Question 1

In a progressive tax system,an investor can benefit from tax-exempt bonds when

Accepted Answer

A) the investor's marginal tax rate is equal to that of the marginal investor. 
B) the investor's marginal tax rate exceeds that of the marginal investor. 
C) the investor's marginal tax rate is less than that of the marginal investor. 
D) None of the above. 
A) the investor's marginal tax rate is equal to that of the marginal investor. 
B) the investor's marginal tax rate exceeds that of the marginal investor. 
C) the investor's marginal tax rate is less than that of the marginal investor. 
D) None of the above.

Question 2

In the Current Model

Accepted Answer

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

Question 3

One characteristic of the Pension Model is the fact that,like the Current and Deferred Models,only after-tax dollars are invested.

Accepted Answer

A) True 
 B)False

Question 4

Given a choice between a fully-taxable investment and a tax-favored investment,investors will prefer the tax-favored investment,assuming the two investments are equally risky.

Accepted Answer

A) True 
 B)False

Question 5

In the Deferred Model

Accepted Answer

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

Question 6

What are the characteristics of the Pension Model?

Accepted Answer

Before-tax dollars are invested in the P

Question 7

When given a choice between making a contribution to a Roth IRA or to a nondeductible traditional IRA,the taxpayer should choose the Roth IRA.

Accepted Answer

A) True 
 B)False

Question 8

If a fully-taxable bond yields a BTROR of 10% (Rb = 10%)and a tax-exempt bond of similar risk earns a BTROR of 7.5% (Rf = 7.5%),then the implicit tax rate is

Accepted Answer

A) 25%. 
B) 75%. 
C) 10%. 
D) None of the above. 
A) 25%. 
B) 75%. 
C) 10%. 
D) None of the above.

Question 9

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

Question 10

Flow-through entities include all of the following types of entities except

Accepted Answer

A) partnerships. 
B) C corporations. 
C) S corporations. 
D) limited liability companies (LLCs). 
A) partnerships. 
B) C corporations. 
C) S corporations. 
D) limited liability companies (LLCs).

Question 11

Which of the following concerning implicit taxes and clienteles is not true?

Accepted Answer

A) Market forces drive down the BTROR of tax-favored assets. 
B) The reduced return of tax-favored assets is an implicit tax. 
C) Investors whose tax rate exceeds that of the marginal investor can reap some benefit through the clientele effect. 
D) Marginal investors will always benefit from the implicit tax on tax-favored investments. 
A) Market forces drive down the BTROR of tax-favored assets. 
B) The reduced return of tax-favored assets is an implicit tax. 
C) Investors whose tax rate exceeds that of the marginal investor can reap some benefit through the clientele effect. 
D) Marginal investors will always benefit from the implicit tax on tax-favored investments.

Question 12

Which of the following characteristics belong(s)to the Exempt Model?

Accepted Answer

A) Only after-tax dollars are invested. 
B) Only tax-free dollars are invested. 
C) Earnings on the investment are exempt from explicit taxation. 
D) both A and C 
A) Only after-tax dollars are invested. 
B) Only tax-free dollars are invested. 
C) Earnings on the investment are exempt from explicit taxation. 
D) both A and C

Question 13

Rachel invests $5,000 in a money market account which earns a 5% before-tax return.Rachel has a 20% marginal tax rate.Rachel makes the one-time investment and leaves the funds in the account for 10 years.She allows all after-tax earnings to remain in the account.What is her after-tax accumulation after 10 years?

Accepted Answer

5,000 [1 +

Question 14

The Current Model most closely describes a flow-through entity while a variation of the Deferred Model describes a C corporation.

Accepted Answer

A) True 
 B)False

Question 15

Employer-sponsored qualified retirement plans and deductible IRAs fit the Pension Model.

Accepted Answer

A) True 
 B)False

Question 16

Examples of the Exempt Model include deductible IRAs,H.R.10 (Keogh)plans,Sec.401(k)plans,and tax deferred annuities.

Accepted Answer

A) True 
 B)False

Question 17

In the Exempt Model

Accepted Answer

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

Question 18

Nontax issues to consider when evaluating current salary versus deferred compensation include

Accepted Answer

A) the employee may need the cash now. 
B) deferred compensation carries some risk. 
C) deferred compensation may,depending on the contract,lock the employee into continued employment. 
D) All of the above are issues to be considered. 
A) the employee may need the cash now. 
B) deferred compensation carries some risk. 
C) deferred compensation may,depending on the contract,lock the employee into continued employment. 
D) All of the above are issues to be considered.

Question 19

Rich,an individual investor,lives in a land of no taxation and receive a $10,000 bonus.He invests this amount in a bond that pays interest of 4% per year and holds the bond for 5 years,reinvesting the interest annually at the same 4% return.At the end of 5 years the $10,000 original investment accumulates to

Accepted Answer

A) $10,400. 
B) $12,625. 
C) $12,763. 
D) $12,167. 
A) $10,400. 
B) $12,625. 
C) $12,763. 
D) $12,167.

Question 20

Earl invests $7,000 in a tax-exempt bond yielding 4% which matures in 15 years.What is Earl's after-tax accumulation at maturity?

Accepted Answer

$7,000 (1

Exam 34: Taxes and Investment Planning

In a progressive tax system,an investor can benefit from tax-exempt bonds when

In the Current Model

One characteristic of the Pension Model is the fact that,like the Current and Deferred Models,only after-tax dollars are invested.

Given a choice between a fully-taxable investment and a tax-favored investment,investors will prefer the tax-favored investment,assuming the two investments are equally risky.

In the Deferred Model

What are the characteristics of the Pension Model?

When given a choice between making a contribution to a Roth IRA or to a nondeductible traditional IRA,the taxpayer should choose the Roth IRA.

If a fully-taxable bond yields a BTROR of 10% (Rb = 10%)and a tax-exempt bond of similar risk earns a BTROR of 7.5% (Rf = 7.5%),then the implicit tax rate is

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

Flow-through entities include all of the following types of entities except

Which of the following concerning implicit taxes and clienteles is not true?

Which of the following characteristics belong(s)to the Exempt Model?

The Current Model most closely describes a flow-through entity while a variation of the Deferred Model describes a C corporation.

Employer-sponsored qualified retirement plans and deductible IRAs fit the Pension Model.

Examples of the Exempt Model include deductible IRAs,H.R.10 (Keogh)plans,Sec.401(k)plans,and tax deferred annuities.

In the Exempt Model

Nontax issues to consider when evaluating current salary versus deferred compensation include

Earl invests $7,000 in a tax-exempt bond yielding 4% which matures in 15 years.What is Earl's after-tax accumulation at maturity?

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

Ustaxation 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

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

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 10% (R_b = 10%)and a tax-exempt bond of similar risk earns a BTROR of 7.5% (R_f = 7.5%),then the implicit tax rate is