Deck 1: Federal Income Taxation - an Overview

Question 1

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Subtractions from gross income specifically allowed by the tax law.

Answer 1

B

Question 2

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Based on the value of the property being taxed.

Answer 2

A

Question 3

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
A tax rate that increases as the tax base increases.

Answer 3

E

Question 4

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
A tax rate that remains the same at all levels of the tax base.

Question 5

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Used by persons who do not itemize deductions on their return.

Question 6

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Based on a quantity of a product sold.

Question 7

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
The excess of an asset's tax basis over its selling price.

Question 8

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Current period expenditure incurred in order to earn income.

Question 9

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Land and any structures permanently attached to the land.

Question 10

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
The tax rate obtained by dividing total tax liability by taxable income.

Question 11

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
Tax planning using legal methods to minimize the tax liability.

Question 12

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
The result when two similarly situated taxpayers are taxed the same.

Question 13

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
The tax rate obtained by dividing total tax liability by economic income.

Question 14

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
A tax rate that decreases as the tax base increases.

Question 15

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
The result when two differently situated taxpayers are taxed differently but fairly.

Question 16

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
Fraudulent methods are used to reduce the actual tax liability.

Question 17

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Any asset that is not real estate.

Question 18

Match each term with the correct statement below.
a.Average tax rate
b.Effective tax rate
c.Horizontal equity
d.Marginal tax rate
e.Progressive rate structure
f.Proportional rate structure
g.Regressive rate structure
h.Tax avoidance
i.Tax evasion
j.Vertical equity
The tax rate that will apply to the next dollar of taxable income.

Question 19

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
The value or amount that is subject to taxation.

Question 20

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
The excess of the selling price of an asset over its tax basis.

Question 21

Gifts to qualified charitable organizations may be deducted as a contribution,but not to exceed 50% of an individual taxpayer's adjusted gross income.

Question 22

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
The payment of tax throughout the year as income is earned.

Question 23

Self-employed people are required to make quarterly payments of their estimated tax liability.

Question 24

Horizontal equity exists when two similarly situated taxpayers are taxed the same.

Question 25

The statute of limitations is three years,six years if the taxpayer omits gross income in excess of 25%,and there is no statute of limitations if the taxpayer willfully defrauds the government.

Question 26

An annual loss results from an excess of allowable deductions for a tax year over the reported income.

Question 27

Tax avoidance occurs when a taxpayer uses fraudulent methods or deceptive behavior to hide actual tax liability.

Question 28

A regressive tax rate structure is defined as a tax in which the average tax rate decreases as the tax base increases.

Question 29

The marginal tax rate is the rate of tax that will be paid on the next dollar of income or the rate of tax that will be saved by the next dollar of deduction.

Question 30

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
The period of time during which a taxpayer and/or the IRS can correct a taxpayer's taxable income.

Question 31

Employers are required to pay a Federal Unemployment Tax of 6.2% of the first $10,000 in wages to each employee less a credit of up to 5.4% of state unemployment taxes paid.

Question 32

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Increases in wealth and recoveries of capital that Congress has decided should not be subject to income tax.

Question 33

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
Direct reduction in the income tax liability often created by Congress to further a public purpose.

Question 34

Adam Smith identified efficient,certainty,convenience,and economy as the four basic requirements for a good tax system.

Question 35

A deferral is like an exclusion in that it does not have a current tax effect,but it differs in that an exclusion is never subject to taxation,whereas a deferral will be subject to tax at some point of time in the future.

Question 36

All tax practitioners are governed by the AICPA's Code of Professional Conduct.

Question 37

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
A taxpayer is responsible for determining his/her tax liability and timely paying the tax due.

Question 38

Match each term with the correct statement below.
a.Ad valorem tax
b.Deduction
c.Excise tax
d.Exclusion
e.Expense
f.Gain
g.Loss
h.Ordinary income
i.Pay-as-you-go concept
j.Personal property
k.Real property
l.Self-assessment
m.Standard deduction
n.Statute of limitations
o.Tax base
p.Tax credit
The common,customary,recurring type of income earned by taxpayers.

Question 39

A tax is an enforced contribution used to finance the functions of government.

Question 40

Congress is required to insure that the tax law has the following characteristics: equality,certainty,convenience,and economy.

Question 41

Which of the following are included among Adam Smith's criteria for evaluating a tax?
I)Convenience.
II)Fairness.
III)Neutrality.
IV)Economy.

A)Statements I and II are correct.
B)Statements I, II, and III are correct.
C)Statements I and IV are correct.
D)Statements II and III are correct.
E)Statements I, II, III, and IV are correct.

Question 42

Which of Adam Smith's requirements for a good tax system best supports the argument that the federal income tax rate structure should be progressive?

A)Certainty.
B)Convenience.
C)Equality.
D)Neutrality.
E)Sufficiency.

Question 43

Based on the definition given in Chapter 1 of the text,which of the following is a tax?
I)A registration fee paid to the state to get a car license plate.
II)2% special sales tax for funding public education.
III)A special property tax assessment for installing sidewalks in the taxpayer's neighborhood.
IV)An income tax imposed by Chicago on persons living or working within the city limits.

A)Only statement I is correct.
B)Only statement III is correct.
C)Only statement IV is correct.
D)Statements I and IV are correct.
E)Statements II and IV are correct.

Question 44

Jessica is single and has a 2013 taxable income of $199,800.She also received $15,000 of tax-exempt income.Jessica's marginal tax rate is:

A)22.8%
B)23.5%
C)25.0%
D)28.0%
E)33.0%

Question 45

Vertical equity
I)means that those taxpayers who have the greatest ability to pay the tax should pay the greatest proportion of the tax.
II)means that two similarly situated taxpayers are taxed the same.
III)is reflected in the progressive nature of the federal income tax system.
IV)exists when Avis,a single individual with 4 dependent children,and Art,a single individual with no dependents,both pay $2,400 income tax on equal $26,000 annual salaries.

A)Statements III and IV are correct.
B)Statements II and III are correct.
C)Statements I and III are correct.
D)Only statement IV is correct.
E)Statements I, II, III, and IV are correct.

Question 46

A CPA may prepare tax returns using estimates provided by the taxpayer if it is impracticable to obtain exact data and the estimates are reasonable.

Question 47

Maria is single and has a 2013 taxable income of $199,800 She also received $15,000 of tax-exempt income.Maria's effective tax rate is:

A)22.8%
B)23.3%
C)25.3%
D)28.0%
E)33.0%

Question 48

Which of the following statement is/are included in Adam Smith's four requirements for a good tax system?
I)Changes in the tax law should be made as needed to raise revenue and for proper administration.
II)A tax should be imposed in proportion to a taxpayer's ability to pay.
III)A taxpayer should be required to pay a tax when it is most likely to be convenient for the taxpayer to make the payment.
IV)The government must collect taxes equal to it's expenses.

A)Statements I and II are correct.
B)Statements I and IV are correct.
C)Statements II and III are correct.
D)Statements II and IV are correct.
E)Statements III and IV are correct.

Question 49

Which of the following payments would not be considered a tax?

A)An assessment based on the selling price of the vehicle.
B)A local assessment for new sewers based on the amount of water used.
C)A local assessment for schools based on the value of the taxpayer's property.
D)A surcharge based upon the amount of income tax already calculated.

Question 50

Andrea is single and has a 2013 taxable income of $199,800 She also received $15,000 of tax-exempt income.Andrea's average tax rate is:

A)22.8%
B)23.5%
C)25.1%
D)28.5%
E)33.0%

Question 51

Which of the following payments is a tax?
I)Artis paid the IRS a penalty of $475 (above his $11,184 income tax balance due)because he had significantly underpaid his estimated income tax.
II)Lindsey paid $135 to the State of Indiana to renew her CPA license.
III)Carrie paid a $3.50 toll to cross the Mississippi River.
IV)Darnell paid $950 to the County Treasurer's Office for an assessment on his business equipment.

A)Only statement IV is correct.
B)Only statement III is correct.
C)Statements II and IV are correct.
D)Statements I, II, and III are correct.
E)Statements I, II, III, and IV are correct.

Question 52

Adam Smith's concept of vertical equity is found in a tax rate structure that is

A)Regressive.
B)Proportional.
C)Horizontal.
D)Progressive.
E)Economical.

Question 53

Pay-as-you-go withholding is consistent with Adam Smith's criteria of

A)Certainty.
B)Convenience.
C)Economy.
D)Fairness.
E)Transparency.

Question 54

Bob and Linda are married and have a 2013 taxable income of $280,000.They also received $20,000 of tax-exempt income.Their marginal tax rate is:

A)23.1%
B)24.8%
C)28.0%
D)33.0%
E)35.0%

Question 55

If a taxpayer has a choice of receiving income in the current year versus the following year,which of the following tax rates is important in determining the year in which he should include the income?

A)Average.
B)Effective.
C)Composite.
D)Marginal.

Question 56

According to the IRS definition,which of the following is not a characteristic of a tax?

A)The payment to the governmental authority is required by law.
B)The payment relates to the receipt of a specific benefit.
C)The payment is required pursuant to the legislative power to tax.
D)The purpose of requiring the payment is to provide revenue to be used for the public or governmental purposes.

Question 57

Which of the following payments meets the IRS definition of a tax?

A)A fee paid on the value of property transferred from one individual to another by gift.
B)A one-time additional property tax assessment to add a sidewalk to the neighborhood.
C)A fee paid on the purchase of aerosol producing products to fund ozone research.
D)A fee for a sticker purchased from a city that must be attached to garbage bags before the city garbage trucks will pick up the bags.
E)All of the above meet the definition of a tax.

Question 58

When planning for an investment that will extend over several years,the ability to predict how the results of the investment will be taxed is important.This statement is an example of

A)Certainty.
B)Transparency
C)Equality.
D)Neutrality.
E)Fairness.

Question 59

Horizontal equity
I)means that those taxpayers who have the greatest ability to pay the tax should pay the greatest proportion of the tax.
II)means that two similarly situated taxpayers are taxed the same.
III)is reflected in the progressive nature of the federal income tax system.
IV)exists when Avis,a single individual with 4 dependent children,and Art,a single individual with no dependents,both pay $2,400 income tax on equal $26,000 annual salaries.

A)Statements III and IV are correct.
B)Statements II and III are correct.
C)Statements I and III are correct.
D)Only statement IV is correct.
E)Statements I, II, III, and IV are correct.

Question 60

Which of the following payments meets the IRS definition of a tax?

A)Sewer fee charged added to a city trash collection bill.
B)A special assessment paid to the county to pave a street.
C)A levy on the value of a deceased taxpayer's estate.
D)Payment of $300 to register an automobile. The $300 consists of a $50 registration fee and $250 based on the weight of the auto.

Question 61

Katie pays $10,000 in tax-deductible property taxes.Katie's marginal tax rate is 25%,average tax rate is 24%,and effective tax rate is 20%.Katie's tax savings from paying the property tax is:

A)$ 1,600
B)$ 2,000
C)$ 2,400
D)$ 2,500
E)$10,000

Question 62

A state sales tax levied on all goods and services sold is an example of a

A)progressive tax.
B)regressive tax.
C)proportional tax.
D)value added tax.

Question 63

Shara's 2013 taxable income is $42,000 before considering charitable contributions.Shara is a single individual.She makes a donation of $5,000 to the American Heart Association in December 2013.By how much did Shara's marginal tax rate decline simply because of the donation?

A)0%
B)7%
C)3%
D)5%
E)10%

Question 64

A tax provision has been discussed that would add an additional marginal tax rate of 39% to be applied to an individual's taxable income in excess of $800,000.If this provision were to become law,what overall distributional impact would it have on our current income tax system?

A)Proportional.
B)Regressive.
C)Progressive.
D)Disproportional.
E)None of the above.

Question 65

Jim and Anna are married and have a 2013 taxable income of $280,000.They also received $20,000 of tax-exempt income.Their effective tax rate is:

A)22.7%
B)22.9%
C)24.8%
D)33.0%
E)35.0%

Question 66

Terry is a worker in the country Pretoria.His salary is $46,000 and his taxable income is $52,000.Pretoria imposes a Worker Tax as follows:
Employers withhold a tax of 20% of all wages and salaries.If taxable income as reported on the employee's income tax return is greater than $50,000,an additional 10% tax is withheld on all income.Terry's marginal tax rate is:

A)0%
B)10%
C)20%
D)30%

Question 67

Frank and Fran are married and have a 2013 taxable income of $280,000.They also received $20,000 of tax-exempt income.Their average tax rate is:

A)23.1%
B)24.5%
C)25.3%
D)33.0%
E)35.0%

Question 68

Katarina,a single taxpayer,has total income from all sources of $100,000 for 2013.Her taxable income after taking into consideration $25,000 in deductions and $10,000 in exclusions is $65,000.Katarina's tax liability is $12,179.What are Katarina's marginal,average,and effective tax rates?

A)28% marginal; 18.7% average; 18.7% effective.
B)25% marginal; 16.2% average; 16.2% effective.
C)25% marginal; 16.2% average; 18.7% effective.
D)25% marginal; 18.7% average; 16.2% effective.
E)28% marginal; 16.2% average; 18.7% effective.

Question 69

Taxpayer A pays tax of $3,300 on taxable income of $10,000 while taxpayer B pays tax of $6,600 on $20,000.The tax is a

A)proportional tax.
B)regressive tax.
C)progressive tax.
D)horizontal tax.

Question 70

Jered and Samantha are married.Their 2013 taxable income is $90,000 before considering their mortgage interest deduction.If the mortgage interest totals $10,000 for 2013,what are the tax savings attributable to their interest deduction?

A)$ 1,500
B)$ 2,500
C)$ 2,800
D)$ 3,300
E)$10,000

Question 71

Employment taxes are

A)revenue neutral.
B)regressive .
C)value-added.
D)progressive.
E)proportional.

Question 72

The mythical country of Januvia imposes a tax based on the number of titanium coins each taxpayer owns at the end of each year per the following schedule:


$\begin{array}{cc}\hline \text { Number of titanium coins } & \text { Tax } \\\hline 0 -200 & \$ 500+\$ 5 \text { per titanium coin } \\ 201-500 & \$ 1,000+\$ 6 \text { per titanium coin } \\ >500 & \$ 4,000+\$ 7 \text { per titanium coin }\\\hline \end{array}$
Marvin,a resident of Januvia,owns 300 titanium coins at the end of the current year.
I.Marvin's titanium coins tax is $2,800.
II.Marvin's marginal tax rate is $6.
III.Marvin's average tax rate is $9.33.
IV.Marvin's average tax rate is $6.

A)Statements II and III are correct.
B)Statements I, II, and IV are correct.
C)Statements II and IV are correct.
D)Statements I, II and III are correct.
E)Only statement II is correct.

Question 73

Lee's 2013 taxable income is $88,000 before considering charitable contributions.Lee is a single individual.She makes a donation of $10,000 to the American Heart Association in December 2013.By how much did Lee's marginal tax rate decline simply because of the donation?

A)0%
B)10%
C)3%
D)5%
E)8%

Question 74

The Federal income tax is a

A)revenue neutral tax.
B)regressive tax.
C)value-added tax.
D)progressive tax.
E)form of sales tax.

Question 75

Indicate which of the following statements concerning the following tax rate structures is/are correct.
$\begin{array}{rr}& \text {When Income } & \text { Total Tax } \\& \underline{\text { Equals }}& \underline{\text { Equals }}\\ \text { Structure \#1 } &10,000 & 750 \\&100,000 & 6,000 \\\\ \text { Structure \#2 } &15,000 & 900 \\&75,000 & 4,000 \\\\ \text { Structure \#3 } &13,000 & 1,200 \\&86,000 &9,600\end{array}$
I.Tax Structure #1 is regressive.
II.Tax Structure #1 is proportional
III.Tax Structure #2 is progressive.
IV.Tax Structure #3 is progressive

A)Only statement I is correct.
B)Only statement III is correct.
C)Statements I and IV are correct.
D)Statements II and IV are correct.
E)Statements I, II, and IV are correct.

Question 76

Betty is a single individual.In 2013,she receives $5,000 of tax-exempt income in addition to her salary and other investment income.Betty's 2013 tax return showed the following information:
$\begin{array}{lr} \text { Gross income } &\$\quad 90,000 \\ \text { Deductions for adjusted gross income } &\underline {(4,000)} \\ \text { Adjusted gross income } &\$ \quad 86,000 \\ \text { Itemized deductions } &(14,600) \\ \text {Personal exemption } &\underline {(3,900) }\\ \text { Taxable income } &\underline { \$ \quad 67,500} \\\\ \text { Income tax } & \$ \quad12,804 \\ \text { Less: Income tax withheld from wages } &\underline {(12.800)} \\ \text {Balance of tax due } & \$ \quad 4\end{array}$
Which of the following statements concerning Betty's tax rates is (are)correct?
I.Betty's average tax rate is 19.0%.
II.Betty's average tax rate is 17.7%.
III.Betty's effective tax rate is 19.0%.
IV.Betty's effective tax rate is 17.7%.

A)Statements I and III are correct.
B)Statements I and IV are correct.
C)Statements II and III are correct.
D)Statements II and IV are correct.

Question 77

Sally is a single individual.In 2013,she receives $10,000 of tax-exempt income in addition to her salary and other investment income of $100,000.Sally's 2013 tax return showed the following information:

Question 78

Alan is a single taxpayer with a gross income of $88,000,a taxable income of $66,000,and an income tax liability of $12,429.Josh also has $8,000 of tax-exempt interest income.What are Alan's marginal,average,and effective tax rates?

A)25% marginal; 16.8% average; 18.8% effective.
B)28% marginal; 15.9% average; 21.5% effective.
C)28% marginal; 16.8% average; 21.5% effective.
D)25% marginal; 18.8% average; 16.8% effective.

Question 79

Jaun plans to give $5,000 to the American Diabetes Association.Jaun's marginal tax rate is 28%.His average tax rate is 25%.Jaun's after-tax cost of the contribution is

A)$1,250
B)$1,400
C)$3,600
D)$3,750
E)$5,000

Question 80

Indicate which of the following statements concerning the following tax rate structures is/are correct.
$\begin{array}{rr}& \text {When Income } & \text { Total Tax } \\& \underline{\text { Equals }}& \underline{\text { Equals }}\\ \text { Structure \#1 } &10,000 & 600 \\&100,000 & 5,000 \\\\ \text { Structure \#2 } &15,000 & 900 \\&75,000 & 4,500 \\\\ \text { Structure \#3 } &13,000 & 975 \\&86,000 & 6,600\end{array}$
I.Tax Structure #1 is proportional.
II.Tax Structure #1 is regressive
III.Tax Structure #2 is progressive.
IV.Tax Structure #3 is progressive

A)Only statement I is correct.
B)Only statement III is correct.
C)Statements I and II are correct.
D)Statements II and IV are correct.
E)Statements I, II, and IV are correct.