Test Bank Exam Solutions - ACCTG015 - South-Western Federal Taxation 2021: Individual Income Taxes, ISBN: 9780357359792

1. 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

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 individuals generates more revenue than

the Federal income tax on corporations.

*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 certainty.

a. True *b. False

6. 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

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.

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*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 less 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 amount of ad

valorem taxes imposed on realty may not remain the same.

*a. True b. False

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

15. A Federal excise tax is no longer imposed on admission to theaters.

*a. True b. False

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16. There is a Federal excise tax on hotel occupancy.

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 varies from state to state.

a. True *b. False

19. Not all of 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 make the purchase in a state that levies no such taxes.

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a. True *b. False

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. 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. 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 2013.

*a. True b. False

28. Under the usual state inheritance tax, two heirs, a cousin and a

son of the deceased, would not be taxed at the same rate.

*a. True b. False

29. The annual exclusion, currently $14,000, is available for gift and

estate tax purposes.

a. True *b. False

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