(Test Bank) South-Western Federal Taxation 2018 Essentials Of Taxation Individuals And Business Entities

Raabe,Young,Nellen,Maloney, 2018

Business

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2018th Edition

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Test Bank for South-Western Federal Taxation 2018 Essentials Of Taxation Individuals And Business Entities, The downloadable file consists of 1340 pages, and the total size of the file is 18.18 MB. Purchase now only for highly discounted price.

Author(s): Raabe, Young, Nellen, Maloney

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South -Western Federal Taxation 2018: Essentials of Taxation: Individuals and Business Entities William A. Raabe James C. Young Annette Nellen David M. Maloney Test bank 2021 Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 1 1. The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase. a. True b. False ANSWER: False RATIONALE: The FICA tax (Medicare component) is proportional because the rate is constant regardless of the wages earned. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-03 - LO: 1-03 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 2. The Federal estate and gift taxes are examples of progressive taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-03 - LO: 1-03 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 3. The Federal excise tax on cigarettes is an example of a proportional tax. a. True b. False ANSWER: True RATIONALE: The tax is a flat $1.01 per pack. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 2 LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-03 - LO: 1-03 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 4. Currently, the Federal income tax is less progressive than it ever has been in the past. a. True b. False ANSWER: False RATIONALE: Currently, the Federal income tax has six rates. At one time, it had two rates. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-03 - LO: 1-03 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 5. A Federal excise tax is no longer imposed on admission to theaters. a. True b. False ANSWER: True RATIONALE: Such tax has been rescinded. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 3 6. There is a Federal excise tax on hotel occupancy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 7. The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S. a. True b. False ANSWER: False RATIONALE: No such restriction is imposed. Although many of the European luxury and sports car manufacturers were initially hit hard by the tax, the law is silent on this matter. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 8. Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state. a. True b. False ANSWER: False RATIONALE: The Federal excise tax rate on gasoline remains constant. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 4 LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 9. Not all of the states that impose a general sales tax also have a use tax. a. True b. False ANSWER: False RATIONALE: Every state that has a general sales tax also has a use tax. There are no states with only a sales or use tax. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 10. Sales made by mail order are not exempt from the application of a general sales (or use) tax. a. True b. False ANSWER: True RATIONALE: They are not exempt but compliance is sporadic. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 5 11. 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 RATIONALE: This possibility could exist if local jurisdictions exact additional sales taxes. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 12. States impose either a state income tax or a general sales tax, but not both types of taxes. a. True b. False ANSWER: False RATIONALE: Many states impose both. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 13. 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 RATIONALE: A review of the Example 5 discussion shows that this may not always be successful. POINTS: 1 DIFFICULTY: Easy Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 6 QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2 016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 14. The principal objective of the FUTA tax is to provide some measure of retirement security. a. True b. False ANSWER: False RATIONALE: This is the objective of the FICA tax. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 15. 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 RATIONALE: There is no dollar amount limitation on the Medicare component of FICA. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 7 DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 16. 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 RATIONALE: An exemption exists for taxpayer’s children who are under age 18. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2 016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 17. Unlike FICA, FUTA requires that employers comply with state as well as Federal rules. a. True b. False ANSWER: True RATIONALE: This is a major difference between FICA and FUTA. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPROG: Technology: Technology: - BUSPROG: Technology STATE STANDARDS: United States - AK - AICPA: FN-Reporting KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 18. On transfers by death, the Federal government relies on an estate tax, while states impose an estate tax, an inheritance tax, both taxes, or neither tax. a. True b. False ANSWER: True RATIONALE: The Federal government relies on an estate tax while states impose an estate tax, an Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 8 inheritance tax, both taxes, or neither tax. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 19. An inheritance tax is a tax on a decedent’s right to pass property at death. a. True b. False ANSWER: False RATIONALE: What is described is an estate tax. An inheritance tax is a tax on an heir’s right to receive property from a decedent. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 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 the family unit. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPROG: Technology: Technology: - BUSPROG: Technology STATE STANDARDS: United States - AK - AICPA: FN-Measurement - Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 9 AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 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 in 2017. a. True b. False ANSWER: True RATIONALE: A combination of the charitable and marital deductions will eliminate Clint’s taxable estate. POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 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 RATIONALE: The more closely related the heir is to the decedent, the larger the exemption allowed and/or the lower the tax rate imposed. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 10 23. The annual exclusion, currently $14,000, is available for gift and estate tax purposes. a. True b. False ANSWER: False RATIONALE: The annual exclusion is not available for estate tax purposes. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Knowledge OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 24. In 2017, 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 RATIONALE: $100,000 (value of land) – $50,000 (consideration received) – $14,000 (per donee annual exclusion) = $36,000 (taxable gift). POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 5 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 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 RATIONALE: If Julius can obtain the consent of his wife to make the election to split the gifts, twelve per donee annual exclusions are available. Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 11 POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 26. One of the motivations for making a gift is to save on income taxes. a. True b. False ANSWER: True RATIONALE: This presumes that income -producing property is involved and that the donee is in a lower tax bracket than the donor. POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 27. 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 RATIONALE: Conversion from residential to rental use will increase the taxes. Furthermore, Mona’s mother may have had a senior citizen exemption on the property, which will no longer be appropriate. Lastly, the furnishings in the rent house could now be subject to an ad valorem tax on personalty. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 12 LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 28. 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 RATIONALE: By definition, a fixture becomes part of the real estate to which it is attached. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 29. 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 RATIONALE: Property taxes will vary in accordance with changes in the assessed value of the property. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Measurement - AICPA: FN-Measurement KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM Chapter 01: Introduction to Taxation Copyright Cengage Learning. Powered by Cognero. Page 13 DATE MODIFIED: 5/17/2017 6:45 PM 30. 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 POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 1-02 - LO: 1-02 NATIONAL STANDARDS: United States - BUSPROG: Technology: Technology: - BUSPROG: Technology STATE STANDARDS: United States - AK - AICPA: FN-Reporting KEYWORDS: Bloom's: Comprehension OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:10 PM DATE MODIFIED: 5/17/2017 6:45 PM 31. Tomas owns a sole proprietorship, and Lucy is the sole shareholder of a C corporation. In the current year both businesses make a net profit of $60,000. Neither business distributes any funds to the owners in the year. For the current year, Tomas must report $60,000 of income on his individual tax return, but Lucy is not required to report any income from the corporation on her individual tax return. a. True b. False ANSWER: True RATIONALE: Proprietorship profits flow through to the owner and are reported on the owner’s individual income tax return. It does not matter how much of the profit is withdrawn from the proprietorship. Thus, Tomas must report the net profit of $60,000 on his Form 1040 (Schedule C). Shareholders are required to report income from a C corporation only to the extent of dividends received. Consequently, Lucy has no income to report from the corporation for the current year. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: EOTX.SWFT.LO: 12-01 - LO: 12-01 NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension STATE STANDARDS: United States - AK - AICPA: FN-Reporting KEYWORDS: Bloom's: Application OTHER: Time: 2 min. DATE CREATED: 11/28/2016 3:53 PM DATE MODIFIED: 5/17/2017 7:18 PM 32. Carol and Candace are equal partners in Peach Partnership. In the current year, Peach had a net profit of $75,000 ($250,000 gross income – $175,000 operating expenses) and distributed $25,000 to each partner. Peach must pay tax on $75,000 of income.