Question 1

There are several different types of tax rates that taxpayers might use in different contexts. Describe each tax rate and how a taxpayer might use it.

Accepted Answer

The marginal tax rate is the tax rate th

Question 2

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 3

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 4

If Leonardo instead had $30,000 of additional tax deductions for year 2014, his marginal tax rate (rounded) on the deductions would be:

Accepted Answer

A)  28.00% 
B)  25.00% 
C)  25.57% 
D)  17.07% 
E)  None of these 
A)  28.00% 
B)  25.00% 
C)  25.57% 
D)  17.07% 
E)  None of these

Question 5

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 2014, 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 tax deductions, what is her marginal tax rate on these deductions? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

Accepted Answer

Heather will owe $9,412.50 in federal in

Question 6

The city of Granby, Colorado recently enacted a 1.5% surcharge on vacation cabin rentals that will help pay for the city's new elementary school. This surcharge is an example of ________.

Accepted Answer

A)  A sin tax to discourage undesirable behavior 
B)  A government fine 
C)  An earmarked tax 
D)  Both a sin tax to discourage undesirable behavior and an earmarked tax 
E)  None of these 
A)  A sin tax to discourage undesirable behavior 
B)  A government fine 
C)  An earmarked tax 
D)  Both a sin tax to discourage undesirable behavior and an earmarked tax 
E)  None of these

Question 7

Raquel recently overheard two journalism students discussing the merits of the federal tax system. One student offered as an example of unfairness the spouse of a well-known politician who paid little income tax as most of the spouse's income was earned in the form of municipal bond interest. What type of taxes is the journalism student considering in his example? What type of taxes is he ignoring? Define each type of tax. What role does each type of tax play in calculating relative tax burdens? What role does each type of tax play in evaluating fairness?

Accepted Answer

The student is considering explicit taxe

Question 8

Margaret recently received a parking ticket. This is a common example of a local tax.

Accepted Answer

A) True 
 B)False

Question 9

Property taxes may be imposed on both real and personal property.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

The main difficulty in calculating an income tax is determining the correct amount of the tax base.

Accepted Answer

A) True 
 B)False

Question 12

If Susie earns $750,000 in taxable income, how much tax will she pay as a single taxpayer for year 2014?

Accepted Answer

A)  $243.752.90 
B)  $252,500.00 
C)  $254,045.75 
D)  $270,376.45 
E)  None of these 
A)  $243.752.90 
B)  $252,500.00 
C)  $254,045.75 
D)  $270,376.45 
E)  None of these

Question 13

A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools.

Accepted Answer

A) True 
 B)False

Question 14

Ricky and Lucy are debating several types of taxes. Their debate has focused on the different types of tax rate structures and whether they are "fair." Please define each tax rate structure, provide examples of each structure, and discuss how each structure may be viewed with respect to vertical equity.

Accepted Answer

A proportional (flat) tax rate structure

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

Question 16

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 17

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 his money?

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 Sundial, Inc. bonds because their explicit tax is less than the implicit tax on city of Mitchell bonds. 
D)  Invest in city of Mitchell bonds because their implicit tax is less than the explicit tax on Sundial, Inc. bonds. 
E)  None of these. 
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 Sundial, Inc. bonds because their explicit tax is less than the implicit tax on city of Mitchell bonds. 
D)  Invest in city of Mitchell bonds because their implicit tax is less than the explicit tax on Sundial, Inc. bonds. 
E)  None of these.

Question 18

To calculate a tax, you need to know: I. the tax base
II) the taxing agency
III) the tax rate
IV) the purpose of the tax

Accepted Answer

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

Question 19

The concept of tax sufficiency:

Accepted Answer

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

Question 20

Which of the following is true regarding use taxes?

Accepted Answer

A)  A use tax is relatively easy to enforce compared to a sales tax. 
B)  Use taxes attempt to eliminate any tax advantage of purchasing goods out of state. 
C)  Use taxes encourage taxpayers to buy goods out of state to avoid paying sales tax in their home state. 
D)  A use tax is generally a progressive tax. 
E)  None of these is true. 
A)  A use tax is relatively easy to enforce compared to a sales tax. 
B)  Use taxes attempt to eliminate any tax advantage of purchasing goods out of state. 
C)  Use taxes encourage taxpayers to buy goods out of state to avoid paying sales tax in their home state. 
D)  A use tax is generally a progressive tax. 
E)  None of these is true.

Exam 1: An Introduction to Tax

There are several different types of tax rates that taxpayers might use in different contexts. Describe each tax rate and how a taxpayer might use it.

Which of the following is false?

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

If Leonardo instead had $30,000 of additional tax deductions for year 2014, his marginal tax rate (rounded) on the deductions would be:

The city of Granby, Colorado recently enacted a 1.5% surcharge on vacation cabin rentals that will help pay for the city's new elementary school. This surcharge is an example of ________.

Margaret recently received a parking ticket. This is a common example of a local tax.

Property taxes may be imposed on both real and personal property.

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

The main difficulty in calculating an income tax is determining the correct amount of the tax base.

If Susie earns $750,000 in taxable income, how much tax will she pay as a single taxpayer for year 2014?

A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools.

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

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

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 his money?

To calculate a tax, you need to know: I. the tax base II) the taxing agency III) the tax rate IV) the purpose of the tax

The concept of tax sufficiency:

Which of the following is true regarding use taxes?

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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