,Chapter 01: Understanding and Working with the Federal Tax Law
1. Many states have balanced budgets because laws or constitutional amendments preclude deficit spending.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-01 - LO: 1-01
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - TX - AICPA: FN-Measurement
United States - AK - AICPA: FN-Research
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
2. The United States Federal government has a provision in the Constitution which precludes deficit spending.
a. True
b. False
ANSWER: False
RATIONALE: There is no such provision and the national debt continues to grow.
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-01 - LO: 1-01
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - AK - AICPA: FN-Measurement -
AICPA: FN-Measurement
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
3. Revenue-neutral tax laws reduce deficits.
a. True
b. False
ANSWER: False
RATIONALE: They do not reduce deficits, but do not aggravate the problem.
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-01 - LO: 1-01
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - AK - AICPA: FN-Measurement -
AICPA: FN-Measurement
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
4. Longer class lives for depreciable property and the required use of straight-line method of depreciation would likely
dampen the tax incentive for purchasing capital assets.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 1
,Chapter 01: Understanding and Working with the Federal Tax Law
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - TX - AICPA: FN-Reporting
United States - AK - AICPA: FN-Research
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
5. The Internal Revenue Code is a compilation of Federal tax legislation that appears in Title 26 of the United States
Code.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - AK - AICPA: FN-Research
United States - TX - FN-Reporting
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
6. The domestic production activities deduction is structured to create jobs.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - AK - AICPA: FN-Measurement -
AICPA: FN-Measurement
KEYWORDS: Bloom's: Comprehension
OTHER: Time: 2 min.
7. The encouragement of private-sector pension plans can be justified under the encouragement of certain industries.
a. True
b. False
ANSWER: False
RATIONALE: Justified under social considerations and encouragement of certain activities (e.g., savings).
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-02 - LO: 1-02
Copyright Cengage Learning. Powered by Cognero. Page 2
, Chapter 01: Understanding and Working with the Federal Tax Law
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - TX - AICPA: FN-Measurement
United States - AK - AICPA: FN-Reporting
KEYWORDS: Bloom's: Comprehension
OTHER: Time: 2 min.
8. One Internal Revenue Code section enables shareholders in a small business corporation to obtain an ordinary
deduction for any loss recognized on a stock investment.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - TX - AICPA: FN-Measurement
United States - AK - AICPA: FN-Reporting
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
9. Since interest and taxes are deductible by a homeowner, a person who rents an apartment may take an itemized
deduction equal to 20% of rent payments.
a. True
b. False
ANSWER: False
RATIONALE: No such deduction is allowed.
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - AK - AICPA: FN-Reporting
KEYWORDS: Bloom's: Comprehension
OTHER: Time: 2 min.
10. Although a corporation is subject to a Federal income tax, a partnership is not.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: CPET.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - AK - AICPA: FN-Reporting
KEYWORDS: Bloom's: Comprehension
OTHER: Time: 2 min.
Copyright Cengage Learning. Powered by Cognero. Page 3
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