Question 1

A tax credit

Accepted Answer

A)  is not the same as a tax deduction. 
B)  is another phrase for a tax deduction. 
C)  is never calculated on federal tax returns. 
D)  only applies to the EITC. 
A)  is not the same as a tax deduction. 
B)  is another phrase for a tax deduction. 
C)  is never calculated on federal tax returns. 
D)  only applies to the EITC. A

Question 2

Which of the following is an allowable deduction?

Accepted Answer

A)  Unreimbursed medical expenses that exceed 7.5% of AGI 
B)  State and local income and property taxes 
C)  Interest on qualified education loans up to a certain limit 
D)  All of the answer options are correct. 
A)  Unreimbursed medical expenses that exceed 7.5% of AGI 
B)  State and local income and property taxes 
C)  Interest on qualified education loans up to a certain limit 
D)  All of the answer options are correct. D

Question 3

Investors considering switching capital assets may also consider the potential tax liability and decide not to switch.This is known as bracket creep.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain B

Question 4

Only realized capital gains are included in taxable income.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 5

Flat tax

Accepted Answer

A)  is same tax rate to everyone. 
B)  is same tax rate to each component of income. 
C)  allows a tax base with no deductions with a few exemptions and expenses. 
D)  is same tax rate to everyone and to each component of income only. 
E)  all of these answer options are correct. 
A)  is same tax rate to everyone. 
B)  is same tax rate to each component of income. 
C)  allows a tax base with no deductions with a few exemptions and expenses. 
D)  is same tax rate to everyone and to each component of income only. 
E)  all of these answer options are correct.

Question 6

Consider an individual who earns $95,000,has two children,pays $6,000 in child care expenses for one child,pays $19,000 in college tuition for the other child,pays $6,500 in mortgage interest (mortgage interest is tax deductible),and pays $9,600 in medical expenses.Medical expenses in excess of 7.5 percent of one's income are deductible.Personal exemptions are $3,050 per person (including the tax filer).When the individual's income is $30,000 or above,he/she gets a 12% child care credit.A college credit of 9% of tuition costs is given to those that have income less than $90,000.Her statutory marginal tax rate is 15 percent.What is her actual or effective marginal tax rate?

Accepted Answer

Final taxes owed are

Question 7

Which would a taxpayer in the 35% tax bracket prefer: a $2,000 tax exemption or a $700 tax credit? What if the taxpayer were in the 25% tax bracket?

Accepted Answer

For 35% taxpayer: exemption $2,000(0.35)

Question 8

Capital gains are

Accepted Answer

A)  treated exactly like other sources of income. 
B)  taxed differently than other sources of income. 
C)  generally not associated with a "lock-in effect." 
D)  only realized at death. 
A)  treated exactly like other sources of income. 
B)  taxed differently than other sources of income. 
C)  generally not associated with a "lock-in effect." 
D)  only realized at death.

Question 9

Suppose you paid $500,000 for an asset.You hold the asset for five years.The interest rate that you get for the asset is 10%.Assume the tax rate on capital gains is 20%.
(A)If capital gains are taxed only when the asset is realized,how much will you have earned on the asset?
(B)Suppose that capital gains are taxed annually instead of at realization.How much will you have earned on the asset?
(C)How big is the difference in the two taxing schemes?

Accepted Answer

(A)$500,000 × (1.10)⁵ - $500,00

Question 10

Exemptions are more desirable than deductions for a person in the 36% tax bracket.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 11

A Roth IRA differs from a traditional IRA in that

Accepted Answer

A)  the Roth IRA allows for savings towards retirement. 
B)  the Roth IRA is phased out at certain income levels. 
C)  the Roth IRA is not tax deductible at the time it is deposited. 
D)  all of these answer options are correct. 
A)  the Roth IRA allows for savings towards retirement. 
B)  the Roth IRA is phased out at certain income levels. 
C)  the Roth IRA is not tax deductible at the time it is deposited. 
D)  all of these answer options are correct.

Question 12

Since its inception in 1913,there have been many revisions to the income tax code.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 13

The lowest marginal tax rate used in the United States is

Accepted Answer

A)  10 percent. 
B)  28 percent. 
C)  33 percent. 
D)  39.6 percent. 
A)  10 percent. 
B)  28 percent. 
C)  33 percent. 
D)  39.6 percent.

Question 14

AGI always exceeds taxable income.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 15

According to the H-S definition of income,employer contributions are excluded from money income.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 16

AGI is

Accepted Answer

A)  found by subtracting certain business expenses from H-S income. 
B)  found by subtracting exemptions from taxable income. 
C)  not used in modern tax policy. 
D)  none of these answer options are correct. 
A)  found by subtracting certain business expenses from H-S income. 
B)  found by subtracting exemptions from taxable income. 
C)  not used in modern tax policy. 
D)  none of these answer options are correct.

Question 17

Suppose there is a simple tax system that says you pay 10% for income up to $10,000,25% for income between $10,000 and $50,000,and 35% for all income above $50,000.Mr.Campbell has income of $72,000.Mrs.Campbell has income of $55,000.
(A)What is Mr.Campbell's individual tax liability? Mrs.Campbell's?
(B)What is their liability if they file a joint return?
(C)Is there a marriage penalty? If so,how much is it?

Accepted Answer

(A)Mr.Campbell: [(10,000 * 0.10)+ (40,00

Question 18

Tax expenditures are revenues that

Accepted Answer

A)  are always recouped during tax season. 
B)  only apply to large corporations. 
C)  are needed to get full exemptions. 
D)  are forgone due to preferential tax treatment. 
A)  are always recouped during tax season. 
B)  only apply to large corporations. 
C)  are needed to get full exemptions. 
D)  are forgone due to preferential tax treatment.

Question 19

The Haig-Simons definition of income includes

Accepted Answer

A)  employer pension contributions and insurance purchases. 
B)  transfer payments. 
C)  income in-kind. 
D)  all of these answer options are correct. 
A)  employer pension contributions and insurance purchases. 
B)  transfer payments. 
C)  income in-kind. 
D)  all of these answer options are correct.

Question 20

Discuss the advantages of using an income tax system such as the one discussed in this chapter,as opposed to a consumption tax.

Accepted Answer

Using income as the unit of ta

A tax credit

Which of the following is an allowable deduction?

Investors considering switching capital assets may also consider the potential tax liability and decide not to switch.This is known as bracket creep.

Only realized capital gains are included in taxable income.

Flat tax

Which would a taxpayer in the 35% tax bracket prefer: a $2,000 tax exemption or a $700 tax credit? What if the taxpayer were in the 25% tax bracket?

Capital gains are

Exemptions are more desirable than deductions for a person in the 36% tax bracket.

A Roth IRA differs from a traditional IRA in that

Since its inception in 1913,there have been many revisions to the income tax code.

The lowest marginal tax rate used in the United States is

AGI always exceeds taxable income.

According to the H-S definition of income,employer contributions are excluded from money income.

AGI is

Tax expenditures are revenues that

The Haig-Simons definition of income includes

Discuss the advantages of using an income tax system such as the one discussed in this chapter,as opposed to a consumption tax.

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

Efficient and Equitable Taxation

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters

Exam 17: The Personal Income Tax

A tax credit

Which of the following is an allowable deduction?

Investors considering switching capital assets may also consider the potential tax liability and decide not to switch.This is known as bracket creep.

Only realized capital gains are included in taxable income.

Flat tax

Which would a taxpayer in the 35% tax bracket prefer: a $2,000 tax exemption or a $700 tax credit? What if the taxpayer were in the 25% tax bracket?

Capital gains are

Exemptions are more desirable than deductions for a person in the 36% tax bracket.

A Roth IRA differs from a traditional IRA in that

Since its inception in 1913,there have been many revisions to the income tax code.

The lowest marginal tax rate used in the United States is

AGI always exceeds taxable income.

According to the H-S definition of income,employer contributions are excluded from money income.

AGI is

Tax expenditures are revenues that

The Haig-Simons definition of income includes

Discuss the advantages of using an income tax system such as the one discussed in this chapter,as opposed to a consumption tax.

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

Efficient and Equitable Taxation

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters