Question 1

Joe is in the 28 percent marginal tax bracket.He has $50,000 to invest.He can invest in taxable bonds paying 5 percent interest or tax-exempt bonds paying 3.75 percent interest.Which bonds should he invest in?

Accepted Answer

The answer of Joe is in the 28 percent marginal...

Question 2

What is a corporation's annual deduction for capital losses?

Accepted Answer

A) $3,000 
B) An amount equal to capital gains only 
C) An amount equal to capital gains plus $3,000 
D) Corporations cannot deduct capital losses

Question 3

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

Accepted Answer

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

Question 4

What is the purpose of the alternative minimum tax?

Accepted Answer

The answer of What is the purpose of the alternative...

Question 5

Ethan received $120,000 in salary in 2015.What is his FICA tax if the Medicare rate is 1.45%,the Social Security rate is 6.2% on the 2015 maximum of $118,500,and the FUTA rate is 6% on a $7,000 maximum?

Accepted Answer

A) $9,065 
B) $9,087 
C) $9,485 
D) $9,507

Question 6

Which of these entities is taxed directly on its income?

Accepted Answer

A) Limited Liability Company 
B) C Corporation 
C) Partnership 
D) Sole Proprietorship

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 basis at the end of the second year if they organize the business as a partnership?

Accepted Answer

A) $0 
B) $11,700 
C) $27,950 
D) $28,600 
E) $33,800

Question 8

Which of the following statements is false?

Accepted Answer

A) Use taxes are assessed on out-of-state purchases used in the purchaser's state. 
B) The estate tax is based on the fair market value of property transferred at the owner's death. 
C) Tariffs are taxes levied on good and materials brought into a country. 
D) Gift taxes are imposed on the recipient of the gift.

Question 9

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

Question 10

Sara is single and has no dependents.What is the total amount of her standard deduction and personal exemption for 2015?

Accepted Answer

A) 0 
B) $4,000 
C) $6,300 
D) $10,300

Question 11

Briefly compare a sole proprietorship to a corporation as a business entity.

Accepted Answer

The answer of Briefly compare a sole proprietorship to a...

Question 12

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

Question 13

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?

Accepted Answer

A) $44,000 
B) $29,000 
C) $26,000 
D) $44,00

Exam 1: Introduction to Taxation