South-Western Federal Taxation 2022 Essentials of Taxation Individuals and Business Entities 25th ed

a.  True
b.  False
ANSWER: True
27. The formula for the Federal income tax on corporations is the same as that applicable to individuals.
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Class:
Date:
Ch 1 Introduction To Taxation
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a.  True
b.  False
ANSWER: False
28. A state income tax can be imposed on nonresident taxpayers who earn income within the state on an itinerant basis.
a.  True
b.  False
ANSWER: True
29. For state income tax purposes, some states allow a credit for dependents rather than a deduction.
a.  True
b.  False
ANSWER: True
30. Some states use their state income tax return as a means of collecting unpaid sales and use taxes.
a.  True
b.  False
ANSWER: True
31. No state may offer an income tax amnesty program more than once.
a.  True
b.  False
ANSWER: False
32. For Federal income tax purposes, there never has been a general amnesty period.
a.  True
b.  False
ANSWER: True
33. Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.
a.  True
b.  False
ANSWER: False
34. When a state decouples from a Federal tax provision, it means that this provision will not apply for state income tax
purposes.
a.  True
b.  False
ANSWER: True
35. The principal objective of the FUTA tax is to provide some measure of retirement security.
a.  True
b.  False
ANSWER: False
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36. Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.
a.  True
b.  False
ANSWER: False
37. A parent employs his twin daughters, age 17, in his sole proprietorship. The daughters are not subject to FICA
coverage.
a.  True
b.  False
ANSWER: True
38. Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.
a.  True
b.  False
ANSWER: True
39. A major advantage of a flat tax type of income tax is its simplicity.
a.  True
b.  False
ANSWER: True
40. The objective of pay-as-you-go (paygo) is to improve administrative feasibility.
a.  True
b.  False
ANSWER: True
41. When Congress enacts a tax cut that is phased in over a period of years, revenue neutrality is achieved.
a.  True
b.  False
ANSWER: False
42. A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.
a.  True
b.  False
ANSWER: True
43. The tax law provides various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain
additional education. These provisions can be justified on both economic and equity grounds.
a.  True
b.  False
ANSWER: False
44. Various tax provisions encourage the creation of certain types of retirement plans. Such provisions can be justified on
both economic and social grounds.
a.  True
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b.  False
ANSWER: True
45. 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
ANSWER: True
46. To mitigate the effect of the annual accounting period concept, the tax law permits the carryforward of excess
charitable contributions of a particular year to other years.
a.  True
b.  False
ANSWER: True
47. Jason’s business warehouse is destroyed by fire. Because the insurance proceeds exceed the basis of the 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
b.  False
ANSWER: True
48. 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.
a.  True
b.  False
ANSWER: False
49. Stealth taxes have the effect of generating additional taxes from all taxpayers.
a.  True
b.  False
ANSWER: False
50. A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and
not when earned is consistent with generally accepted accounting principles.