Question 1

If a fully-taxable bond yields a BTROR of 8% (Rb = 8%)and a tax-exempt bond of similar risk earns a BTROR of 5% (Rf = 5%),then the implicit tax is

Accepted Answer

A) 3%. 
B) 5%. 
C) 8%. 
D) none of the above. 
A) 3%. 
B) 5%. 
C) 8%. 
D) none of the above.

Question 2

If t0 is the tax rate in Year 0,tn is the tax rate in Year n,and ATA is after-tax accumulation,then which one of the following does not hold true?

Accepted Answer

A) if t0 = tn,ATA per Exempt Model = ATA per Pension Model 
B) if t0 > tn,ATA per Exempt Model 0 n,ATA per Exempt Model > ATA per Pension Model 
D) if t0 > tn,ATA per Exempt Model > ATA per Pension Model 
A) if t0 = tn,ATA per Exempt Model = ATA per Pension Model 
B) if t0 > tn,ATA per Exempt Model 0 n,ATA per Exempt Model > ATA per Pension Model 
D) if t0 > tn,ATA per Exempt Model > ATA per Pension Model

Question 3

Charlene can invest $4,000 of after-tax dollars (AT$)directly in a taxable bond outside an IRA,or she can contribute the $4,000 to a nondeductible IRA and invest in the same bond through the IRA vehicle.In either case,the bond yields an annual 7% before-tax rate of return (BTROR).Charlene's marginal tax rate is 20%,and she expects it to remain so for the entire investment horizon of 25 years.What is her annualized after-tax rate of return (annualized ATROR)for the "bond outside the IRA"?

Accepted Answer

A) 5)6% 
B) 6% 
C) 6)5% 
D) 7% 
A) 5)6% 
B) 6% 
C) 6)5% 
D) 7%

Question 4

The C Corporation Model is a variation of the Pass-Through Model,where taxation occurs at both the entity and the owner levels.

Accepted Answer

A) True 
 B)False

Question 5

In the Current Model

Accepted Answer

A) investment earnings are taxed currently. 
B) the initial investment is taxable currently,and the investment earnings are taxed at the end of the investment period. 
C) investment earnings are exempt from explicit taxation. 
D) the initial investment is deductible or excludible from gross income,and the entire accumulation is taxed at the end of the investment period. 
A) investment earnings are taxed currently. 
B) the initial investment is taxable currently,and the investment earnings are taxed at the end of the investment period. 
C) investment earnings are exempt from explicit taxation. 
D) the initial investment is deductible or excludible from gross income,and the entire accumulation is taxed at the end of the investment period.

Question 6

The Pass-Through Model used for S corporations and partnerships is an application of the

Accepted Answer

A) Pension Model. 
B) Current Model. 
C) Deferred Model. 
D) Exempt Model. 
A) Pension Model. 
B) Current Model. 
C) Deferred Model. 
D) Exempt Model.

Question 7

If "R" equals the before-tax rate of return and "t" equals the investor's marginal tax rate,then the after-tax rate of return represented by "r" can be expressed as

Accepted Answer

A) r = R(1 - t). 
B) r = R(1 + t). 
C) r = (1 + t)R. 
D) r = R - t. 
A) r = R(1 - t). 
B) r = R(1 + t). 
C) r = (1 + t)R. 
D) r = R - t.

Question 8

Savings accounts and money market funds are examples of investments taxed under the Current Model.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a classic example of the Deferred Model?

Accepted Answer

A) a deductible traditional IRA 
B) a 401(k)plan 
C) a H.R.10 (Keogh)plan 
D) a nondeductible traditional IRA 
A) a deductible traditional IRA 
B) a 401(k)plan 
C) a H.R.10 (Keogh)plan 
D) a nondeductible traditional IRA

Question 10

The general form of the annualized after-tax rate of return (annualized ATROR)for the Deferred Model can be expressed as

Accepted Answer

A) rann = [(1 + R)n(1 - tn)+ tn]1/n - 1. 
B) rann = [(1 - R)n(1 - t)+ t]1/n - 1. 
C) rann = [(1 + R)n(1 + t)+ t]1/n - 1. 
D) rann = [(1 + R)n(1 + t)- t]1/n - 1. 
A) rann = [(1 + R)n(1 - tn)+ tn]1/n - 1. 
B) rann = [(1 - R)n(1 - t)+ t]1/n - 1. 
C) rann = [(1 + R)n(1 + t)+ t]1/n - 1. 
D) rann = [(1 + R)n(1 + t)- t]1/n - 1.

Question 11

In the Deferred Model,both the initial investment dollars and the investment earnings are taxed at the end of the investment period.

Accepted Answer

A) True 
 B)False

Question 12

One of the characteristics of the Exempt Model is that earnings on the investment are exempt from explicit taxation.

Accepted Answer

A) True 
 B)False

Exam 34: Taxes and Investment Planning

If a fully-taxable bond yields a BTROR of 8% (Rb = 8%)and a tax-exempt bond of similar risk earns a BTROR of 5% (Rf = 5%),then the implicit tax is

If t0 is the tax rate in Year 0,tn is the tax rate in Year n,and ATA is after-tax accumulation,then which one of the following does not hold true?

The C Corporation Model is a variation of the Pass-Through Model,where taxation occurs at both the entity and the owner levels.

In the Current Model

The Pass-Through Model used for S corporations and partnerships is an application of the

If "R" equals the before-tax rate of return and "t" equals the investor's marginal tax rate,then the after-tax rate of return represented by "r" can be expressed as

Savings accounts and money market funds are examples of investments taxed under the Current Model.

Which of the following is a classic example of the Deferred Model?

The general form of the annualized after-tax rate of return (annualized ATROR)for the Deferred Model can be expressed as

In the Deferred Model,both the initial investment dollars and the investment earnings are taxed at the end of the investment period.

One of the characteristics of the Exempt Model is that earnings on the investment are exempt from explicit taxation.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

U.S. Taxation of Foreign-Related Transactions

an Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Business Expenses and Deferred Compensation

Itemized Deductions

Losses and Bad Debts

Depreciation,cost Recovery,amortization,and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods,tax Credits,and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Filters

If a fully-taxable bond yields a BTROR of 8% (R_b = 8%)and a tax-exempt bond of similar risk earns a BTROR of 5% (R_f = 5%),then the implicit tax is

If t₀ is the tax rate in Year 0,t_n is the tax rate in Year n,and ATA is after-tax accumulation,then which one of the following does not hold true?