Question 1

Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax of $12,000 on $120,000. The tax is a

Accepted Answer

A proportional tax means that the tax rate is constant regardless of income. Both Arthur and Barbara pay a tax rate of 10% on their respective incomes ($5,000/$50,000 and $12,000/$120,000), indicating a proportional tax system.

Question 2

All states impose a state income tax which is generally based on an individual's federal adjusted gross income (AGI) with minor adjustments.

Accepted Answer

The answer of All states impose a state income tax...

Question 3

For gift tax purposes, a $15,000 annual exclusion per donee is permitted.

Accepted Answer

This is true. The annual exclusion allows an individual to give up to $15,000 per year to each donee without incurring gift tax.

Question 4

Property transferred to the decedent's spouse is exempt from the estate tax because of the estate tax marital deduction provision.

Accepted Answer

The estate tax marital deduction provision allows for unlimited transfers of property between spouses, which is exempt from estate tax.

Question 5

Gifts between spouses are generally exempt from transfer taxes.

Accepted Answer

According to the IRS, gifts between spouses are considered to be marital deductions and are generally exempt from federal gift and estate taxes.

Question 6

Which of the following taxes is progressive?

Accepted Answer

The federal income tax is progressive, meaning that the tax rate increases as the taxable income increases.

Question 7

The unified transfer tax system, comprised of the gift and estate taxes, is based upon the total property transfers an individual makes during lifetime and at death.

Accepted Answer

The unified transfer tax system includes both the gift tax and the estate tax and is based on an individual's property transfers both during their lifetime and at their death.

Question 8

Gifts made during a taxpayer's lifetime may affect the amount of estate tax paid by the taxpayer's estate.

Accepted Answer

Gifts made during a taxpayer's lifetime are subject to gift tax, which is part of the federal estate and gift tax system. The value of the gifts may be included in the taxpayer's taxable estate if they were made within three years of their death, and may affect the amount of estate tax that their estate will pay.

Question 9

The primary liability for payment of the gift tax is imposed upon the donee.

Accepted Answer

The primary liability for payment of the gift tax is imposed upon the donor, not the donee. However, in some cases, the donor and the donee may agree to split the gift tax liability.

Question 10

Larry and Ally are married and file a joint return. They are considering purchasing a personal residence that will generate two deductions: $10,000 in home mortgage interest and $8,000 in real estate taxes. Their marginal tax rate is 24%. What is the total tax savings if Larry and Ally purchase the residence?

Accepted Answer

The answer of Larry and Ally are married and file...

Question 11

Larry and Ally are married and file a joint return. They are considering purchasing a personal residence that will generate two deductions: $10,000 in home mortgage interest and $8,000 in real estate taxes. Their marginal tax rate is 24%. If Larry and Ally purchase the residence, what will be the after- tax cost of the additional $18,000 in expenditures?

Accepted Answer

The answer of Larry and Ally are married and file...

Question 12

Briana, who is single, has taxable income for 2018 of $78,000, resulting in a total tax of $13,100. Her total economic income is $98,000. Briana's average tax rate and effective tax rate are, respectively,

Accepted Answer

The average tax rate is calculated as total tax divided by taxable income ($13,100 / $78,000 = 16.79%). The effective tax rate is calculated as total tax divided by total economic income ($13,100 / $98,000 = 13.37%).

Question 13

Sarah contributes $25,000 to a church. Sarah's marginal tax rate is 35% while her average tax rate is 25%. After considering her tax savings, Sarah's contribution costs

Accepted Answer

The answer of Sarah contributes $25,000 to a church. Sarah's...

Question 14

Property is generally included on an estate tax return at its historical cost basis.

Accepted Answer

Property is generally included on an estate tax return at its fair market value at the time of the decedent's death, not its historical cost basis.

Question 15

Helen, who is single, is considering purchasing a residence that will provide an $18,000 tax deduction for property taxes and mortgage interest. If her marginal tax rate is 24% and her effective tax rate is 20%, what is the amount of Helen's tax savings from purchasing the residence?

Accepted Answer

Helen's tax savings from the deduction is calculated by multiplying the deduction amount by her marginal tax rate: $18,000 * 24% = $4,320.

Question 16

Charlotte pays $8,000 in tax deductible property taxes. Charlotte's marginal tax rate is 24%, effective tax rate is 20% and average rate is 22%. Charlotte's tax savings from paying the property tax is

Accepted Answer

The answer of Charlotte pays $8,000 in tax deductible property...

Question 17

The corporate tax rate is

Accepted Answer

The corporate tax rate is generally considered proportional because it is typically a flat rate applied to corporate profits, meaning all corporations pay the same percentage of their income in taxes regardless of their income level.

Question 18

Which of the following taxes is regressive?

Accepted Answer

The answer of Which of the following taxes is regressive?
...

Question 19

An individual will be subject to gift tax on gifts made to a charity greater than $15,000.

Accepted Answer

An individual is not subject to gift tax on gifts made to a charity, regardless of the amount, as long as the charity is recognized as tax-exempt by the IRS. This is because charitable gifts qualify for a special exclusion from gift tax. The $15,000 gift tax exclusion applies only to gifts made to individuals.

Question 20

Which of the following taxes is proportional?

Accepted Answer

Sales tax is proportional because it is a fixed percentage of the purchase price, regardless of the amount spent.

Quiz 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals