Question 1

A progressive tax rate structure is one where the rate of tax increases as the tax base increases.

Accepted Answer

This is the definition of a progressive tax rate structure.

Question 2

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 donee may agree that the donee will pay the gift tax.

Question 3

If a taxpayer's total tax liability is $4,000,taxable income is $20,000,and total economic income is $40,000,then the effective tax rate is 20 percent.

Accepted Answer

False

Question 4

If a taxpayer's total tax liability is $30,000,taxable income is $100,000,and economic income is $120,000,the average tax rate is 30 percent.

Accepted Answer

Average tax rate is calculated by dividing total tax liability by taxable income. In this case, 30,000/100,000 = 0.3 or 30 percent.

Question 5

Regressive tax rates decrease as the tax base increases.

Accepted Answer

The answer of Regressive tax rates decrease as the tax...

Question 6

A proportional tax rate is one where the rate of the tax is the same for all taxpayers,regardless of income levels.

Accepted Answer

A proportional tax rate applies the same tax rate to all taxpayers, regardless of their income levels. This means that everyone pays the same percentage of their income in taxes.

Question 7

The terms "progressive tax" and "flat tax" are synonymous.

Accepted Answer

The terms "progressive tax" and "flat tax" are not synonymous. A progressive tax system is one in which the tax rate increases as the taxable amount increases. A flat tax system, on the other hand, is one in which the same tax rate is applied to all levels of taxable income.

Question 8

For gift tax purposes,a $14,000 annual exclusion per donee is permitted.

Accepted Answer

The IRS allows a $14,000 annual exclusion per donee for gift tax purposes, which means you can give $14,000 to as many people as you like each year without triggering a gift tax.

Question 9

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 10

The marginal tax rate is useful in tax planning because it measures the tax effect of a proposed transaction.

Accepted Answer

The marginal tax rate is the rate at which an additional dollar of income is taxed. It is important in tax planning because it helps to determine the tax effect of a proposed transaction or investment. By understanding the marginal tax rate, individuals and businesses can make more informed decisions about how to structure their finances to minimize their tax liability.

Question 11

When a change in the tax law is deemed necessary by Congress,the entire Internal Revenue Code must be revised.

Accepted Answer

When a change in the tax law is deemed necessary by Congress, they can make amendments or additions to specific sections of the Internal Revenue Code rather than revising the entire code.

Question 12

Gifts between spouses are generally exempt from transfer taxes.

Accepted Answer

The unlimited marital deduction allows spouses to transfer unlimited assets to each other during life or at death without incurring gift or estate tax. There are some exceptions, however, such as if one spouse is not a U.S. citizen or if the gift is in the form of a terminable interest.

Question 13

A taxpayer's average tax rate is the tax rate applied to an incremental amount of taxable income that is added to the tax base.

Accepted Answer

The answer of A taxpayer's average tax rate is the...

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

The Sixteenth Amendment permits the passage of a federal income tax.

Accepted Answer

The Sixteenth Amendment to the US Constitution was ratified in 1913 and grants Congress the power to levy an income tax.

Question 16

The federal income tax is the dominant form of taxation by the federal government.

Accepted Answer

The federal income tax is the largest source of revenue for the federal government, accounting for over 50% of total revenue in recent years. Therefore, it is the dominant form of taxation.

Question 17

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 and estate taxes and is based on all property transfers made during an individual's lifetime and at their death.

Question 18

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 property transferred to the decedent's spouse to be exempt from the estate tax.

Question 19

While federal and state income taxes as well as the federal gift and estate taxes are generally progressive in nature,property taxes are proportional.

Accepted Answer

The answer of While federal and state income taxes as...

Question 20

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, and the value of those gifts may reduce the amount of the taxpayer's estate that is subject to estate tax. However, there are also rules and exemptions that apply to both gift tax and estate tax, so each situation is unique and requires careful planning to minimize tax liability.

Quiz 1: An Introduction to Taxation