayers are not able to complete their Federal
income tax returns without outside assistance.
a. True
b. False
ANSWER: True
RATIONALE: Approximately 60% use tax return preparers, while slightly more than 32% purchase tax return
software.
7. The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages
increase.
a. True
b. False
ANSWER: False
RATIONALE: The FICA tax (Medicare component) is proportional because the rate is constant regardless of the
wages earned.
3
, 8. The Federal estate and gift taxes are examples of progressive taxes.
a. True
b. False
ANSWER: True
9. The Federal excise tax on cigarettes is an example of a proportional tax.
a. True
b. False
ANSWER: True
RATIONALE: The tax is a flat $1.01 per pack.
10. Currently, the Federal income tax is less progressive than it ever has been in the past.
a. True
b. False
ANSWER: False
RATIONALE: Currently, the Federal income tax has six rates. At one time, it had two rates.
11. Mona inherits her mother’s personal residence, which she converts to a furnished rent house. These
changes should affect the amount of ad valorem property taxes levied on the properties.
a. True
b. False
ANSWER: True
RATIONALE: Conversion from residential to rental use will increase the taxes. Furthermore, Mona’s mother
may have had a senior citizen exemption on the property, which will no longer be appropriate. Lastly, the
furnishings in the rent house could now be subject to an ad valorem tax on personalty.
4
