Question 1

Compare progressive, proportional, and regressive taxes.

Accepted Answer

The tax rate in a progressive system of

Question 2

Identify the following with an E if all or part of the item could be an exclusion from gross income or D if all or part of the item could be a deduction.
-Identify the following with an E if all or part of the item could be an exclusion from gross income or D if all or part of the item could be a deduction. 
_____ a. Scholarship 
_____ b. Medical expense 
_____ c. Charitable contribution 
_____ d. Life insurance proceeds 
_____ e. Inheritances 
_____ f. State income taxes
 _____ g. Tax exempt interest
 _____ h. Student loan interest
_____ i. Social Security benefits
_____ j. The value of food stamps
a. Scholarship _____
f. State income taxes

Accepted Answer

. a. E b. D c. D d.

Question 3

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

Accepted Answer

A)  Cash dividend 
B)  Corporate bond interest income 
C)  Stock dividend 
D)  All are included in gross income 
E)  None are included in gross income 
A)  Cash dividend 
B)  Corporate bond interest income 
C)  Stock dividend 
D)  All are included in gross income 
E)  None are included in gross income

Question 4

Ethan received $130,000 in salary in 2017. What is his FICA tax if the Medicare rate is 1.45%, the Social Security rate is 6.2% on the 2017 maximum of $127,200, and the FUTA rate is 6% on a $7,000 maximum?

Accepted Answer

A)  $9,065 
B)  $9,232 
C)  $9,771 
D)  $9,945 
A)  $9,065 
B)  $9,232 
C)  $9,771 
D)  $9,945

Question 5

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

Accepted Answer

A)  Both are flow through entities 
B)  Owners increase basis for debt undertaken by S corporation or partnership 
C)  Both forms limit owner's participation in tax-free fringe benefits 
D)  Owner's increase basis for gains and decrease basis for losses 
A)  Both are flow through entities 
B)  Owners increase basis for debt undertaken by S corporation or partnership 
C)  Both forms limit owner's participation in tax-free fringe benefits 
D)  Owner's increase basis for gains and decrease basis for losses

Question 6

Which of the following types of taxes is a consumption tax?

Accepted Answer

A)  Estate tax 
B)  Income tax 
C)  Gift tax 
D)  Use tax 
A)  Estate tax 
B)  Income tax 
C)  Gift tax 
D)  Use tax

Question 7

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?

Accepted Answer

A)  $0 
B)  $11,700 
C)  $28,600 
D)  $33,800 
E)  $44,850 
A)  $0 
B)  $11,700 
C)  $28,600 
D)  $33,800 
E)  $44,850

Question 8

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

Accepted Answer

A)  Excise tax 
B)  Income tax 
C)  Value added tax 
D)  Gift tax 
A)  Excise tax 
B)  Income tax 
C)  Value added tax 
D)  Gift tax

Question 9

Which of the following best describes horizontal equity?

Accepted Answer

A)  All taxpayers should pay some taxes on their incomes 
B)  As income increases, taxes should increase 
C)  Persons with equal incomes should pay the same amount of taxes 
D)  A person with capital gains should pay less tax than a person with the same amount of salary income 
A)  All taxpayers should pay some taxes on their incomes 
B)  As income increases, taxes should increase 
C)  Persons with equal incomes should pay the same amount of taxes 
D)  A person with capital gains should pay less tax than a person with the same amount of salary income

Question 10

_____ 14. A $100 tax deduction is more valuable to a taxpayer than a $100 tax credit.

Accepted Answer

A) True 
 B)False

Question 11

Jason purchased a 20 percent interest in JKL Partnership for $20,000 at the beginning of the year. At year-end, the partnership reported net income of $15,000 and distributed $2,000 cash to Jason. What is Jason's year-end basis?

Accepted Answer

A)  $20,000 
B)  $21,000 
C)  $23,000 
D)  $33,000 
A)  $20,000 
B)  $21,000 
C)  $23,000 
D)  $33,000

Question 12

What tax provision encourages the fiduciary of an estate or a trust to distribute the income annually to the beneficiaries?

Accepted Answer

The tax rates applicable to the income t

Question 13

Which of the following types of taxes is levied by almost all states on some or all goods purchased?

Accepted Answer

A)  Sales tax 
B)  Income tax 
C)  Property tax 
D)  Wealth transfer tax 
A)  Sales tax 
B)  Income tax 
C)  Property tax 
D)  Wealth transfer tax

Question 14

_____ 17. Partnerships and S corporations are flow-through entities.

Accepted Answer

A) True 
 B)False

Question 15

Explain how horizontal equity differs from vertical equity.

Accepted Answer

Horizontal equity would require taxpayer

Question 16

Which of the following is an objective of taxation?

Accepted Answer

A)  Raise revenue 
B)  Foster social goals 
C)  Stimulate the economy 
D)  All of the above 
A)  Raise revenue 
B)  Foster social goals 
C)  Stimulate the economy 
D)  All of the above

Question 17

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?

Accepted Answer

A)  $30,000 
B)  $25,000 
C)  $5,000 
D)  $0 
A)  $30,000 
B)  $25,000 
C)  $5,000 
D)  $0

Question 18

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?

Accepted Answer

A)  $20,000 
B)  $24,000 
C)  $44,000 
D)  $64,000 
A)  $20,000 
B)  $24,000 
C)  $44,000 
D)  $64,000

Question 19

The Shoe Market, Inc. 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 income and $6,000 interest income on State of California bonds. It paid $512,000 for salaries and had $552,000 of other operating expenses. What is Shoe Market's taxable income? What is its income tax liability?

Accepted Answer

$128,000 taxable income; $33,170 tax
Tax

Question 20

How much income tax must the Benton Trust pay in 2017 if its taxable income (after all deductions) is $4,600?

Accepted Answer

A)  $460 
B)  $690 
C)  $895 
D)  $1,240 
A)  $460 
B)  $690 
C)  $895 
D)  $1,240

Compare progressive, proportional, and regressive taxes.

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

Ethan received $130,000 in salary in 2017. What is his FICA tax if the Medicare rate is 1.45%, the Social Security rate is 6.2% on the 2017 maximum of $127,200, and the FUTA rate is 6% on a $7,000 maximum?

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

Which of the following types of taxes is a consumption tax?

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

Which of the following best describes horizontal equity?

_____ 14. A $100 tax deduction is more valuable to a taxpayer than a $100 tax credit.

Jason purchased a 20 percent interest in JKL Partnership for $20,000 at the beginning of the year. At year-end, the partnership reported net income of $15,000 and distributed $2,000 cash to Jason. What is Jason's year-end basis?

What tax provision encourages the fiduciary of an estate or a trust to distribute the income annually to the beneficiaries?

Which of the following types of taxes is levied by almost all states on some or all goods purchased?

_____ 17. Partnerships and S corporations are flow-through entities.

Explain how horizontal equity differs from vertical equity.

Which of the following is an objective of taxation?

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?

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?

How much income tax must the Benton Trust pay in 2017 if its taxable income (after all deductions) is $4,600?

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 1: Introduction to Taxation

Compare progressive, proportional, and regressive taxes.

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

Ethan received $130,000 in salary in 2017. What is his FICA tax if the Medicare rate is 1.45%, the Social Security rate is 6.2% on the 2017 maximum of $127,200, and the FUTA rate is 6% on a $7,000 maximum?

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

Which of the following types of taxes is a consumption tax?

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

Which of the following best describes horizontal equity?

_____ 14. A $100 tax deduction is more valuable to a taxpayer than a $100 tax credit.

Jason purchased a 20 percent interest in JKL Partnership for $20,000 at the beginning of the year. At year-end, the partnership reported net income of $15,000 and distributed $2,000 cash to Jason. What is Jason's year-end basis?

What tax provision encourages the fiduciary of an estate or a trust to distribute the income annually to the beneficiaries?

Which of the following types of taxes is levied by almost all states on some or all goods purchased?

_____ 17. Partnerships and S corporations are flow-through entities.

Explain how horizontal equity differs from vertical equity.

Which of the following is an objective of taxation?

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?

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?

How much income tax must the Benton Trust pay in 2017 if its taxable income (after all deductions) is $4,600?

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters