Question 1

Implicit taxes are indirect taxes on tax-favored assets.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is true regarding tax-advantaged assets?

Accepted Answer

A)  They are typically subject to excise taxes to account for their low explicit taxes. 
B)  A corporate bond is typically considered a tax-advantaged asset and They are often subject to implicit taxes are correct but not They are typically subject to excise taxes to account for their low explicit taxes. 
C)  A corporate bond is typically considered a tax-advantaged asset. 
D)  They are often subject to implicit taxes. 
E)  None of the choices are correct. 
A)  They are typically subject to excise taxes to account for their low explicit taxes. 
B)  A corporate bond is typically considered a tax-advantaged asset and They are often subject to implicit taxes are correct but not They are typically subject to excise taxes to account for their low explicit taxes. 
C)  A corporate bond is typically considered a tax-advantaged asset. 
D)  They are often subject to implicit taxes. 
E)  None of the choices are correct.

Question 3

If Susie earns $750,000 in taxable income and files as head of household for year 2017, what is Susie's average tax rate? (Use tax rate schedule.)

Accepted Answer

A)  33.71% 
B)  35.00% 
C)  33.05% 
D)  39.60% 
E)  None of the choices are correct. 
A)  33.71% 
B)  35.00% 
C)  33.05% 
D)  39.60% 
E)  None of the choices are correct.

Question 4

A common example of an employment related tax is the Medicare tax.

Accepted Answer

A) True 
 B)False

Question 5

Jackson has the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate bonds th8a8t)pay10% interest. Jackson is a single taxpayer who earns $55,000 annually. Assume that the city ofMitchell bonds and the Sundial, Inc. bonds have similar risk.Assume the original facts as given except that Jackson is a head of household taxpayer and the city of Mitchell pays interest of 7.8%. How would you advise Jackson to invest hismoney?

Accepted Answer

A)  Invest in Sundial, Inc. bonds because their explicit tax is greater than the implicit tax on city of Mitchell bonds. 
B)  Invest in city of Mitchell bonds because their implicit tax is greater than the explicit tax on Sundial, Inc. bonds. 
C)  Invest in city of Mitchell bonds because their implicit tax is less than the explicit tax on Sundial, Inc. bonds. 
D)  Invest in Sundial, Inc. bonds because their explicit tax is less than the implicit tax on city of Mitchell bonds. 
E)  None of the choices are correct. 
A)  Invest in Sundial, Inc. bonds because their explicit tax is greater than the implicit tax on city of Mitchell bonds. 
B)  Invest in city of Mitchell bonds because their implicit tax is greater than the explicit tax on Sundial, Inc. bonds. 
C)  Invest in city of Mitchell bonds because their implicit tax is less than the explicit tax on Sundial, Inc. bonds. 
D)  Invest in Sundial, Inc. bonds because their explicit tax is less than the implicit tax on city of Mitchell bonds. 
E)  None of the choices are correct.

Question 6

The concept of tax sufficiency:

Accepted Answer

A)  Suggests that a government should consider the income and substitution effects when changing tax rates. 
B)  Suggests that a government should estimate how taxpayers will respond to changes in the current tax structure. 
C)  Suggests the need for tax forecasting. 
D)  All of the choices are correct. 
E)  None of the choices are correct. 
A)  Suggests that a government should consider the income and substitution effects when changing tax rates. 
B)  Suggests that a government should estimate how taxpayers will respond to changes in the current tax structure. 
C)  Suggests the need for tax forecasting. 
D)  All of the choices are correct. 
E)  None of the choices are correct.

Question 7

The ultimate economic burden of a tax is best captured by:

Accepted Answer

A)  The average tax rate. 
B)  The proportional tax rate. 
C)  The effective tax rate. 
D)  The marginal tax rate. 
E)  None of the choices are correct. 
A)  The average tax rate. 
B)  The proportional tax rate. 
C)  The effective tax rate. 
D)  The marginal tax rate. 
E)  None of the choices are correct.

Question 8

A flat tax is an example of a graduated tax system.

Accepted Answer

A) True 
 B)False

Question 9

Heather, a single taxpayer who files as a head of household, earns $60,000 in taxable income and$5,000 in interest from an investment in city of Oxford Bonds. Using the U.S. tax rate schedule for year 2017, how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $20,000 of taxdeductions, what is her marginal tax rate on these deductions? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)(Use tax rate schedule.)

Accepted Answer

Heather wi

Question 10

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis 8c3o)uld have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 9% interest with similar risk as the city of Athens bond. Assume that Curtis' marginal tax rate is 28%.What is Curtis' after-tax rate of return on the city of Athens bond?

Accepted Answer

A)  7.00% 
B)  1.96% 
C)  2.52% 
D)  9.00% 
E)  None of the choices are correct. 
A)  7.00% 
B)  1.96% 
C)  2.52% 
D)  9.00% 
E)  None of the choices are correct.

Question 11

Geronimo files his tax return as a head of household for year 2017. If his taxable income is $72,000, what is his average tax rate? (Use tax rate schedule.)

Accepted Answer

A)  18.24% 
B)  19.08% 
C)  25.00% 
D)  17.02% 
E)  None of the choices are correct 
A)  18.24% 
B)  19.08% 
C)  25.00% 
D)  17.02% 
E)  None of the choices are correct

Question 12

The substitution effect:

Accepted Answer

A)  Is typically more descriptive for taxpayers with lower disposable income. 
B)  Predicts that taxpayers will work harder to pay for consumer products when tax rates increase. 
C)  Results in the government collecting more aggregate tax revenue than under the income effect. 
D)  Is one of the effects considered in static forecasting. 
E)  None of the choices are correct. 
A)  Is typically more descriptive for taxpayers with lower disposable income. 
B)  Predicts that taxpayers will work harder to pay for consumer products when tax rates increase. 
C)  Results in the government collecting more aggregate tax revenue than under the income effect. 
D)  Is one of the effects considered in static forecasting. 
E)  None of the choices are correct.

Question 13

Regressive tax rate structures are typically considered to be vertically equitable.

Accepted Answer

A) True 
 B)False

Question 14

The 9th Amendment to the U.S. Constitution removed all doubt that a federal income tax was allowed under the U.S. Constitution.

Accepted Answer

A) True 
 B)False

Question 15

The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this?

Accepted Answer

A)  An excise tax 
B)  It is not a tax; it is a fine 
C)  A sin tax 
D)  A sin tax and An excise tax are correct 
E)  None of the choices are correct 
A)  An excise tax 
B)  It is not a tax; it is a fine 
C)  A sin tax 
D)  A sin tax and An excise tax are correct 
E)  None of the choices are correct

Question 16

Junior earns $80,000 taxable income as a regional circuit stock car driver and is taxed at an average rate of 25 percent (i.e., $20,000 of tax). If Congress increases the income tax rate such that Junior's average tax rate increases from 25% to 30%, how much more income tax will he pay assuming that the income effect is larger than the substitution effect? What effect will this tax rate change have on the tax base and tax collected? What will happen to the government's tax revenues if Junior chooses to spend more time pursuing his other passions besides work (e.g., earns only $60,000 in taxableincome) in response to the tax rate change? What is the term that describes this type of reaction to a tax rate increase? (Round your answers to two decimal places.)

Accepted Answer

The answer of Junior earns $80,000 taxable income as a...

Question 17

Margaret was issued a $150 speeding ticket. This is:

Accepted Answer

A)  Not a tax because Margaret could have avoided payment if she did not speed. 
B)  Not a tax because it is considered a fine intended to punish illegal behavior. 
C)  A tax because payment is required by law. 
D)  A tax because it is imposed by a government agency. 
E)  A tax because the payment is not related to any specific benefit received from the government agency collecting the ticket. 
A)  Not a tax because Margaret could have avoided payment if she did not speed. 
B)  Not a tax because it is considered a fine intended to punish illegal behavior. 
C)  A tax because payment is required by law. 
D)  A tax because it is imposed by a government agency. 
E)  A tax because the payment is not related to any specific benefit received from the government agency collecting the ticket.

Question 18

Taxes influence many types of business decisions but generally do not influence personaldecisions.

Accepted Answer

A) True 
 B)False

Question 19

The largest federal tax, in terms of revenue collected, is the social security tax.

Accepted Answer

A) True 
 B)False

Question 20

To calculate a tax, you need to know:I. the tax baseII. the taxing agencyIII. the tax rateIV. the purpose of the tax

Accepted Answer

A)  Only IV is correct. 
B)  Items I through IV are correct. 
C)  Only III is correct. 
D)  Only I is correct. 
E)  I and III are correct. 
A)  Only IV is correct. 
B)  Items I through IV are correct. 
C)  Only III is correct. 
D)  Only I is correct. 
E)  I and III are correct.

Exam 1: An Introduction to Tax

Implicit taxes are indirect taxes on tax-favored assets.

Which of the following is true regarding tax-advantaged assets?

If Susie earns $750,000 in taxable income and files as head of household for year 2017, what is Susie's average tax rate? (Use tax rate schedule.)

A common example of an employment related tax is the Medicare tax.

The concept of tax sufficiency:

The ultimate economic burden of a tax is best captured by:

A flat tax is an example of a graduated tax system.

Geronimo files his tax return as a head of household for year 2017. If his taxable income is $72,000, what is his average tax rate? (Use tax rate schedule.)

The substitution effect:

Regressive tax rate structures are typically considered to be vertically equitable.

The 9th Amendment to the U.S. Constitution removed all doubt that a federal income tax was allowed under the U.S. Constitution.

The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this?

Margaret was issued a $150 speeding ticket. This is:

Taxes influence many types of business decisions but generally do not influence personaldecisions.

The largest federal tax, in terms of revenue collected, is the social security tax.

To calculate a tax, you need to know:I. the tax baseII. the taxing agencyIII. the tax rateIV. the purpose of the tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters