Solutions and Test Bank For South-Western Federal Taxation 2021: Individual Income Taxes 44th Edition 44e By Young PDF

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Solution Manual, Test Bank, eBook For South-Western Federal Taxation 2021: Individual Income Taxes 44th Edition By James C. Young, Nellen, Raabe, Hoffman, Maloney + APLIA, MINDTAP Assignments & Quizzes....

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Chap01_44e_2021 Indicatewhetherthestatementistrueorfalse. 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. TheFederalestateandgifttaxesareexamplesofprogressivetaxes. a. True b. False 3. In2020,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 4. Duringanymonthinwhichboththefailuretofilepenaltyandthefailuretopaypenaltyapply,thefailuretofile penaltyisincreasedbytheamountofthefailuretopaypenalty. a. True b. False 5. TheprincipalobjectiveoftheFUTAtaxistoprovidesomemeasureofretirementsecurity. a. True b. False 6. Salesmadebymailorderarenotexemptfromtheapplicationofageneralsales(oruse)tax. a. True b. False 7. 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 8. Thetaxlawprovidesvarioustaxcredits,deductions,andexclusionsthataredesignedtoencouragetaxpayerst obtainadditionaleducation.Theseprovisionscanbejustifiedonbotheconomicandequitygrounds. a. True b. False 9. Ifaspecialagentbecomesinvolvedintheauditofareturn,thisindicatesthattheIRSsuspectsthatfraudis involved. a. True b. False

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Chap01_44e_2021 10.Forthenegligencepenaltytoapply,theunderpaymentmustbecausedbyintentionaldisregardofrulesand regulationswithoutintenttodefraud. a.True b.False 11.UponauditbytheIRS,Faithisassessedadeficiencyof$40,000ofwhich$25,000isattributabletonegligence. The20%negligencepenaltywillapplyto$25,000. a.True b.False 12.Theobjectiveofpay-as-you-go(paygo)istoimproveadministrativefeasibility. a.True b.False 13.Nostatemayofferanincometaxamnestyprogrammorethanonce. a.True b.False 14.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 15.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 16.BeforetheSixteenthAmendmenttotheConstitutionwasratified,therewasnovalidFederalincometaxon individuals. a.True b.False 17.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 b.False 18.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2020. a.True b.False

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Chap01_44e_2021 19.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 20.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t theapplicationofthewherewithaltopayconcept. a.True b.False 21.Ifanincometaxreturnisnotfiledbyataxpayer,thereisnostatuteoflimitationsonassessmentsoftaxbythe IRS. a.True b.False 22.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 23.Onoccasion,Congresshastoenactlegislationthatclarifiesthetaxlawinordertochangearesultreachedby theU.S.SupremeCourt. a.True b.False 24.ThemajorityofIRSauditsarehandledbycorrespondence. a.True b.False 25.ACPAfirminCaliforniasendsmanyofitslesscomplextaxreturnstobepreparedbyagroupofaccountantsin India.Ifcertainproceduresarefollowed,thisoutsourcingoftaxreturnpreparationisproper. a.True b.False 26.Asamatterofadministrativeconvenience,theIRSwouldprefertohaveCongressdecrease(ratherthan increase)theamountofthestandarddeductionallowedtoindividualtaxpayers. a.True b.False 27.Wheninterestischargedonadeficiency,anypartofamonthcountsasafullmonth. a.True b.False

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Chap01_44e_2021 28.Somestatesusetheirstateincometaxreturnasameansofcollectingunpaidsalesandusetaxes. a.True b.False 29.Ifataxpayerfilesearly(i.e.,beforetheduedateofthereturn),thestatuteoflimitationsonassessmentsbegins onthedatethereturnisfiled. a.True b.False 30.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 31.Thevalueaddedtax(VAT)hasnothadwideacceptanceintheinternationalcommunity. a.True b.False 32.AnofficeauditbytheIRStakesplaceattheofficeofthetaxpayer. a.True b.False 33.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 34.Stealthtaxeshavetheeffectofgeneratingadditionaltaxesfromalltaxpayers. a.True b.False 35.TheFederalgas-guzzlertaxappliesonlytoautomobilesmanufacturedoverseasandimportedintotheUnited States. a.True b.False 36.Statesimposeeitherastateincometaxorageneralsalestax,butnotbothtypesoftaxes. a.True b.False 37.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

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Chap01_44e_2021 38.Aparentemployshistwindaughters,age17,inhissoleproprietorship.ThedaughtersarenotsubjecttoFICA coverage. a.True b.False 39.TheFederalincometaxonindividualsgeneratesmorerevenuethantheFederalincometaxoncorporations. a.True b.False 40.Theamountofataxpayer’sitemizeddeductionswillincreasethechanceofbeingauditedbytheIRS. a.True b.False 41.Amajoradvantageofaflattaxtypeofincometaxisitssimplicity. a.True b.False 42.UnlikeFICA,FUTArequiresthatemployerscomplywithstateaswellasFederalrules. a.True b.False 43.ThereisaFederalexcisetaxonhoteloccupancy. a.True b.False 44.Incasesofdoubt,courtshaveheldthattaxreliefprovisionsshouldbebroadlyconstruedinfavoroftaxpayers. a.True b.False 45.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 46.Foromissionsfromgrossincomeinexcessof25%ofthatreported,thereisnostatuteoflimitationson additionalincometaxassessmentsbytheIRS. a.True b.False 47.TheformulafortheFederalincometaxoncorporationsisthesameasthatapplicabletoindividuals. a.True b.False

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Chap01_44e_2021 48.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 49.Ifataxdeficiencyisattributabletofraud,thenegligencepenaltywillnotbeimposed. a.True b.False 50.TheIRSisrequiredtoredeterminetheinterestrateonunderpaymentsandoverpaymentsonceayear. a.True b.False 51.Inpreparingataxreturn,allquestionsonthereturnmustbeanswered. a.True b.False 52.Astateincometaxcanbeimposedonnonresidenttaxpayerswhoearnincomewithinthestateonanitinerant basis. a.True b.False 53.Aninheritancetaxisataxonadecedent’srighttopasspropertyatdeath. a.True b.False 54.Theannualexclusion,currently$15,000,isavailableforgiftandestatetaxpurposes. a.True b.False 55.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 56.TheFederalexcisetaxongasolineisanexampleofaproportionaltax. a.True b.False 57.WhenCongressenactsataxcutthatisphasedinoveraperiodofyears,revenueneutralityisachieved. a.True b.False 58.Currently,thetaxbasefortheSocialSecuritycomponentoftheFICAisnotlimitedtoadollaramount. a.True b.False Copyright Cengage Learning. Powered by Cognero.

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Chap01_44e_2021 59.Iffraudisinvolved,thereisnotimelimitontheassessmentofadeficiencybytheIRS. a.True b.False 60.Forindividualtaxpayers,theinterestrateforincometaxrefunds(overpayments)isthesameasthatapplicable toassessments(underpayments). a.True b.False 61.Thecivilfraudpenaltycanentaillargefinesandpossibleincarceration. a.True b.False 62.Inpreparinganincometaxreturn,theuseofaclient’sestimatesisnotpermitted. a.True b.False 63.Currently,theFederalcorporateincometaxislessprogressivethantheindividualincometax. a.True b.False 64.Eventhoughaclientrefusestocorrectanerroronapastreturn,itmaybepossibleforapractitionertocontinue topreparereturnsfortheclient. a.True b.False 65.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 66.Forstateincometaxpurposes,amajorityofstatesallowadeductionforFederalincometaxes. a.True b.False 67.Ultimately,mosttaxesarepaidbyindividuals. a.True b.False 68.ForFederalincometaxpurposes,thereneverhasbeenageneralamnestyperiod. a.True b.False

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Chap01_44e_2021 69.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 70.Theamountofthestateexcisetaxesongasolinevariesfromstatetostate. a.True b.False 71.Sally’sneighboroftenbragsthathisemployeroftenpayshimincash“offthebooks”tosavehimtaxes.Sallyis tiredofhearingthisandcontactstheIRStoreporttheneighbor.IfthistipresultsintaxescollectedbytheIRS, Sallywilllikelyreceiveanawardofaportionofthetaxandpenaltiescollected. a.True b.False 72.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 73.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 74.Oneofthemotivationsformakingagiftistosaveonincometaxes. a.True b.False 75.TheIRSagentauditingthereturnwillissueanRARevenifthetaxpayerowesnoadditionaltaxes. a.True b.False 76.Acalendaryeartaxpayerfileshis2019FederalincometaxreturnonMarch4,2020.Thereturnreflectsan overpaymentof$6,000,andthetaxpayerrequestsarefundofthisamount.TherefundispaidonMay16,2020 Therefundneednotincludeinterest. a.True b.False 77.AtaxcutenactedbyCongressthatcontainsasunsetprovisionwillmakethetaxcuttemporary. a.True b.False

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Chap01_44e_2021 78.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. a.True b.False 79.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 80.Understateamnestyprograms,alldelinquentandunpaidincometaxesareforgiven. a.True b.False 81.Anexcisetaxisoftenusedtotrytoinfluencebehavior. a.True b.False 82.Afixturewillbesubjecttotheadvaloremtaxonpersonaltyratherthantheadvaloremtaxonrealty. a.True b.False 83.Notallofthestatesthatimposeageneralsalestaxalsohaveausetax. a.True b.False 84.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 85.IfmoreIRSauditsareproducingahighernumberofnochangeresults,thisindicatesincreasedcomplianceon thepartoftaxpayers. a.True b.False 86.Bracketcreepwillnotexistifthereisonlyasingle(flat)taxratefortheincometax. a.True b.False

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Chap01_44e_2021 Indicatetheanswerchoicethatbestcompletesthestatementoranswersthequestion. 87.Whichofthefollowingtaxesispaidonlybytheemployer? a.FICA b.FUTA c.SocialSecuritytax d.Medicaretax 88.Beforeproposingthatthestate’ssalestaxbeexpandedtoincludefood,alegislatorshouldaskwhether: a.Thestatetaxagencywillallowthisexpansion. b.Amajorityofhisconstituentsagree. c.Grocerystoreswillbeabletocollectthetax. d.Thestate’sconstitutionallowsforthistax. 89.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. 90.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. 91.Botheconomicandsocialconsiderationscanbeusedtojustify: a.Favorabletaxtreatmentforaccidentandhealthplansprovidedforemployeesandfinancedby employers. b.Disallowanceofanydeductionforexpendituresdeemedtobecontrarytopublicpolicy(e.g.,fines, penalties,illegalkickbacks,bribestogovernmentofficials). c.Varioustaxcredits,deductions,andexclusionsthataredesignedtoencouragetaxpayerstoobtain additionaleducation. d.Allowanceofadeductionforstateandlocalincometaxespaid. 92.TaxesnotimposedbytheFederalgovernmentinclude: a.Tobaccoexcisetax. b.Customsduties(tariffsonimports). c.Taxonrentalcars. d.Gasguzzlertax.

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Chap01_44e_2021 93.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. 94.TheUnitedStates(eitherFederal,state,orlocal)doesnotimpose: a.Franchisetaxes. b.Severancetaxes. c.Customduties. d.Exportduties. 95.Provisionsinthetaxlawthatpromoteenergyconservationandmoreuseofalternative(nonfossil)fuelscanbe justifiedby: a.Politicalconsiderations. b.Economicandsocialconsiderations. c.Promotingadministrativefeasibility. d.Encouragementofsmallbusiness. 96.JaneisthetaxdirectorforTangentSoftwareCorporation.SheisunsurewhetherTangentisrequiredtocharge salestaxwhensoftwareisprovidedtocustomersinStateXviathe“cloud.”Thisindicatesthatthesalestax doesnotmeettheprincipleof: a.Equity. b.Certainty. c.Neutrality. d.Economicgrowthandefficiency. 97.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. 98.“Bracketcreep”isavoidedby: a.Usingsunsetprovisions. b.Providingspecialtaxrulesforsmallbusinesses. c.Thestatuteoflimitations. d.Adjustingtheratebracketsforinflationannually.

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Chap01_44e_2021 99.Regardingproperethicalaccountingguidelines,which,ifany,ofthefollowingiscorrect? a.Theuseofclientestimatesinpreparingareturnmaybeacceptable. b.Undernocircumstancesshouldaquestiononataxreturnbeleftunanswered. c.Ifaclienthasmadeamistakeinaprioryear’sreturnandrefusestocorrectit,theaccountantshould withdrawfromtheengagement. d.Iftheexactamountofadeductionisnotcertain(e.g.,aroundmid-$600s),itshouldberecordedasan oddamount(i.e.,$649)soastoincreasetheappearanceofgreatercertainty. 100.Taxfunctionsthataccountingandfinanceprofessionalsmayassistclientswithincludeallbutthefollowing: a.Taxcompliance. b.Taxplanning. c.Cashmanagementtoensuretimelypaymentoftaxes. d.Taxevasion. 101.Which,ifany,ofthefollowingtaxesareregressive(ratherthanprogressive)? a.Stategeneralsalestax b.Federalindividualincometax c.Federalestatetax d.Federalgifttax 102.Intermsofprobability,whichofthefollowingtaxpayerswouldbeleastlikelytobeauditedbytheIRS? a.Taxpayerowns...