Exam 1: Introduction to Taxation

Abigail is married filing separately with taxable income of $175,000. What is her marginal tax rate?

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

Which of the following statements is false?

What are Adam Smith's four canons of taxation? Briefly describe each.

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

Susie is single, has salary income of $26,000, and $12,000 of deductions in 2018. What is her taxable income? What is her income tax liability?

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 32% marginal tax bracket and Matt is in the 24% marginal tax bracket. Their marginal tax brackets will not change as a result of profit or loss from this business. What is Matt's basis at the end of the second year if they organize the business as a partnership?

Jordan is the sole proprietor of Adams Company that reported net income of $57,000 for the year. During the year he withdrew $11,000 from the business for personal use. Jordan is in the 24% marginal tax bracket. How much income from the above must Jordan include in his taxable income for the year?

John earns $25,000 and pays $2,000 in taxes. Marcy earns $60,000 and pays $4,000 in taxes. How would you characterize this tax system?

What is an individual's maximum annual deduction for capital losses?

Deazia is the sole proprietor of Baldwin Hair Salon that reported net income of $44,000 for the year. During the year she withdrew $20,000 from the business for personal use. How much income from the above must Deazia include in her taxable income for the year?

There are three basic taxable entities: the individual, the fiduciary, and the C corporation.

Sophia owns 20% of a partnership that reported net income of $130,000 for the year. During the year $18,000 was distributed to Sophia from the partnership. How much should Sophia include in her taxable income for the year?

The type and degree of connection between a business and a state necessary for a state to impose a tax is referred to as nexus.

Compare progressive, proportional, and regressive taxes.

Which of the following statements describes the correct relationship between marginal and average tax rates in a progressive tax system?

Differentiate a wealth tax from a wealth transfer tax and give an example of each.

Elena owns 25% of a partnership that reported net income of $100,000 for the year. During the year $5,000 was distributed to Elena from the partnership. How much should Elena include in her taxable income for the year?

What is a tax?

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 32% marginal tax bracket and Matt is in the 24% marginal tax bracket. Their marginal tax brackets will not change as a result of profit or loss from this business. What is Jerry's stock basis at the end of the second year if they organize the business as an S corporation?