Exam 1: An Introduction to Tax

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)

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Question 1

Correct Answer:

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Fred and Wilma will owe $13,879 in federal income tax this year computed as follows:$13,879 = $8,907 + (22% × ($100,000 − $77,400)). Fred and Wilma's average tax rate is 13.88%. Average Tax Rate = Total Tax/Taxable Income = $13,879/$100,000 = 13.88% Fred and Wilma's effective tax rate is 11.57%. Effective Tax Rate = Total Tax/Total Income = $13,879/($100,000 + $20,000)= 11.57% Fred and Wilma are currently in the 22% tax rate bracket.Their marginal tax rate on small increases in income and deductions is 25%. If Fred and Wilma earn an additional $40,000 of taxable income,their marginal tax rate on the income is 22.00%. Marginal Tax Rate = Change in Tax/Change in Taxable Income = ($22,679 -$13,879)/($140,000 − $100,000)= 22.00%

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.

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(True/False)

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Question 2

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False

Given the following tax structure,what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to effective tax rates? Texpayer Salary Muni-Bond Interest Tatal Tax Mort 20,006 5,006 4,000 Lizzy 80,000 30,000 ???

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Question 3

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Mort's average tax rate is 20%. A 20% average tax rate on Lizzy's $80,000 total income would result in $16,000 of tax (i.e.,20% × $80,000 = $16,000).Thus,Lizzy must pay more than $16,000 tax for the tax structure to be progressive with respect to average tax rates. Mort's effective tax rate is 16%. A 16% effective tax rate on Lizzy's $110,000 total income would result in $17,600 of tax (i.e.,16% × $110,000 = $17,600).Thus,Lizzy must pay more than $17,600 tax for the tax structure to be progressive with respect to effective tax rates.

The estate tax is assessed based on the fair market values of transfers made during a taxpayer's life.

(True/False)

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Question 4

Which of the following represents the largest percentage of average state tax revenue?

(Multiple Choice)

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Question 5

For each of the following,determine if each is a tax and why or why not. a.$2.50 toll paid on the Florida Turnpike b.$300 ticket for reckless driving c.1% local surcharge on hotel rooms to fund public roadways d.2% city surcharge on wages earned in the city of Philadelphia

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Question 6

Leonardo,who is married but files separately,earns $80,000 of taxable income.He also has $15,000 in city of Tulsa bonds.His wife,Theresa,earns $50,000 of taxable income. How much money would Leonardo and Theresa save if they file jointly instead of separately for year 2018? (Use tax rate schedule)

(Multiple Choice)

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Question 7

There are several different types of tax rates that taxpayers might use in different contexts.Describe each tax rate and how a taxpayer might use it.

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Question 8

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

(Multiple Choice)

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Question 9

Which of the following would not be a failure of the horizontal equity concept?

(Multiple Choice)

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Question 10

Which of the following is true regarding use taxes?

(Multiple Choice)

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Question 11

Which of the following is a tax? I.A 1% special sales tax for funding local road construction. II)A fee paid to the state for a license to practice as an attorney. III)An income tax imposed by Philadelphia on persons working within the city limits. IV)A special property assessment for installing a new water system in the taxpayer's neighborhood.

(Multiple Choice)

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Question 12

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)

(Multiple Choice)

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Question 13

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)

(Multiple Choice)

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Question 14

Mandy,the mayor of Bogart and a strong advocate of a clean downtown,is proposing an increase in the city sales tax from 7% to 50% on all packs of chewing gum purchased in Bogart.Based on the current gum sales,Mandy estimates that this tax will actually reduce the tax revenue on gum sales.What type of forecasting is Mandy using to derive her tax revenue estimates? What "effect" is her estimate based on? Does this necessarily imply that Mandy will be happy given her desire to have a clean downtown?

(Essay)

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Question 15

A use tax is typically imposed by a state on goods purchased within the state.

(True/False)

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Question 16

The largest federal tax,in terms of revenue collected,is the social security tax.

(True/False)

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Question 17

The city of Granby,Colorado recently enacted a 1.5% surcharge on vacation cabin rentals that will help pay for the city's new elementary school.This surcharge is an example of ________.

(Multiple Choice)

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Question 18

Which of the following taxes represents the largest portion of U.S.Federal Tax revenues?

(Multiple Choice)

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Question 19

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

(True/False)

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Question 20

Showing 1 - 20 of 113

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.

The estate tax is assessed based on the fair market values of transfers made during a taxpayer's life.

Which of the following represents the largest percentage of average state tax revenue?

For each of the following,determine if each is a tax and why or why not. a.$2.50 toll paid on the Florida Turnpike b.$300 ticket for reckless driving c.1% local surcharge on hotel rooms to fund public roadways d.2% city surcharge on wages earned in the city of Philadelphia

Leonardo,who is married but files separately,earns $80,000 of taxable income.He also has $15,000 in city of Tulsa bonds.His wife,Theresa,earns $50,000 of taxable income. How much money would Leonardo and Theresa save if they file jointly instead of separately for year 2018? (Use tax rate schedule)

There are several different types of tax rates that taxpayers might use in different contexts.Describe each tax rate and how a taxpayer might use it.

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 would not be a failure of the horizontal equity concept?

Which of the following is true regarding use taxes?

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)

A use tax is typically imposed by a state on goods purchased within the state.

The largest federal tax,in terms of revenue collected,is the social security tax.

The city of Granby,Colorado recently enacted a 1.5% surcharge on vacation cabin rentals that will help pay for the city's new elementary school.This surcharge is an example of ________.

Which of the following taxes represents the largest portion of U.S.Federal Tax revenues?

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

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 for Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

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