Question 1

Which of the following is a type of wealth tax?
A)A tax on a person's salary
B)A tax on stocks owned by the taxpayer
C)A tax on purchases made at a department store
D)A tax on property given to a grandchild

Accepted Answer

A tax on stocks owned by the taxpayer is a type of wealth tax because it targets the taxpayer's net worth as opposed to targeting income or consumption. The other options do not target the taxpayer's wealth directly.

Question 2

Which of the following types of taxes is not levied by the U.S.government?
A)Sales tax
B)Income tax
C)Gift tax
D)Estate tax

Accepted Answer

Although some states and localities impose a sales tax, it is not levied by the federal government. The other three types of taxes listed are all federal taxes.

Question 3

Karen,single with no dependents,wants to set up a business.She will use either a sole proprietorship or incorporate as a regular corporation.She expects the business to earn $45,000 after all expenses and payments to Karen except for federal taxes.Karen will take $25,000 from the business for living expenses (as a distribution from a sole proprietorship or a salary from a corporation).Considering only income taxes for 2015,should she establish the business as a C corporation or as a sole proprietorship?

Accepted Answer

The answer of Karen,single with no dependents,wants to set up...

Question 4

Charlotte is a head of household with taxable income of $40,000.What is her marginal tax rate?
A)10%
B)15%
C)25%
D)28%

Accepted Answer

Reference table(s)required for solution (Individual income tax tables).

Question 5

Which of the following statements is false?
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.

Accepted Answer

Gift taxes are imposed on the giver of the gift, not the recipient.

Question 6

When appreciated property is transferred,the gift tax is based on
A)replacement cost of the property
B)fair market value of the property on the date of the gift
C)the donor's original cost of the property
D)the donor's original cost increased by half of the appreciation

Accepted Answer

The gift tax is based on the fair market value of the property on the date of the gift, not the replacement cost or the donor's original cost. Appreciation is taken into account in determining the fair market value. Therefore, option B is correct. Option D comes close to the correct answer, but it incorrectly assumes that the donor's original cost is the basis for determining the gift tax.

Question 7

Which type of tax is a real property tax?
A)Income tax
B)Consumption tax
C)Wealth tax
D)Use tax

Accepted Answer

Real property tax is a type of wealth tax, which is based on the assessed value of the property owned by an individual or corporation.

Question 8

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?
A)A flat tax system
B)A proportional system
C)A regressive system
D)A progressive system

Accepted Answer

$2,000/$25,000 = .08; $4,000/$60,000 = .0667

Question 9

Which of the following statements describes the correct relationship between marginal and average tax rates in a progressive tax system?
A)The marginal tax rate is higher than the average tax rate.
B)The average tax rate is higher than the marginal tax rate.
C)The marginal and average tax rates are the same.
D)The average tax rate will always be half of the marginal tax rate.

Accepted Answer

In a progressive tax system, the marginal tax rate increases as income increases. Therefore, the marginal tax rate paid on the last dollar earned will be higher than the average tax rate for the entire income. This relationship holds true as long as the tax system continues to be progressive.

Question 10

Darden Corporation has taxable income of $200,000.If it distributes 25 percent of its after-tax income to its sole shareholder who is in the 25 percent marginal tax bracket,what is the total tax burden on this $200,000 of income?

Accepted Answer

The answer of Darden Corporation has taxable income of $200,000.If...

Question 11

Which of the following types of taxes is a consumption tax?
A)Estate tax
B)Income tax
C)Gift tax
D)Use tax

Accepted Answer

Use tax is a type of consumption tax that is based on the use of goods or services rather than their purchase.

Question 12

Which of the following types of taxes is levied by almost all states on some or all goods purchased?
A)Sales tax
B)Income tax
C)Property tax
D)Wealth transfer tax

Accepted Answer

Sales tax is a tax levied by almost all states on some or all goods purchased. It is a percentage of the sale price and is added to the cost of the item at the time of purchase. Income tax, property tax, and wealth transfer tax are not levied by all states and do not apply to all goods or individuals.

Question 13

The Mercury Corporation must decide whether to invest in some new machinery for its business.Which tax rate is the most relevant for making this decision?
A)The average tax rate
B)The marginal tax rate
C)The nominal tax rate
D)The effective tax rate

Accepted Answer

The marginal tax rate is the most relevant for making this decision because it represents the additional tax cost that the company would incur from the additional income generated by the new machinery. This cost is important in determining whether the investment would be profitable or not. The other tax rates may be useful for overall tax planning but may not be as relevant for this specific decision.

Question 14

Daniel is a single with taxable income of $40,000.What is his marginal tax rate?
A)10%
B)15%
C)25%
D)28%

Accepted Answer

Reference table(s)required for solution (Individual income tax tables).

Question 15

Abigail is married filing separately with taxable income of $200,000.What is her marginal tax rate?
A)35%
B)33%
C)28%
D)25%

Accepted Answer

Reference table(s)required for solution (Individual income tax tables).

Question 16

Ethan and Mia are married and file a joint tax return.Their taxable income is $200,000.What is their marginal tax rate?
A)35%
B)33%
C)28%
D)25%

Accepted Answer

Reference table(s)required for solution (Individual income tax tables).

Question 17

Sylvester is single and has no dependents.His sole proprietorship averages net income of $125,000 annually.He needs $50,000 per year to live on.If he incorporates his business,would he pay more or less in total income taxes if he takes a salary of $50,000 for his living expenses? (Consider only income taxes.)

Accepted Answer

The answer of Sylvester is single and has no dependents.His...

Question 18

Which of the following types of taxes is not levied by the U.S.government?
A)Excise tax
B)Income tax
C)Value added tax
D)Gift tax

Accepted Answer

The U.S. government does not levy a value-added tax (VAT). The other options listed (excise tax, income tax, and gift tax) are all types of taxes that are levied by the U.S. government.

Question 19

Kate received $130,000 in salary in 2015.What is her FICA tax if the Medicare rate is 1.45%,the Social Security rate is 6.2% on a maximum of $118,500 in 2015?
A)$7,347
B)$9,065
C)$9,232
D)$9,945

Accepted Answer

($130,000 x 1.45%)+ ($118,500 x 6.2%)= $9,232

Question 20

Two married persons with moderately high incomes will pay more taxes than two single persons with the same income.This is commonly called:
A)vertical equity.
B)horizontal equity.
C)a marriage bonus.
D)a marriage penalty.

Accepted Answer

The situation described is commonly referred to as a "marriage penalty," where two married individuals with moderately high incomes will pay more in taxes than if they were single. This is due to the way the tax system is structured, as it takes into account the combined income of married couples rather than treating them as two individual taxpayers.

Quiz 1: Introduction to Taxation

Which of the following is a type of wealth tax?

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

Charlotte is a head of household with taxable income of $40,000.What is her marginal tax rate?

Which of the following statements is false?

When appreciated property is transferred,the gift tax is based on

Which type of tax is a real property tax?

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?

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

Darden Corporation has taxable income of $200,000.If it distributes 25 percent of its after-tax income to its sole shareholder who is in the 25 percent marginal tax bracket,what is the total tax burden on this $200,000 of income?

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

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

The Mercury Corporation must decide whether to invest in some new machinery for its business.Which tax rate is the most relevant for making this decision?

Daniel is a single with taxable income of $40,000.What is his marginal tax rate?

Abigail is married filing separately with taxable income of $200,000.What is her marginal tax rate?

Ethan and Mia are married and file a joint tax return.Their taxable income is $200,000.What is their marginal tax rate?

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

Kate received $130,000 in salary in 2015.What is her FICA tax if the Medicare rate is 1.45%,the Social Security rate is 6.2% on a maximum of $118,500 in 2015?

Two married persons with moderately high incomes will pay more taxes than two single persons with the same income.This is commonly called: