South-Western Federal Taxation 2022 Essentials of Taxation Individuals and Business Entities 25th ed
True / False
1. The Medicare component of the FICA tax (1.45% on wages) is progressive since the tax due increases as wages
increase.
a. True
b. False
ANSWER: False
Name:
Class:
Date:
Ch 1 Introduction To Taxation
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2. The Federal estate and gift taxes are examples of progressive rate taxes.
a. True
b. False
ANSWER: True
3. The Federal excise tax on gasoline has a proportional effect on all taxpayers (that is, neither progressive or regressive).
a. True
b. False
ANSWER: False
4. Currently, the Federal corporate income tax is less progressive than the individual income tax.
a. True
b. False
ANSWER: True
5. 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
6. A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.
a. True
b. False
ANSWER: False
7. 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
8. 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
9. An excise tax is often used to try to influence behavior.
a. True
b. False
ANSWER: True
10. There is a Federal excise tax on hotel occupancy.
a. True
b. False
Name:
Class:
Date:
Ch 1 Introduction To Taxation
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ANSWER: False
11. The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the United States.
a. True
b. False
ANSWER: False
12. The amount of the state excise taxes on gasoline varies from state to state.
a. True
b. False
ANSWER: True
13. Not all of the states that impose a general sales tax also have a use tax.
a. True
b. False
ANSWER: False
14. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
a. True
b. False
ANSWER: True
15. 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
16. States impose either a state income tax or a general sales tax, but not both types of taxes.
a. True
b. False
ANSWER: False
17. 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
18. On transfers by death, the Federal government relies on an estate tax, while states may impose an estate tax, an
inheritance tax, both taxes, or neither tax.
a. True
b. False
ANSWER: True
19. An inheritance tax is a tax on a decedent’s right to pass property at death.
Name:
Class:
Date:
Ch 1 Introduction To Taxation
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a. True
b. False
ANSWER: False
20. 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.
a. True
b. False
ANSWER: True
21. 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.
a. True
b. False
ANSWER: True
22. 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
ANSWER: True
23. The annual exclusion, currently $15,000, is available for gift and estate tax purposes.
a. True
b. False
ANSWER: False
24. In 2021, 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
b. False
ANSWER: False
25. Julius, a married taxpayer, makes gifts to each of his six children. A maximum of twelve annual exclusions could be
allowed as to these gifts.
a. True
b. False
ANSWER: True
26. One of the motivations for making a gift is to save on income taxes.
1. The Medicare component of the FICA tax (1.45% on wages) is progressive since the tax due increases as wages
increase.
a. True
b. False
ANSWER: False
Name:
Class:
Date:
Ch 1 Introduction To Taxation
Copyright Cengage Learning. Powered by Cognero. Page 2
2. The Federal estate and gift taxes are examples of progressive rate taxes.
a. True
b. False
ANSWER: True
3. The Federal excise tax on gasoline has a proportional effect on all taxpayers (that is, neither progressive or regressive).
a. True
b. False
ANSWER: False
4. Currently, the Federal corporate income tax is less progressive than the individual income tax.
a. True
b. False
ANSWER: True
5. 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
6. A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.
a. True
b. False
ANSWER: False
7. 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
8. 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
9. An excise tax is often used to try to influence behavior.
a. True
b. False
ANSWER: True
10. There is a Federal excise tax on hotel occupancy.
a. True
b. False
Name:
Class:
Date:
Ch 1 Introduction To Taxation
Copyright Cengage Learning. Powered by Cognero. Page 3
ANSWER: False
11. The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the United States.
a. True
b. False
ANSWER: False
12. The amount of the state excise taxes on gasoline varies from state to state.
a. True
b. False
ANSWER: True
13. Not all of the states that impose a general sales tax also have a use tax.
a. True
b. False
ANSWER: False
14. Sales made over the internet are not exempt from the application of a general sales (or use) tax.
a. True
b. False
ANSWER: True
15. 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
16. States impose either a state income tax or a general sales tax, but not both types of taxes.
a. True
b. False
ANSWER: False
17. 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
18. On transfers by death, the Federal government relies on an estate tax, while states may impose an estate tax, an
inheritance tax, both taxes, or neither tax.
a. True
b. False
ANSWER: True
19. An inheritance tax is a tax on a decedent’s right to pass property at death.
Name:
Class:
Date:
Ch 1 Introduction To Taxation
Copyright Cengage Learning. Powered by Cognero. Page 4
a. True
b. False
ANSWER: False
20. 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.
a. True
b. False
ANSWER: True
21. 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.
a. True
b. False
ANSWER: True
22. 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
ANSWER: True
23. The annual exclusion, currently $15,000, is available for gift and estate tax purposes.
a. True
b. False
ANSWER: False
24. In 2021, 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
b. False
ANSWER: False
25. Julius, a married taxpayer, makes gifts to each of his six children. A maximum of twelve annual exclusions could be
allowed as to these gifts.
a. True
b. False
ANSWER: True
26. One of the motivations for making a gift is to save on income taxes.