South-Western Federal Taxation 2022: Individual Income Taxes 45th edition by James C. Young Test ban
c. $60,000.
d. $120,000.
ANSWER: d
99. Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:
a. To take advantage of the higher unified transfer tax credit available under the gift tax.
b. To avoid a future decline in value of the property transferred.
c. To take advantage of the per donee annual exclusion.
d. To shift income to higher bracket donees.
ANSWER: c
100. Indicate which, if any, statement is incorrect. State income taxes:
a. Can piggyback to the Federal version.
b. Cannot apply to visiting nonresidents.
c. Can decouple from the Federal version.
d. Can provide occasional amnesty programs.
ANSWER: b
101. State income taxes generally can be characterized by:
a. The same date for filing as the Federal income tax.
b. No provision for withholding procedures.
c. Allowance of a deduction for Federal income taxes paid.
d. Applying only to individuals but not to corporations.
ANSWER: a
102. A characteristic of FICA tax is that:
a. It does not apply when one spouse works for the other spouse.
b. It is imposed only on the employer.
c. It provides a modest source of income in the event of loss of employment.
d. None of these.
ANSWER: d
103. A characteristic of FUTA is that:
a. It is imposed on both employer and employee.
b. It is imposed solely on the employee.
c. Compliance requires following guidelines issued by both state and Federal regulatory authorities.
d. It is applicable to spouses of employees but not to any children under age 18.
ANSWER: c
104. The United States (either Federal, state, or local) does not impose:
a. Franchise taxes.
b. Severance taxes.
c. Custom duties.
d. Export duties.
ANSWER: d
105. The proposed flat tax:
a. Would increase the number of deductions available to individuals
b. Would not require individuals to file returns.
c. Would tax the increment in value as goods move through the production and manufacturing stages to the marketplace.
d. Is a type of consumption tax.
ANSWER: d
106. A VAT (value added tax):
a. Is regressive in its effect.
b. Has not proved popular outside of the United States.
c. Is not a tax on consumption.
d. Is used exclusively by third world (less developed) countries.
ANSWER: a
107. Characteristics of the “fair tax” (i.e., national sales tax) include which, if any, of the following:
a. Abolition of the Federal individual (but not the corporate) income tax.
b. Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax).
c. Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes.
d. Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes.
ANSWER: d
108. In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?
a. Taxpayer owns and operates a check-cashing service.
b. Taxpayer is an employed electrician.
c. Taxpayer just received a $3 million personal injury award as a result of a lawsuit.
d. Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.
ANSWER: b
109. Which of the following is a characteristic of the audit process?
a. Most taxpayer audits involve “special” agents.
b. Self-employed taxpayers are less likely to be selected for audit than employed taxpayers.
c. Less important issues are handled by means of a correspondence audit.
d. If a taxpayer disagrees with the IRS auditor’s finding, the only resort is to the courts.
ANSWER: c
110. David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000. which is the balance of the tax owed. Disregarding the interest element, David’s total failure to file and to pay penalties are: