Question 1

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 the choices are correct. 
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 the choices are correct.

Question 2

Which of the following statements is true?

Accepted Answer

A)  Municipal bond interest is subject to explicit federal tax. 
B)  Municipal bond interest is subject to implicit tax. 
C)  Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk. 
D)  All of these statements are true. 
E)  None of these statements is true. 
A)  Municipal bond interest is subject to explicit federal tax. 
B)  Municipal bond interest is subject to implicit tax. 
C)  Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk. 
D)  All of these statements are true. 
E)  None of these statements is true.

Question 3

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

Accepted Answer

A) True 
 B)False

Question 4

The effective tax rate, in general, provides a better depiction of a taxpayer's tax burden than the average tax rate.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Congress recently approved a new, smaller budget for the IRS. What taxation concept evaluates the cost of administering our tax law?

Accepted Answer

A)  Convenience. 
B)  Economy. 
C)  Certainty. 
D)  Equity. 
E)  None of the choices are correct. 
A)  Convenience. 
B)  Economy. 
C)  Certainty. 
D)  Equity. 
E)  None of the choices are correct.

Question 7

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 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. 
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 the choices are correct.

Question 8

Jackson has the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate bonds that pay 10% interest. Jackson is a single taxpayer who earns $55,000 annually. Assume that the city of Mitchell bonds and the Sundial, Inc. bonds have similar risk. What interest rate would the city of Mitchell have to pay in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Inc. bonds for year 2018? (Use tax rate schedule)

Accepted Answer

A)  7.80% 
B)  10.00% 
C)  8.00% 
D)  7.20% 
E)  None of the choices are correct. 
A)  7.80% 
B)  10.00% 
C)  8.00% 
D)  7.20% 
E)  None of the choices are correct.

Question 9

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 10

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 2018, 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%) (Use tax rate schedule)

Accepted Answer

Fred and Wilma will owe $13,879 in feder

Question 11

Sin taxes are:

Accepted Answer

A)  taxes assessed by religious organizations. 
B)  taxes assessed on certain illegal acts. 
C)  taxes assessed to discourage less desirable behavior. 
D)  taxes assessed to fund a specific purpose. 
E)  None of the choices are correct. 
A)  taxes assessed by religious organizations. 
B)  taxes assessed on certain illegal acts. 
C)  taxes assessed to discourage less desirable behavior. 
D)  taxes assessed to fund a specific purpose. 
E)  None of the choices are correct.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Although the primary purpose of a tax system is to raise revenue, Congress uses the federal tax system for other purposes as well. Describe the other ways in which Congress uses the federal tax system. Be specific.

Accepted Answer

In addition to the general objective of

Question 14

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 15

Given the following tax structure, what is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to effective tax rates?

Accepted Answer

Diego's average tax rate is 5%.
 @#IMG-DLM& A 5% a

Question 16

The income and substitution effects are two opposing effects that one could consider in static forecasting.

Accepted Answer

A) True 
 B)False

Question 17

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, what is his effective tax rate (rounded)? (Use tax rate schedule)

Accepted Answer

A)  20.31% 
B)  14.06% 
C)  15.23% 
D)  22.00% 
E)  None of the choices are correct 
A)  20.31% 
B)  14.06% 
C)  15.23% 
D)  22.00% 
E)  None of the choices are correct

Question 18

Ariel invests $50,000 in a city of Las Vegas bond that pays 5% interest. Alternatively, Ariel could have invested the $50,000 in a bond recently issued by Jittery Joe's, Inc. that pays 8% interest with similar non-tax characteristics as the city of Las Vegas bond (e.g., similar risk). Assume that Ariel's marginal tax rate is 24%. What is her after-tax rate of return for the city of Las Vegas bond? For the Jittery Joe's, Inc. bond? How much explicit tax does Ariel pay on the city of Las Vegas bond? How much implicit tax does she pay on the city of Las Vegas bond? How much explicit tax would she have paid on the Jittery Joe's, Inc. bond? Which bond should she choose?

Accepted Answer

Since the city of Las Vegas bond is a ta

Question 19

Oswald is beginning his first tax course and does not really have a solid understanding of the role that taxes play in various decisions. Please describe for Oswald the various types of decisions that taxes may influence.

Accepted Answer

Taxes are a part of everyday life and ha

Question 20

Jackson has the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate bonds that pay 10% interest. Jackson is a single taxpayer who earns $55,000 annually. Assume that the city of Mitchell 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 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 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 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 the choices are correct.

Exam 1: An Introduction to Tax

Which of the following is false?

Which of the following statements is true?

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

The effective tax rate, in general, provides a better depiction of a taxpayer's tax burden than the average tax rate.

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

Congress recently approved a new, smaller budget for the IRS. What taxation concept evaluates the cost of administering our tax law?

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

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.

Sin taxes are:

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

Although the primary purpose of a tax system is to raise revenue, Congress uses the federal tax system for other purposes as well. Describe the other ways in which Congress uses the federal tax system. Be specific.

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

Given the following tax structure, what is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to effective tax rates?

The income and substitution effects are two opposing effects that one could consider in static forecasting.

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, what is his effective tax rate (rounded)? (Use tax rate schedule)

Oswald is beginning his first tax course and does not really have a solid understanding of the role that taxes play in various decisions. Please describe for Oswald the various types of decisions that taxes may influence.

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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