Question 1

Which of the following is not allowed as a personal or dependency exemption?

Accepted Answer

The correct answer is B because to claim a child as a dependent, the child must be under 19 (or under 24 if a full-time student). The child must also have made less than $4,300 in taxable income for the year. As the 26-year-old child mentioned in option B makes $27,000, they do not qualify as a dependent.

Question 2

Which of the following is an income tax filing status?

Accepted Answer

"Married filing jointly and surviving spouses" is a recognized income tax filing status. The other options listed are not standard tax filing statuses as defined by the IRS or other tax authorities.

Question 3

The amount of income taxes that you actually pay is based upon your

Accepted Answer

The answer of The amount of income taxes that you...

Question 4

According the Keown book,most taxes-about ________ of individual income taxes-are collected through withholding from wages.

Accepted Answer

According to the Keown book, about 70 percent of individual income taxes are collected through withholding from wages.

Question 5

Wilma Rudolph was given a cost of living raise and a merit raise at work this year.Her federal income taxes will be paid at 25% instead of 15%.Wilma has experienced

Accepted Answer

Wilma has experienced bracket creep, which occurs when inflation pushes an individual's income into a higher tax bracket, resulting in a higher tax rate being applied to their income. In this case, Wilma's cost of living and merit raises pushed her into a higher tax bracket, resulting in a higher tax rate being applied to her income.

Question 6

Five years ago,you purchased 200 shares of Go-Tech stock for $25 per share.If you sold those shares today at the current market price of $90 per share,what would be your capital gain on the sale,ignoring all commissions?

Accepted Answer

The answer of Five years ago,you purchased 200 shares of...

Question 7

You purchased 100 shares of I-Tech stock for $40 per share 3 years ago.If you sold those shares today at the current market price of $150 per share,what would be your capital gain on the sale,ignoring all commissions?

Accepted Answer

The capital gain is calculated by subtracting the purchase price from the selling price, then multiplying by the number of shares. So, ($150 - $40) * 100 = $11,000.

Question 8

Three years ago you purchased a share of CompUTech stock for $32,which you could sell today at the current market price of $252.What would be your capital gain on the sale,ignoring commissions?

Accepted Answer

Capital gain is calculated by subtracting the purchase price from the selling price. In this case, the purchase price was $32 and the selling price is $252. Therefore, the capital gain is $252 - $32 = $220. Choice A is incorrect because $32 is the original cost of the share, not the capital gain. Choices C and D are incorrect because they represent the selling price, not the capital gain.

Question 9

The percentage of the last dollar you earn that goes toward your taxes is your

Accepted Answer

The percentage of the last dollar you earn that goes toward your taxes is your marginal tax rate. This is because your marginal tax rate represents the tax rate you pay on the last dollar of income you earn.

Question 10

Assume that you have a marginal tax rate of 28 percent,a state income tax rate of 4 percent,and have a city income tax rate of 1 percent.The tax for Social Security and Medicare is 7.65 percent.What would be the effective marginal tax rate on your last dollar of earnings?

Accepted Answer

To calculate the effective marginal tax rate, we need to add up all the tax rates that apply to the last dollar of earnings. 
- Marginal tax rate: 28%
- State income tax rate: 4%
- City income tax rate: 1%
- Social Security and Medicare tax rate: 7.65%

Adding these up, we get: 28% + 4% + 1% + 7.65% = 40.65%
Therefore, the effective marginal tax rate is 40.65%. The correct choice is D.

Question 11

Contributing $2,000 into a tax-deferred retirement plan in a 28% tax bracket will save

Accepted Answer

A tax-deferred retirement plan allows contributions to be made with pre-tax dollars, meaning they are not subject to income tax in the year they are made. Since the individual is in the 28% tax bracket, contributing $2,000 will reduce their taxable income by that amount, resulting in a tax savings of $560 (28% of $2,000).

Question 12

According to the Tax Policy Center,approximately ________ of American households did not pay any federal income taxes in the 2013 tax year.

Accepted Answer

According to the Tax Policy Center, approximately 43 percent of American households did not pay any federal income taxes in the 2013 tax year.

Question 13

You and spouse are filing a joint return.Your current deductions have reduced your taxable income to $88,990,bringing you into the 25 percent tax bracket.The first dollars you earned will be taxed at the ________ tax bracket.

Accepted Answer

The answer of You and spouse are filing a joint...

Question 14

Craig Ripley sold his stock in Gandy Corporation for a price less than what he paid for it.Craig will experience

Accepted Answer

Selling stock for a price less than what was paid for it results in a capital loss.

Question 15

You and spouse are filing a joint return.Your current deductions have reduced your taxable income to $88,990,bringing you into the 25 percent tax bracket.The last dollars you earned will be taxed at the ________ tax bracket.

Accepted Answer

Since the couple's taxable income is at $88,990 and they are in the 25 percent tax bracket, their last dollars earned will be taxed at the same 25 percent tax bracket.

Question 16

A tax system in which tax rates increase as income increases is called a(n)________ system.

Accepted Answer

A progressive tax system is designed so that as income increases, the tax rate also increases. This is done in order to ensure that those who make more money pay a larger percentage of their income in taxes than those who make less money. The idea behind a progressive tax system is that it helps to ensure that everyone pays their fair share, while also helping to reduce income inequality.

Question 17

An IRS-allowed reduction in your income for yourself,your spouse,and any dependents that is subtracted before you compute your taxes is called a(n)

Accepted Answer

The term described in the question is "personal exemptions," which is option D. Options A, B, and C are either incorrect or not directly related to the given term.

Question 18

Expenditures that are subtracted in an effort to calculate the lowest possible taxable income are called

Accepted Answer

Deductions are expenses that reduce taxable income to lower the amount of taxes owed. Exemptions are also subtracted from taxable income, but they are a fixed amount per person rather than an expense. Capital expenses and fixed expenses are not necessarily deductible from taxable income.

Question 19

Deductions calculated using the federal tax form "Schedule A" which are totaled and then subtracted from taxable income are called

Accepted Answer

Deductions calculated using the federal tax form "Schedule A" are referred to as itemized deductions.

Question 20

Which of the methods listed below is not used by the IRS as a tax collection mechanism?

Accepted Answer

The IRS does not typically conduct audits in a taxpayer's home or office. They may request documents or hold meetings in these locations, but audits are usually conducted at an IRS office or through mail correspondence.

Quiz 4: Tax Planning and Strategies