test bank South-Western Federal Taxation 2024: Comprehensive 47th Edition by James Young

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Chapter 01: An Introduction to Taxation and Understanding the Federal Tax Law
True / False

1. 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

2. 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

3. Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.
a. True
b. False
ANSWER: False

4. The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied tax
rates from a low of 1% to a high of 6%.
a. True
b. False
ANSWER: True

5. The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.
a. True
b. False
ANSWER: True

6. The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam Smith’s canon (principle) of
certainty.
a. True
b. False
ANSWER: False

7. The Medicare component of the FICA tax (1.45% on wages) is progressive since the tax due increases as wages
increase.
a. True
b. False
ANSWER: False

8. The Federal estate and gift taxes are examples of progressive rate taxes.
a. True
b. False
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Chapter 01: An Introduction to Taxation and Understanding the Federal Tax Law
ANSWER: True

9. The Federal excise tax on gasoline has a proportional effect on all taxpayers (that is, neither progressive or regressive).
a. True
b. False
ANSWER: False

10. Currently, the Federal corporate income tax is less progressive than the individual income tax.
a. True
b. False
ANSWER: True

11. Mona inherits her mother’s personal residence, which she converts to a furnished rental house. These changes should
affect the amount of ad valorem property taxes levied on the properties.
a. True
b. False
ANSWER: True

12. A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.
a. True
b. False
ANSWER: False

13. Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not remain the
same.
a. True
b. False
ANSWER: True

14. The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business
use personalty.
a. True
b. False
ANSWER: True

15. An excise tax is often used to try to influence behavior.
a. True
b. False
ANSWER: True

16. There is a Federal excise tax on hotel occupancy.
a. True
b. False
ANSWER: False

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Chapter 01: An Introduction to Taxation and Understanding the Federal Tax Law
17. The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the United States.
a. True
b. False
ANSWER: False

18. The amount of the state excise taxes on gasoline varies from state to state.
a. True
b. False
ANSWER: True

19. Not all of the states that impose a general sales tax also have a use tax.
a. True
b. False
ANSWER: False

20. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
a. True
b. False
ANSWER: True

21. Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.
a. True
b. False
ANSWER: True

22. States impose either a state income tax or a general sales tax, but not both types of taxes.
a. True
b. False
ANSWER: False

23. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no
such taxes.
a. True
b. False
ANSWER: False

24. On transfers by death, the Federal government relies on an estate tax, while states may impose an estate tax, an
inheritance tax, both taxes, or neither tax.
a. True
b. False
ANSWER: True

25. An inheritance tax is a tax on a decedent’s right to pass property at death.
a. True

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