ACCOUNTING 31696427308-All-Chapters-Test-Bank-1

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. *a. True ...

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. *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 more 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 ad valorem taxes imposed on realty may not remain the same. *a. True b. False 14. The ad valorem tax on business use personalty is more often avoided by taxpayers than the ad valorem tax on personal use personalty. a. True *b. False 15. Federal excise tax is no longer imposed on cosmetics. *a. True b. False 16. The tax on hotel occupancy is subject to both Federal and state excise taxes. 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 do not vary from state to state. a. True *b. False 19. 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 have the purchase sent to an address in another state that levies no such taxes. a. True *b. False 24. On transfers by death, the Federal government relies on an estate tax, while states use only an inheritance 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. CHAPTER 1 AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE27 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 2011. *a. True b. False 28. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE28 Under a state inheritance tax, two heirs, a cousin and a son of the deceased, would be taxed at the same rate. a. True *b. False 29. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE29 The annual exclusion, currently $13,000, is available for gift but not estate tax purposes. *a. True b. False 30. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE30 In 2011, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has made a taxable gift of $37,000. *a. True b. False 31. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE31 Julius, a married taxpayer, makes gifts to each of his six children. A maximum of six annual exclusions could be allowed as to these gifts. a. True *b. False 32. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE32 One of the motivations for making a gift is to save on income taxes. *a. True b. False 33. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE33 The formula for the Federal income tax on corporations is not the same as that applicable to individuals. *a. True b. False 34. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE34 A state income tax can be imposed on nonresident taxpayers who earn income within the state or on an itinerant basis. *a. True b. False 35. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE35 For state income tax purposes, all states allow a deduction for Federal income taxes. a. True *b. False 36. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE36 Some states use their state income tax return as a means of collecting unpaid sales and use taxes. *a. True b. False 37. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE37 No state has offered an income tax amnesty program more than once. a. True *b. False 38. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE38 For Federal income tax purposes, there never has been a general amnesty period. *a. True b. False 39. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE39 Under state amnesty programs, all delinquent and unpaid income taxes are forgiven. a. True *b. False 40. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE40 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 41. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE41 The principal objective of the FICA tax is to provide some measure of retirement security. *a. True b. False 42. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE42 Currently, the tax base for the Medicare component of the FICA is not limited to a dollar amount. *a. True b. False 43. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE43 A parent employs his twin daughters, age 19, in his sole proprietorship. The daughters are not subject to FICA coverage. a. True *b. False 44. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE44 Unlike FICA, FUTA requires that employers comply with state as well as Federal rules. *a. True b. False 45. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE45 A major disadvantage of a flat tax type of income tax is its complexity. a. True *b. False 46. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE46 The value added tax (VAT) has had wide acceptance in the international community. *a. True b. False 47. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE47 Recently, more IRS audits are producing a greater number of no change results. This indicates increased compliance on the part of taxpayers. a. True *b. False 48. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE48 The amount of a taxpayer’s itemized deductions will increase the chance of being audited by the IRS. *a. True b. False 49. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE49 In a field audit, the audit by the IRS takes place at the office of the IRS. a. True *b. False 50. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE50 The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes. *a. True b. False 51. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE51 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 52. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE52 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 53. CHAPTER 1AN INTRODUCTION TO TAXATION AND UNDERSTANDING THE FE53 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