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Exam 1: An Introduction to Tax

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Question 1

Multiple Choice

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Which of the following is true regarding tax-advantaged assets?

A) They are typically subject to excise taxes to account for their low explicit taxes
B) A corporate bond is typically considered a tax-advantaged asset
C) They are often subject to implicit taxes
D) A corporate bond is typically considered a tax-advantaged asset and they are often subject to implicit taxes are correct but not they are typically subject to excise taxes to account for their low explicit taxes
E) None of these

F) B) and C)
G) A) and C)

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C

Question 2

Multiple Choice

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If Susie earns $750,000 in taxable income and files as head of household for year 2013,what is Susie's average tax rate (rounded) ?

A) 33.35%
B) 33.97%
C) 35.00%
D) 39.60%
E) None of these

F) C) and E)
G) C) and D)

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Question 3

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Bart is contemplating starting his own business.His new business would operate as a sole proprietorship and would require hiring several employees.Describe the employment-related taxes that Bart should be aware of as he starts his new business as a self-employed business owner.

Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue?

Relative to explicit taxes,implicit taxes are much easier to estimate.

In terms of effective tax rates,the sales tax can be viewed as a regressive tax.

Nelson has the choice between investing in a city of Fruithurst bond at 4% or a J.B.Ribs,Inc.bond at 6.5%.Assuming that both bonds have the same non-tax characteristics and that Nelson has a 40% marginal tax rate,in which bond should he invest? What interest rate offered by J.B.Ribs,Inc.would make Nelson indifferent between investing in the two bonds?

Manny,a single taxpayer,earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds.What is Manny's current marginal tax rate for year 2013?

The tax base for the federal income tax is taxable income.

George recently paid $50 to renew his driver's license.The $50 payment is considered a tax.

Property taxes may be imposed on both real and personal property.

Although the primary purpose of a tax system is to raise revenue,Congress uses the federal tax system for other purposes as well.Describe the other ways in which Congress uses the federal tax system.Be specific.

The difficulty in calculating a tax is typically in the determination of:

Given the following tax structure,what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to effective tax rates? Mort's average tax rate is 20%.

Regressive tax rate structures are typically considered to be vertically equitable.

Implicit taxes are indirect taxes on tax-favored assets.

Earmarked taxes are:

Consider the following tax rate structures.Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not?

Jonah,a single taxpayer,earns $150,000 in taxable income and $10,000 in interest from an investment in city of Denver Bonds.Using the U.S.tax rate schedule for year 2013,how much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate? If Jonah earned an additional $40,000 of taxable income,what is his marginal tax rate on this income? (Round the tax rates to 2 decimal places,e.g. ,.12345 as 12.35%)

A use tax is typically imposed by a state on goods purchased within the state.A use tax is levied on goods owned,possessed,or consumed within a state that were not purchased within the state.