Question 1

The substitution effect:

Accepted Answer

A)  Predicts that taxpayers will work harder to pay for consumer products when tax rates increase 
B)  Is one of the effects considered in static forecasting 
C)  Results in the government collecting more aggregate tax revenue than under the income effect 
D)  Is typically more descriptive for taxpayers with lower disposable income 
E)  None of these 
A)  Predicts that taxpayers will work harder to pay for consumer products when tax rates increase 
B)  Is one of the effects considered in static forecasting 
C)  Results in the government collecting more aggregate tax revenue than under the income effect 
D)  Is typically more descriptive for taxpayers with lower disposable income 
E)  None of these

Question 2

Which of the following principles encourages a vertically equitable tax system?

Accepted Answer

A)  Pay as you go 
B)  Economy 
C)  Income effects 
D)  Ability to pay principle 
E)  None of these 
A)  Pay as you go 
B)  Economy 
C)  Income effects 
D)  Ability to pay principle 
E)  None of these

Question 3

Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue?

Accepted Answer

A)  Only issue treasury bonds 
B)  Only cut funding to various federal projects 
C)  Only increase federal spending 
D)  Issue treasury bonds and cut funding to various federal projects but not increase federal spending 
E)  None of these 
A)  Only issue treasury bonds 
B)  Only cut funding to various federal projects 
C)  Only increase federal spending 
D)  Issue treasury bonds and cut funding to various federal projects but not increase federal spending 
E)  None of these

Question 4

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 9% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 28%. What is Curtis's after-tax rate of return on the city of Athens bond?

Accepted Answer

A)  1.96% 
B)  2.52% 
C)  7.00% 
D)  9.00% 
E)  None of these 
A)  1.96% 
B)  2.52% 
C)  7.00% 
D)  9.00% 
E)  None of these

Question 5

A sales tax is a common example of a progressive tax rate structure.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true?

Accepted Answer

A)  A regressive tax rate structure imposes an increasing marginal tax rate as the tax base increases 
B)  Regressive tax structures are the most common tax rate structure 
C)  An example of a regressive tax is an excise tax 
D)  In terms of effective tax rates, a sales tax can be viewed as a regressive tax 
E)  None of these 
A)  A regressive tax rate structure imposes an increasing marginal tax rate as the tax base increases 
B)  Regressive tax structures are the most common tax rate structure 
C)  An example of a regressive tax is an excise tax 
D)  In terms of effective tax rates, a sales tax can be viewed as a regressive tax 
E)  None of these

Question 7

Nelson has the choice between investing in a city of Fruithurst bond at 4% or a J.B. Ribs, Inc. bond at 6.5%. Assuming that both bonds have the same non-tax characteristics and that Nelson has a 40% marginal tax rate, in which bond should he invest? What interest rate offered by J.B. Ribs, Inc. would make Nelson indifferent between investing in the two bonds?

Accepted Answer

Nelson's after tax rate of return on the

Question 8

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 9% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 28%. How much implicit tax would Curtis pay on the city of Athens bond?

Accepted Answer

A)  $17,500 
B)  $1,400 
C)  $1,300 
D)  $5,000 
E)  None of these 
A)  $17,500 
B)  $1,400 
C)  $1,300 
D)  $5,000 
E)  None of these

Question 9

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 9% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 28%. How much explicit tax would Curtis incur on interest earned on the Initech, Inc. bond?

Accepted Answer

A)  $16,200 
B)  $6,300 
C)  $4,900 
D)  $12,600 
E)  None of these 
A)  $16,200 
B)  $6,300 
C)  $4,900 
D)  $12,600 
E)  None of these

Question 10

Leonardo 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. If Leonardo and his wife file married filing jointly in 2016, what would be their average tax rate (rounded)?

Accepted Answer

A)  15.00% 
B)  25.00% 
C)  18.49% 
D)  23.54% 
E)  None of these 
A)  15.00% 
B)  25.00% 
C)  18.49% 
D)  23.54% 
E)  None of these

Question 11

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

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 2016, how much federal tax will he owe?

Accepted Answer

A)  $15,000.00 
B)  $12,021.25 
C)  $10,771.25 
D)  $8,072.50 
E)  None of these 
A)  $15,000.00 
B)  $12,021.25 
C)  $10,771.25 
D)  $8,072.50 
E)  None of these

Question 14

Estimated tax payments are one way the federal income tax system addresses the "certainty" criterion in evaluating tax systems.

Accepted Answer

A) True 
 B)False

Question 15

Relative to explicit taxes, implicit taxes are much easier to estimate.

Accepted Answer

A) True 
 B)False

Question 16

Ricky and Lucy are debating several types of taxes. Their debate has focused on the different types of tax rate structures and whether they are "fair." Please define each tax rate structure, provide examples of each structure, and discuss how each structure may be viewed with respect to vertical equity.

Accepted Answer

A proportional (flat) tax rate structure

Question 17

In terms of effective tax rates, the sales tax can be viewed as a regressive tax.

Accepted Answer

A) True 
 B)False

Question 18

Curtis invests $250,000 in a city of Athens bond that pays 7% interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Inc. that pays 9% interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 28%. If Curtis invested in the Initech, Inc. bonds, what would be his after-tax rate of return from this investment?

Accepted Answer

A)  5.04% 
B)  7.00% 
C)  6.48% 
D)  2.52% 
E)  None of these 
A)  5.04% 
B)  7.00% 
C)  6.48% 
D)  2.52% 
E)  None of these

Question 19

Taxes influence many types of business decisions but generally do not influence personal decisions.

Accepted Answer

A) True 
 B)False

Question 20

The difficulty in calculating a tax is typically in the determination of:

Accepted Answer

A)  The correct tax rate 
B)  Where to file the tax return 
C)  The tax base 
D)  The due date for the return 
E)  None of these 
A)  The correct tax rate 
B)  Where to file the tax return 
C)  The tax base 
D)  The due date for the return 
E)  None of these

The substitution effect:

Which of the following principles encourages a vertically equitable tax system?

Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue?

A sales tax is a common example of a progressive tax rate structure.

Which of the following is true?

Leonardo 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. If Leonardo and his wife file married filing jointly in 2016, what would be their average tax rate (rounded)?

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

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

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 2016, how much federal tax will he owe?

Estimated tax payments are one way the federal income tax system addresses the "certainty" criterion in evaluating tax systems.

Relative to explicit taxes, implicit taxes are much easier to estimate.

In terms of effective tax rates, the sales tax can be viewed as a regressive tax.

Taxes influence many types of business decisions but generally do not influence personal decisions.

The difficulty in calculating a tax is typically in the determination of:

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From 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

Filters

Exam 1: An Introduction to Tax

The substitution effect:

Which of the following principles encourages a vertically equitable tax system?

Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue?

A sales tax is a common example of a progressive tax rate structure.

Which of the following is true?

Leonardo 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. If Leonardo and his wife file married filing jointly in 2016, what would be their average tax rate (rounded)?

The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income.

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

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 2016, how much federal tax will he owe?

Estimated tax payments are one way the federal income tax system addresses the "certainty" criterion in evaluating tax systems.

Relative to explicit taxes, implicit taxes are much easier to estimate.

In terms of effective tax rates, the sales tax can be viewed as a regressive tax.

Taxes influence many types of business decisions but generally do not influence personal decisions.

The difficulty in calculating a tax is typically in the determination of:

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual for Agi Deductions

Individual From 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

Filters