South-Western Federal Taxation 2018: Comprehensive 41st Edition Test Bank

Name: South-Western Federal Taxation 2018: Comprehensive 41st Edition Test Bank
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Author: Emma Thompson

Ensure exam success with South-Western Federal Taxation 2018: Comprehensive 41st Edition Test Bank, featuring key insights, exam tricks, and practice exercises.

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1. The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPROG: Technology: Technology: - BUSPROG: Technology
STATE STANDARDS: United States - AK - AICPA: FN-Research
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
2. 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: More than 50% use tax return preparers and about 33% purchase tax return software.
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPROG: Technology: Technology: - BUSPROG: Technology
STATE STANDARDS: United States - AK - AICPA: FN-Reporting
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM

3. 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.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJEC
TIVES:
CMPV.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STAND
ARDS:
United States - BUSPROG: Technology: Technology: - BUSPROG: Technology
STATE STANDAR
DS:
United States - AK - AICPA: FN-Research
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
4. 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.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVE
S:
CMPV.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARD
S:
United States - BUSPROG: Technology: Technology: - BUSPROG: Technology
STATE STANDARDS: United States - AK - AICPA: FN-Research
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM

5. 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
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-02 - LO: 1-02
NATIONAL STANDARDS: United States - BUSPROG: Technology: Technology: - BUSPROG: Technology
STATE STANDARDS: United States - AK - AICPA: FN-Research
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
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
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.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJEC
TIVES:
CMPV.SWFT.LO: 1-03 - LO: 1-03
NATIONAL STAND
ARDS:
United States - BUSPROG: Technology: Technology: - BUSPROG: Technology
STATE STANDAR
DS:
United States - AK - AICPA: FN-Reporting
KEYWORDS: Bloom's: Comprehension
OTHER: Time: 2 min.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM

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.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIV
ES:
CMPV.SWFT.LO: 1-03 - LO: 1-03
NATIONAL STANDAR
DS:
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
8. The Federal estate and gift taxes are examples of progressive taxes.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-03 - LO: 1-03
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM

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.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-03 - LO: 1-03
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
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.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-03 - LO: 1-03
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM

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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
RATIONA
LE:
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.
POINTS: 1
DIFFICUL
TY:
Easy
QUESTIO
N TYPE:
True / False
HAS VARI
ABLES:
False
LEARNIN
G OBJEC
TIVES:
CMPV.SWFT.LO: 1-04 - LO: 1-04
NATIONA
L STAND
ARDS:
United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE ST
ANDARD
S:
United States - AK - AICPA: FN-Measurement -
AICPA: FN-Measurement
KEYWOR
DS:
Bloom's: Comprehension
OTHER: Time: 2 min.
DATE CR
EATED:
11/28/2016 3:10 PM
DATE MO
DIFIED:
5/11/2017

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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
RATIONALE: Property taxes will vary in accordance with changes in the assessed value of the property.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04 - LO: 1-04
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
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
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04 - LO: 1-04
NATIONAL STANDARDS: United States - BUSPROG: Technology: Technology: - BUSPROG: Technology
STATE

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15. A Federal excise tax is no longer imposed on admission to theaters.
a. True
b. False
ANSWER: True
RATIONALE: Such tax has been rescinded.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04 - LO: 1-04
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
16. There is a Federal excise tax on hotel occupancy.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04 - LO: 1-04
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.
DATE CREATED: 11/28/2016 3:10 PM

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17. The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.
a. True
b. False
ANSWER: False
RATIONALE: No such restriction is imposed. Although many of the European luxury and sports car manufacturers
were initially hit hard by the tax, the law is silent on this matter.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYP
E:
True / False
HAS VARIABLE
S:
False
LEARNING OBJ
ECTIVES:
CMPV.SWFT.LO: 1-04 - LO: 1-04
NATIONAL STA
NDARDS:
United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDA
RDS:
United States - AK - AICPA: FN-Measurement -
AICPA: FN-Measurement
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
DATE CREATED
:
11/28/2016 3:10 PM
DATE MODIFIED
:
5/11/2017 12:50 PM
18. Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.
a. True
b. False
ANSWER: False
RATIONALE: The Federal excise tax rate on gasoline remains constant.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04

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19. Not all of the states that impose a general sales tax also have a use tax.
a. True
b. False
ANSWER: False
RATIONALE: Every state that has a general sales tax also has a use tax. There are no states with only a
sales or use tax.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVE
S:
CMPV.SWFT.LO: 1-04 - LO: 1-04
NATIONAL STANDARD
S:
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
20. Sales made by mail order are not exempt from the application of a general sales (or use) tax.
a. True
b. False
ANSWER: True
RATIONALE: They are not

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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
RATIONALE: This possibility could exist if local jurisdictions exact additional sales taxes.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04 - LO: 1-04
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
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
RATIONALE: Many states impose both.
POINTS:

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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
RATIONALE: A review of the Example 5 discussion shows that this may not always be successful.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04 - LO: 1-04
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
24. On transfers by death, the Federal government relies on an estate tax, while states impose an estate tax, an inheritance
tax, both taxes, or neither tax.
a. True
b.

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25. An inheritance tax is a tax on a decedent’s right to pass property at death.
a. True
b. False
ANSWER: False
RATIONALE: What is described is an estate tax. An inheritance tax is a tax on an heir’s right to receive
property from a decedent.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIV
ES:
CMPV.SWFT.LO: 1-04 - LO: 1-04
NATIONAL STANDAR
DS:
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED:

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27. 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 2017.
a. True
b. False
ANSWER: True
RATIONALE: A combination of the charitable and marital deductions will eliminate Clint’s taxable estate.
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04 - LO: 1-04
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.
DATE CREATED: 11/28/2016 3:10 PM

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29. The annual exclusion, currently $14,000, is available for gift and estate tax purposes.
a. True
b. False
ANSWER: False
RATIONALE: The annual exclusion is not available for estate tax purposes.
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CMPV.SWFT.LO: 1-04 - LO: 1-04
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.
DATE CREATED: 11/28/2016 3:10 PM
DATE MODIFIED: 5/11/2017 12:50 PM
30. In 2017, José, a widower, sells

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