All Chapters Test Bank Complete Answers
1. The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal income tax on individuals.
a. True
b. False
2. Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal ...
1. The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to
validate the Federal income tax on individuals.
*a. True
b. False
2. Before the Sixteenth Amendment to the Constitution was ratified, there was no valid
Federal income tax on individuals.
a. True
*b. False
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
4. The Federal income tax on corporations generates more revenue than the Federal income
tax on individuals.
a. True
*b. False
5. The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam
Smith’s canon of convenience.
*a. True
b. False
6. Although the law is complicated, most individual taxpayers are able to complete their
Federal income tax returns without outside assistance.
a. True
*b. False
7. The FICA tax (Medicare component) on wages is progressive since the tax due increases
as wages increase.
, a. True
*b. False
8. The Federal estate and gift taxes are examples of progressive taxes.
*a. True
b. False
9. The Federal excise tax on cigarettes is an example of a proportional tax.
*a. True
b. False
10. Currently, the Federal income tax is more progressive than it ever has been in the past.
a. True
*b. False
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
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
13. Even if property tax rates are not changed, the ad valorem taxes imposed on realty may
not remain the same.
*a. True
b. False
14. The ad valorem tax on business use personalty is more often avoided by taxpayers than
,the ad valorem tax on personal use personalty.
a. True
*b. False
15. Federal excise tax is no longer imposed on cosmetics.
*a. True
b. False
16. The tax on hotel occupancy is subject to both Federal and state excise taxes.
a. True
*b. False
17. The Federal gas-guzzler tax applies only to automobiles manufactured overseas and
imported into the U.S.
a. True
*b. False
18. Like the Federal counterpart, the amount of the state excise taxes on gasoline do not
vary from state to state.
a. True
*b. False
19. The states that impose a general sales tax also have a use tax.
*a. True
b. False
20. Sales made by mail order are not exempt from the application of a general sales (or use)
tax.
*a. True
b. False
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
22. States impose either a state income tax or a general sales tax, but not both types of
taxes.
a. True
*b. False
23. A safe and easy way for a taxpayer to avoid local and state sales taxes is to have the
purchase sent to an address in another state that levies no such taxes.
a. True
*b. False
24. On transfers by death, the Federal government relies on an estate tax, while states use
only an inheritance tax.
a. True
*b. False
25. An inheritance tax is a tax on a decedent’s right to pass property at death.
a. True
*b. False
26. One of the major reasons for the enactment of the Federal estate tax was to prevent
large amounts of wealth from being accumulated within the family unit.
*a. True
b. False
27. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE27
Under Clint’s will, all of his property passes to either the Lutheran Church or to his wife.
No Federal estate tax will be due on Clint’s death in 2011.
*a. True
, b. False
28. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE28
Under a state inheritance tax, two heirs, a cousin and a son of the deceased, would be taxed
at the same rate.
a. True
*b. False
29. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE29
The annual exclusion, currently $13,000, is available for gift but not estate tax purposes.
*a. True
b. False
30. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE30
In 2011, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda,
for $50,000. José has made a taxable gift of $37,000.
*a. True
b. False
31. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE31
Julius, a married taxpayer, makes gifts to each of his six children. A maximum of six
annual exclusions could be allowed as to these gifts.
a. True
*b. False
32. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE32
One of the motivations for making a gift is to save on income taxes.
*a. True
b. False
, 33. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE33
The formula for the Federal income tax on corporations is not the same as that applicable to
individuals.
*a. True
b. False
34. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE34
A state income tax can be imposed on nonresident taxpayers who earn income within the
state or on an itinerant basis.
*a. True
b. False
35. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE35
For state income tax purposes, all states allow a deduction for Federal income taxes.
a. True
*b. False
36. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE36
Some states use their state income tax return as a means of collecting unpaid sales and use
taxes.
*a. True
b. False
37. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING
THE FE37
No state has offered an income tax amnesty program more than once.
a. True
*b. False
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