Question 1

Congress is required to insure that the tax law has the following characteristics: equality, certainty, convenience, and economy.

Accepted Answer

A) True 
 B)False

Question 2

Deductions for adjusted gross income and itemized deductions are two types of reductions used to calculate taxable income. Which of the following are characteristics of these types of deductions?
I.Taxpayers deduct the larger of itemized deductions or the standard deduction.
II.Taxpayers deduct the larger of deductions for adjusted gross income or the standard deduction
III.Deductions for adjusted gross income are limited to those incurred in a trade or business, incurred in the earning other forms of income, and certain specifically allowed personal expenses of individuals.
​

Accepted Answer

A) Only statement III is correct. 
B) Statements I and II are correct. 
C) Statements I and III are correct. 
D) Statements II and III are correct. 
E) Statements I, II, and III are correct.

Question 3

A tax is an enforced contribution used to finance the functions of government.

Accepted Answer

A) True 
 B)False

Question 4

Match each term with the correct statement below.
-The tax rate obtained by dividing total tax liability by economic income.

Accepted Answer

A) Average tax rate 
B) Effective tax rate 
C) Horizontal equity 
D) Marginal tax rate 
E) Progressive rate structure
F)Proportional rate structure
G)Regressive rate structure
H)Tax avoidance
I)Tax evasion
J)Vertical equity

Question 5

Employment taxes are

Accepted Answer

A) revenue neutral. 
B) regressive. 
C) value-added. 
D) progressive. 
E) proportional.

Question 6

The return selection program designed to select returns with the highest probability of errors is

Accepted Answer

A) The TCMP. 
B) The DIF program. 
C) The special audit program. 
D) The document perfection program. 
E) The information-matching program.

Question 7

Glenna put money in savings accounts in 50 different banks. She knows a bank is not required to report to the IRS any interest it pays her that totals less than $10. Because the banks do not report the payments to the IRS, Glenna does not report the interest received as taxable income. Which of the following is (are) true?
I.Glenna's actions are tax evasion because she intentionally misrepresented facts on a tax return to avoid paying tax.
II.Glenna's actions are tax avoidance because the IRS will never know about the interest income.
III.Glenna's actions are tax evasion because she took steps to conceal the income.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Statements I and III are correct. 
D) Statements II and III are correct. 
E) Statements I, II, and III are correct.

Question 8

Trang is in the 12% marginal tax bracket in the current year. She owes a $10,000 bill for business expenses. Since she reports taxable income on a cash basis, she can deduct the $10,000 in either this year or next year, depending on when she makes the payment. She can pay the bill at any time before January 31 of next year, without incurring the normal 12% interest charge. She expects to be in the 22% marginal bracket next year. Without considering the time value of money, what are her tax savings if she pays the bill after January 1?

Accepted Answer

A) Current year $1,000. 
B) Current year $1,200. 
C) Next year $1,000. 
D) Next year $2,200. 
E) Next year $1,200.

Question 9

Mo is a single taxpayer reporting $95,000 of gross income. In addition, Mo receives $5,000 of tax-exempt interest.
Required: Compute the following:
a. Mo's taxable income is ___________________.
b. Mo's tax liability is ____________________.
c. Mo's marginal tax rate is ____________________.
d. Mo's average tax rate is ____________________.
e. Mo's effective tax rate is ____________________.

Accepted Answer

The answer of Mo is a single taxpayer reporting $95,000...

Question 10

Which of the following statement is/are included in Adam Smith's four requirements for a good tax system?
I.Changes in the tax law should be made as needed to raise revenue and for proper administration.
II.A tax should be imposed in proportion to a taxpayer's ability to pay.
III.A taxpayer should be required to pay a tax when it is most likely to be convenient for the taxpayer to make the payment.
IV.The government must collect taxes equal to it's expenses.

Accepted Answer

A) Statements I and II are correct. 
B) Statements I and IV are correct. 
C) Statements II and III are correct. 
D) Statements II and IV are correct. 
E) Statements III and IV are correct.

Question 11

Match each term with the correct statement below.
-Subtractions from gross income specifically allowed by the tax law.

Accepted Answer

A) Ad valorem tax 
B) Deduction 
C) Excise tax 
D) Exclusion 
E) Expense
F)Gain
G)Loss
H)Ordinary income
I)Pay-as-you-go concept
J)Personal property
K)Real property
L)Self-assessment
M)Standard deduction
N)Statute of limitations
O)Tax base
P)Tax credit

Question 12

Jered and Samantha are married. Their 2018 taxable income is $95,000 before considering a $10,000 deduction for adjusted gross income (AGI). What are the tax savings attributable to their deduction?

Accepted Answer

A) $0 
B) $1,200 
C) $2,200 
D) $2,400 
E) $10,000

Question 13

Match each term with the correct statement below.
-The excess of the selling price of an asset over its tax basis.

Accepted Answer

A) Ad valorem tax 
B) Deduction 
C) Excise tax 
D) Exclusion 
E) Expense
F)Gain
G)Loss
H)Ordinary income
I)Pay-as-you-go concept
J)Personal property
K)Real property
L)Self-assessment
M)Standard deduction
N)Statute of limitations
O)Tax base
P)Tax credit

Question 14

Which of the following are types of IRS examinations?
I.Information matching program.
II.Office examination.
III.Field examination.
IV.Revenue agent report.
​

Accepted Answer

A) Statements II and III are correct. 
B) Only statement III is correct. 
C) Statements I and IV are correct. 
D) Statements I, II and III are correct. 
E) Only statement II is correct.

Question 15

Julia is single and earns a salary of $65,000. Her allowable deductions for adjusted gross income total $1,200 and she has $4,200 of allowable itemized deductions. What is Julia's taxable income and income tax liability for 2018?

Accepted Answer

The answer of Julia is single and earns a salary...

Question 16

Sarah owes a deductible expense that she can either pay (and deduct) this year or next year. She is in the 22% marginal tax rate bracket. Which of the following statements about this payment is/are correct?
I.Deductions should always be taken in the current year. Sarah should pay the expense this year.
II.If Sarah expects to be in the 32% marginal tax rate bracket next year, she should pay the expense next year.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 17

Match each term with the correct statement below.
-The tax rate obtained by dividing total tax liability by taxable income.

Accepted Answer

A) Average tax rate 
B) Effective tax rate 
C) Horizontal equity 
D) Marginal tax rate 
E) Progressive rate structure
F)Proportional rate structure
G)Regressive rate structure
H)Tax avoidance
I)Tax evasion
J)Vertical equity

Question 18

Match each term with the correct statement below.
-The tax rate that will apply to the next dollar of taxable income.

Accepted Answer

A) Average tax rate 
B) Effective tax rate 
C) Horizontal equity 
D) Marginal tax rate 
E) Progressive rate structure
F)Proportional rate structure
G)Regressive rate structure
H)Tax avoidance
I)Tax evasion
J)Vertical equity

Question 19

Sally is a single individual. In 2018, she receives $20,000 of tax-exempt income in addition to her salary and other investment income of $100,000. Sally's 2018 tax return showed the following information:
?
$$\begin{array} { l r } 
\text { Gross income } & \$ 100,000 \
\text { Deductions for adjusted gross income } & ( 4,000 ) \
\text { Adjusted gross income } & \$ 96,000 \
\text { Itemized deductions } & \$ ( 16,000 ) \
\text { Taxable income } & \$ 80,000 \
\text { Total tax } & \$ 13,540 \
\text { Less: Income tax withheld from wages } & ( 13,590 ) \
\text { Refund } & \$ 50
\end{array}$$
Which of the following statements concerning Sally's tax rates is (are) correct?
I.Sally's average tax rate is 16.9%.
II.Sally's average tax rate is 13.5%.
III.Sally's marginal tax rate is 22%.
IV.Sally's marginal tax rate is 16.9%.
?

Accepted Answer

A) Statements I and III are correct. 
B) Statements I and IV are correct. 
C) Statements II and III are correct. 
D) Statements II and IV are correct. 
E) Only statement IV is correct.

Question 20

On December 28, 2018, Doris and Dan are considering one last financial decision for 2018, a contribution of $1,000 to the American Diabetes Association. If they make the $1,000 contribution, it will be fully deductible on their 2018 income tax return. Their filing status is married filing jointly. Their 2018 taxable income before this contribution is $150,000. If they make this contribution, what is its after-tax cost?

Accepted Answer

The answer of On December 28, 2018, Doris and Dan...

Exam 1: Federal Income Taxation-An Overview

Congress is required to insure that the tax law has the following characteristics: equality, certainty, convenience, and economy.

A tax is an enforced contribution used to finance the functions of government.

Match each term with the correct statement below. -The tax rate obtained by dividing total tax liability by economic income.

Employment taxes are

The return selection program designed to select returns with the highest probability of errors is

Mo is a single taxpayer reporting $95,000 of gross income. In addition, Mo receives $5,000 of tax-exempt interest. Required: Compute the following: a. Mo's taxable income is _. b. Mo's tax liability is . c. Mo's marginal tax rate is . d. Mo's average tax rate is . e. Mo's effective tax rate is __.

Match each term with the correct statement below. -Subtractions from gross income specifically allowed by the tax law.

Jered and Samantha are married. Their 2018 taxable income is $95,000 before considering a $10,000 deduction for adjusted gross income (AGI) . What are the tax savings attributable to their deduction?

Match each term with the correct statement below. -The excess of the selling price of an asset over its tax basis.

Which of the following are types of IRS examinations? I.Information matching program. II.Office examination. III.Field examination. IV.Revenue agent report.

Julia is single and earns a salary of $65,000. Her allowable deductions for adjusted gross income total $1,200 and she has $4,200 of allowable itemized deductions. What is Julia's taxable income and income tax liability for 2018?

Match each term with the correct statement below. -The tax rate obtained by dividing total tax liability by taxable income.

Match each term with the correct statement below. -The tax rate that will apply to the next dollar of taxable income.

Exam 1: Federal Income Taxation-An Overview

Congress is required to insure that the tax law has the following characteristics: equality, certainty, convenience, and economy.

A tax is an enforced contribution used to finance the functions of government.

Match each term with the correct statement below. -The tax rate obtained by dividing total tax liability by economic income.

Employment taxes are

The return selection program designed to select returns with the highest probability of errors is

Match each term with the correct statement below. -Subtractions from gross income specifically allowed by the tax law.

Jered and Samantha are married. Their 2018 taxable income is $95,000 before considering a $10,000 deduction for adjusted gross income (AGI) . What are the tax savings attributable to their deduction?

Match each term with the correct statement below. -The excess of the selling price of an asset over its tax basis.

Which of the following are types of IRS examinations? I.Information matching program. II.Office examination. III.Field examination. IV.Revenue agent report. ​

Julia is single and earns a salary of $65,000. Her allowable deductions for adjusted gross income total $1,200 and she has $4,200 of allowable itemized deductions. What is Julia's taxable income and income tax liability for 2018?

Match each term with the correct statement below. -The tax rate obtained by dividing total tax liability by taxable income.

Match each term with the correct statement below. -The tax rate that will apply to the next dollar of taxable income.

Which of the following are types of IRS examinations? I.Information matching program. II.Office examination. III.Field examination. IV.Revenue agent report.