TEST BANK FOR
South-Western Federal Taxation 2025: Individual Income Taxes 48e Young
Chapter 1-20
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Chapter 01 2025 Individuals
Answers Included
Indicate whether the statement is true or false.
1. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
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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.
The 20% negligence penalty will apply to $25,000.
a. True
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b. False
3. Ultimately, most taxes are paid by individuals.
a. True
b. False
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4. 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
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5. The principal objective of the FUTA tax is to provide some measure of retirement security.
a. True
b. False
6. If more IRS audits are producing a higher number of no change results, this indicates increased compliance on
the part of taxpayers.
a. True
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b. False
7. A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that
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levies no such taxes.
a. True
b. False
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8. A calendar year taxpayer files his 2023 Federal income tax return on March 4, 2024. The return reflects an
overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2024.
The refund need not include interest.
a. True
b. False
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9. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
a. True
b. False
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10. For Federal income tax purposes, there never has been a general amnesty period.
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a. True
b. False
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11. To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income
taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.
a. True
b. False
12. Because it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize a gain in
the year the installment sale occurs.
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a. True
b. False
13. The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS.
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 has
not made a taxable gift.
a. True
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b. False
15. For omissions from gross income in excess of 25% of that reported, there is no statute of limitations on
additional income tax assessments by the IRS.
a. True
b. False
16. Stealth taxes have the effect of generating additional taxes from all taxpayers.
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a. True
b. False
17. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the
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property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to
the application of the wherewithal to pay concept.
a. True
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b. False
18. An inheritance tax is a tax on a decedent’s right to pass property at death.
a. True
b. False
19. When interest is charged on a deficiency, any part of a month counts as a full month.
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a. True
b. False
, Name: Class: Date:
Chapter 01 2025 Individuals
20. The majority of IRS audits are handled by correspondence.
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a. True
b. False
21. The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal
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income tax on corporations.
a. True
b. False
22. One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth
from being accumulated within a family unit.
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a. True
b. False
23. Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.
a. True
b. False
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24. In preparing an income tax return, the use of a client’s estimates is not permitted.
a. True
b. False
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25. The Federal estate and gift taxes are examples of progressive rate taxes.
a. True
b. False
26. During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure to file
penalty is increased by the amount of the failure to pay penalty.
a. True
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b. False
27. For the negligence penalty to apply, the underpayment must be caused by intentional disregard of rules and
regulations without intent to defraud.
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a. True
b. False
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28. Under Clint’s will, all of his property passes to either the Lutheran Church or to his spouse. No Federal estate
tax will be due on Clint’s death.
a. True
b. False
29. For state income tax purposes, some states allow a credit for dependents rather than a deduction.
a. True
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b. False
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, Name: Class: Date:
Chapter 01 2025 Individuals
30. If a special agent becomes involved in the audit of a return, this indicates that the IRS suspects that fraud is
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involved.
a. True
b. False
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31. As a matter of administrative convenience, the IRS would prefer to have Congress decrease (rather than
increase) the amount of the standard deduction allowed to individual taxpayers.
a. True
b. False
32. The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.
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a. True
b. False
33. Some states use their state income tax return as a means of collecting unpaid use tax.
a. True
b. False
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34. An office audit by the IRS takes place at the office of the taxpayer.
a. True
b. False
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35. The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.
a. True
b. False
36. The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.
a. True
b. False
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37. When a state decouples from a Federal tax provision, it means that this provision will not apply for state income
tax purposes.
a. True
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b. False
38. If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments begins
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on the date the return is filed.
a. True
b. False
39. The annual exclusion, currently $18,000, is available for gift and estate tax purposes.
a. True
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b. False
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