Question 1

Employers often withhold federal income taxes directly from worker's paychecks. This is an example of which principle in practice?

Accepted Answer

A)  Convenience 
B)  Certainty 
C)  Economy 
D)  Equity 
E)  None of these 
A)  Convenience 
B)  Certainty 
C)  Economy 
D)  Equity 
E)  None of these A

Question 2

If Curtis invested in the Initech, Inc. bonds, what would be his after-tax rate of return from this investment?

Accepted Answer

A)  5.04% 
B)  7.00% 
C)  6.48% 
D)  2.52% 
E)  None of these 
A)  5.04% 
B)  7.00% 
C)  6.48% 
D)  2.52% 
E)  None of these C

Question 3

Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock Bonds. Using the U.S. tax rate schedule for married filing jointly for year 2014, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income, what is their marginal tax rate on this income? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

Accepted Answer

Fred and Wilma will owe $16,712.50 in federal income tax this year computed as follows:
$16,712.50 = $10,162.50 + (25% × ($100,000 - $73,800)).
Fred and Wilma's average tax rate is 16.71%. $$\text { Average Tax Rate } = \frac { \text { TotalTax } } { \text { TaxableIncome } } = \frac { \$ 16,712.50 } { \$ 100,000 } = 16.71 \%$$ Fred and Wilma's effective tax rate is 13.93%. $$\text { Effective Tax Rate } = \frac { \text { TotalTax } } { \text { TotalIncome } } = \frac { \$ 16,712.50 } { ( \$ 100,000 + \$ 20,000 ) } = 13.93 \%$$ Fred and Wilma are currently in the 25% tax rate bracket. Their marginal tax rate on small increases in income and deductions is 25%.
If Fred and Wilma earn an additional $40,000 of taxable income, their marginal tax rate on the income is 25.00%. $$\text { Marginal Tax Rate } = \frac { \Delta \text { Tax } } { \Delta \text { TaxableIncome } } = \frac { ( \$ 26,712.50 - \$ 16,712.50 ) } { ( \$ 140,000 - \$ 100,000 ) } = 25.00 \%$$

Question 4

How much money would Leonardo and Theresa save if they filed jointly instead of separately for year 2014?

Accepted Answer

A)  Nothing 
B)  $167.50 
C)  $309.75 
D)  $5,907.00 
E)  None of these 
A)  Nothing 
B)  $167.50 
C)  $309.75 
D)  $5,907.00 
E)  None of these

Question 5

A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true regarding real property taxes and personal property taxes?

Accepted Answer

A)  Personal property taxes are assessed on permanent structures and land 
B)  Real property taxes are assessed on cars and boats 
C)  All U.S. states currently impose personal property taxes 
D)  Real property taxes are generally easier to administer than personal property taxes 
E)  None of these is true 
A)  Personal property taxes are assessed on permanent structures and land 
B)  Real property taxes are assessed on cars and boats 
C)  All U.S. states currently impose personal property taxes 
D)  Real property taxes are generally easier to administer than personal property taxes 
E)  None of these is true

Question 7

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 8

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 
C)  They are often subject to implicit taxes 
D)  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 
E)  None of these 
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 
C)  They are often subject to implicit taxes 
D)  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 
E)  None of these

Question 9

For each of the following, determine if each is a tax and why or why not.
a. $2.50 toll paid on the Florida Turnpike
b. $300 ticket for reckless driving
c. 1% local surcharge on hotel rooms to fund public roadways
d. 2% city surcharge on wages earned in the city of Philadelphia

Accepted Answer

a. not a tax because receiving a specifi

Question 10

Mandy, the mayor of Bogart and a strong advocate of a clean downtown, is proposing an increase in the city sales tax from 7% to 50% on all packs of chewing gum purchased in Bogart. Based on the current gum sales, Mandy estimates that this tax will actually reduce the tax revenue on gum sales. What type of forecasting is Mandy using to derive her tax revenue estimates? What "effect" is her estimate based on? Does this necessarily imply that Mandy will be happy given her desire to have a clean downtown?

Accepted Answer

Mandy's forecast is based on dynamic for

Question 11

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is false?

Accepted Answer

A)  A proportional tax rate structure imposes a constant tax rate while a progressive tax rate structure imposes an increasing marginal rate related to the tax base 
B)  The average tax rate changes under a proportional tax rate structure, but it is static for a progressive tax rate system 
C)  An example of a proportional tax is the tax on gasoline 
D)  An example of a progressive tax is the federal tax on gifts 
E)  None of these 
A)  A proportional tax rate structure imposes a constant tax rate while a progressive tax rate structure imposes an increasing marginal rate related to the tax base 
B)  The average tax rate changes under a proportional tax rate structure, but it is static for a progressive tax rate system 
C)  An example of a proportional tax is the tax on gasoline 
D)  An example of a progressive tax is the federal tax on gifts 
E)  None of these

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

If Manny earns an additional $35,000 in taxable income in year 2014, what is his marginal tax rate (rounded) on this income?

Accepted Answer

A)  22.49% 
B)  28.00% 
C)  25.91% 
D)  25.00% 
E)  None of these 
A)  22.49% 
B)  28.00% 
C)  25.91% 
D)  25.00% 
E)  None of these

Question 15

Which of the following is not one of the basic tax rate structures?

Accepted Answer

A)  Proportional 
B)  Equitable 
C)  Regressive 
D)  Progressive 
E)  All of these are different kinds of the basic tax rate structures 
A)  Proportional 
B)  Equitable 
C)  Regressive 
D)  Progressive 
E)  All of these are different kinds of the basic tax rate structures

Question 16

What is Curtis's after-tax rate of return on the city of Athens bond?

Accepted Answer

A)  1.96% 
B)  2.52% 
C)  7.00% 
D)  9.00% 
E)  None of these 
A)  1.96% 
B)  2.52% 
C)  7.00% 
D)  9.00% 
E)  None of these

Question 17

In a regressive tax rate system, the marginal tax rate will often be greater than the average tax rate.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is true?

Accepted Answer

A)  A regressive tax rate structure imposes an increasing marginal tax rate as the tax base increases 
B)  Regressive tax structures are the most common tax rate structure 
C)  An example of a regressive tax is an excise tax 
D)  In terms of effective tax rates, a sales tax can be viewed as a regressive tax 
E)  None of these 
A)  A regressive tax rate structure imposes an increasing marginal tax rate as the tax base increases 
B)  Regressive tax structures are the most common tax rate structure 
C)  An example of a regressive tax is an excise tax 
D)  In terms of effective tax rates, a sales tax can be viewed as a regressive tax 
E)  None of these

Question 19

Bart is contemplating starting his own business. His new business would operate as a sole proprietorship and would require hiring several employees. Describe the employment-related taxes that Bart should be aware of as he starts his new business as a self-employed business owner.

Accepted Answer

Employment taxes consist of the Old Age,

Question 20

If Leonardo and his wife file married filing jointly in 2014, what would be their average tax rate (rounded)?

Accepted Answer

A)  15.00% 
B)  25.00% 
C)  18.63% 
D)  23.73% 
E)  None of these 
A)  15.00% 
B)  25.00% 
C)  18.63% 
D)  23.73% 
E)  None of these

Exam 1: An Introduction to Tax

Employers often withhold federal income taxes directly from worker's paychecks. This is an example of which principle in practice?

If Curtis invested in the Initech, Inc. bonds, what would be his after-tax rate of return from this investment?

How much money would Leonardo and Theresa save if they filed jointly instead of separately for year 2014?

A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning.

Which of the following is true regarding real property taxes and personal property taxes?

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

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

For each of the following, determine if each is a tax and why or why not. a. $2.50 toll paid on the Florida Turnpike b. $300 ticket for reckless driving c. 1% local surcharge on hotel rooms to fund public roadways d. 2% city surcharge on wages earned in the city of Philadelphia

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

Which of the following is false?

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

If Manny earns an additional $35,000 in taxable income in year 2014, what is his marginal tax rate (rounded) on this income?

Which of the following is not one of the basic tax rate structures?

What is Curtis's after-tax rate of return on the city of Athens bond?

In a regressive tax rate system, the marginal tax rate will often be greater than the average tax rate.

Which of the following is true?

Bart is contemplating starting his own business. His new business would operate as a sole proprietorship and would require hiring several employees. Describe the employment-related taxes that Bart should be aware of as he starts his new business as a self-employed business owner.

If Leonardo and his wife file married filing jointly in 2014, what would be their average tax rate (rounded)?

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

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

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 of the Cfa Institute

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