Exam 1: Introduction to Taxation

Two married persons with moderately high incomes will pay more taxes than two single persons with the same income.This is commonly called:

The first codification of the Internal Revenue Code took place in 1954.

Adam Smith's four canons of taxation are Equity,Certainty,Economy and Convenience.

Jerry and Matt decide to form a business.Jerry will contribute $4,200 for a 35% interest and Matt will contribute $7,800 for a 65% interest.The business will take out a $25,000 loan to cover the balance of their working capital needs.They expect that the business will have a loss of $38,000 for the first year.In the second year,the business will have a profit of $52,000 and it will distribute $5,200 to Matt and $2,800 to Jerry.Jerry is in the 33% marginal tax bracket and Matt is in the 28% marginal tax bracket.Their marginal tax brackets will not change as a result of profit or loss from this business.How much tax will Matt pay in the second year (rounded to the nearest dollar)due to this business if they organize the business as a partnership?

Explain the difference between a business's gross revenue and its gross income.

The Walstore Shoe Market had $1,875,000 of shoe sales and its cost for these shoes was $688,000.In addition,Shoe Market received $5,000 of corporate bond interest and $6,000 interest on State of California bonds.It paid $512,000 in salaries and had $552,000 of other operating expenses.What is Shoe Market's taxable income? What is its income tax liability?

Which of the following is normally not included in gross income?

Zenith Corporation has $900,000 of gross income and $720,000 of operating expenses.It has alternative minimum taxable income of $520,000.What is its alternative minimum tax?

Darden Corporation has taxable income of $200,000.If it distributes 25 percent of its after-tax income to its sole shareholder who is in the 25 percent marginal tax bracket,what is the total tax burden on this $200,000 of income?

Jerry and Matt decide to form a business.Jerry will contribute $4,200 for a 35% interest and Matt will contribute $7,800 for a 65% interest.The business will take out a $25,000 loan to cover the balance of their working capital needs.They expect that the business will have a loss of $38,000 for the first year.In the second year,the business will have a profit of $52,000 and it will distribute $5,200 to Matt and $2,800 to Jerry.Jerry is in the 33% marginal tax bracket and Matt is in the 28% marginal tax bracket.Their marginal tax brackets will not change as a result of profit or loss from this business. What is Matt's income tax savings (rounded to the nearest dollar)for the first year if they organize the business as a partnership?

Which of the following types of taxes is not levied by the U.S.government?

Why are S corporations and partnerships called flow-through entities?

Which of the following is not a characteristic of both S corporations and partnerships?

Which of the following nominal rates does not apply to a C corporation?

Compare progressive,proportional,and regressive taxes.

What is the marginal tax rate for a corporation with $110,000 of taxable income?

Jerry and Matt decide to form a business.Jerry will contribute $4,200 for a 35% interest and Matt will contribute $7,800 for a 65% interest.The business will take out a $25,000 loan to cover the balance of their working capital needs.They expect that the business will have a loss of $38,000 for the first year.In the second year,the business will have a profit of $52,000 and it will distribute $5,200 to Matt and $2,800 to Jerry.Jerry is in the 33% marginal tax bracket and Matt is in the 28% marginal tax bracket.Their marginal tax brackets will not change as a result of profit or loss from this business.What is Matt's stock basis at the end of the second year if they organize the business as an S corporation?

When does a seller realize a loss of the sale of an asset?

Walter is married,files a joint return,and has three dependent children.If his adjusted gross income is $64,000 and he has $6,000 in itemized deductions in 2015,what is his taxable income? What is his income tax liability?

Emma owns 40% of Johnson,Inc.,a regular C corporation,that reported a net loss of $50,000 for the year.Emma acquired her stock on January 1 of the current year by investing $4,000 cash.In July,the corporation took out a bank loan for $25,000.How much of the loss can Emma deduct on her tax return for the year?