ACC 403: Chapter 1

Mitch, a single taxpayer, earns $110,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2024, how much federal tax will he owe? (Tax rate schedule)

$19,443

Tori bought a dress costing $80 from Arlene's Dress Shop in a state where there is a sales tax. The tax base is the price of the dress, and the tax rate is 6 percent. What amount of tax did Tori have to pay on the purchase?

$4.80

Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much implicit tax would Curtis pay on the city of Athens bond?

$5,000 ($250,000 * 0.09) - ($250,000 * 0.07)

Marc, a single taxpayer, earns $64,000 in taxable income and $5,400 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for 2024, how much federal tax will he owe? (Use tax rate schedule.)

$9,133

Taxes influence which of the following decisions?

- Business Decisions - Personal Decisions - Political Decisions - Investment Decisions

Which of the following statements are correct regarding the history of the U.S. personal income tax?

- The income tax was once ruled unconstitutional. - The 16th Amendment to the U.S. Constitution gives Congress the power to assess income tax on individuals.

Which of the following taxes are known as transfer taxes?

- gift tax - estate tax

Which of the following taxes are commonly assessed by state and/or local governments?

- sales tax - property tax - income tax

Which of the following types of taxes are paid by employers based upon their employees' wages?

- unemployment tax - medicare tax - social security tax

Which of the following is considered a tax?

1% local surcharge on hotel rooms to pay for city government.

Shelby bought a dress costing $200 from Arlene's Dress Shop in a state where there is a sales tax rate of 5% and the price of the dress is the sales tax base. Shelby had to pay ________ dollars in sales tax

10

Arlene is single and has taxable income of $19,100. Her tax liability is currently $2,060. She has the opportunity to earn an additional $5,000 if she accepts and completes a special project at work. There are no additional expenses to offset the $5,000 income. Consequently, Arlene will have a tax liability of $2,660 if she accepts the special project. Arlene has a marginal tax rate of

12%

Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for year 2024, what is his effective tax rate?

12.70%

Curtis invests $550,000 in a city of Athens bond that pays 7.75 percent interest. Alternatively, Curtis could have invested the $550,000 in a bond recently issued by Initech, Incorporated that pays 10.00 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond?

13,200

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo and his wife file married filing jointly in 2024, what would be their average tax rate?

14.39% $18,706 / $130,000

Mitch, a single taxpayer, earns $110,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2024, what is his effective tax rate

16.20%

Mitch, a single taxpayer, earns $110,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2024, what is his average tax rate

17.68%

Arlene is single and has taxable income of $40,567. Her tax liability is currently $4,636. She has the opportunity to earn an additional $6,000 this year. Her tax liability will grow to $5,771 if she receives the additional income. What is Arlene's marginal tax rate for the additional $6,000?

18.92%

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo instead had $30,000 of additional tax deductions for 2024, his marginal tax rate on the deductions would be:

22%

Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds. If Manny earns an additional $45,000 in taxable income in 2024, what is his marginal tax rate on this income?

22.42%

Mitch, a single taxpayer, earns $110,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. If Mitch earned an additional $80,000 in taxable income, what would his 2024 marginal tax rate be on the $80,000 (rounded)?

24%

Which of the following is considered a tax?

A local surcharge paid on retail sales to fund public schools

Which of the following definitions describes a tax?

A payment required by a government that is unrelated to any specific benefit or service received from the government.

The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this?

A sin tax and an excise tax are correct.

Which of the following decisions would most likely NOT be influenced by our tax system?

Attending a family function

Which of the following decisions would most likely NOT be influenced by the United States income tax laws?

Choosing which public school system your children will attend

Employers often withhold federal income taxes directly from workers' paychecks. This is an example of which principle in practice?

Convenience

Which of the following taxes uses a proportional tax rate structure?

Federal corporate income tax

Which of the following taxes uses a progressive tax rate structure?

Federal individual income tax

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

Issue treasury bonds and cut funding to various federal projects but not increase federal spending

Which of the following statements is correct regarding state income tax?

Many states also impose an income tax on corporations.

Which tax is assessed to provide medical insurance for individuals who are elderly or disabled?

Medicare tax

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 2024?

None

Which of the following statements is INCORRECT regarding sales tax?

Products purchased on the internet are never subject to sales tax.

Which of the following is true regarding real property taxes and personal property taxes?

Real property taxes are generally easier to administer than personal property taxes.

Which of the following represents the largest percentage of average state tax revenue?

Sales tax

Al believes that SUVs have negative social and environmental effects because of their increased carbon monoxide emissions. He proposes eliminating sales taxes on smaller automobiles in favor of higher sales taxes levied on SUVs. Al performs some calculations and comes to the conclusion that based on the current number of SUVs owned in the U.S., exactly the same amount of total sales tax will be collected under his reformed system. Which of the following concepts explains why Al's idea may not work?

Substitution effect

James invests $100,000 in a city of Athens bond that pays 8% interest. Alternatively, James could have invested the $100,000 in a bond recently issued by HighTech, Incorporated that pays 10% interest with similar risk as the city of Athens bond. Assume that James's marginal tax rate is 25%. Which bond should James should choose and why?

The city of Athens bond because it earns a higher after-tax rate of return.

Which of the following is necessary for a payment to be considered a tax?

The payment is required by a governmental body.

Which of the following statements describes implicit taxes?

The reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status

Which of the following statements is INCORRECT regarding use tax?

The retailer is responsible for collecting and remitting the tax to the state where the consumer resides.

Which of the following sentences describes the marginal tax rate?

The tax rate applied to the next additional increment of a taxpayer's taxable income (or deductions)

What is the general purpose of a tax?

To fund the operations of the government

Which of the following would not be a failure of the horizontal equity concept?

Two taxpayers pay different amounts of estate tax because one taxpayer's estate is worth significantly more.

Which of the following is an example of a progressive tax system?

U.S. Federal Income Tax

Congress would like to increase tax revenues by 10 percent. Assume that the average taxpayer in the United States earns $65,000 and pays an average tax rate of 15 percent. a. if the income effect is in effect for all taxpayers, what average tax rate will result in a 10% increase in tax revenues? b. this is an example of what type of forecasting

a. 16.26 b. dynamic

Which of the following principles encourages a vertically equitable tax system?

ability to pay principle

The city of Granby, Colorado, recently enacted a 1.5 percent surcharge on vacation cabin rentals that will fund the city's new elementary school. This surcharge is an example of _____

an earmarked tax

the general purpose of a tax is to raise __________ to fund the operations of the __________

capital; government

The first personal income tax was enacted in 1861 to fund the _______ __________

civil war

Federal estate taxes are also known as __________ taxes

death

Congress recently approved a new, smaller budget for the IRS. What taxation concept evaluates the cost of administering our tax law?

economy

A tax can be defined as a fine or penalty.

false

Horizontal equity means that two taxpayers with different amounts of income should pay different amounts of tax but fairly in relation to their ability to pay.

false

Jerry recently paid $20 in tolls for the Florida turnpike. The $20 payment is considered a tax.

false

The federal estate tax is the MOST significant tax assessed by the U.S. government because it generates more revenue for the government than other types of federal taxes.

false

The federal income tax is an example of a regressive tax system.

false

The gift tax is imposed on the fair market value of items transferred upon death.

false

The reduced pre-tax rate of return on municipal bonds is an example of an explicit tax.

false

A tax is a payment required by a(n) __________ that is unrelated to any specific benefit or service by the taxpayer

government

A(n) ___________ tax is defined as the reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status.

implicit

An example of a tax assessed by a state or local government is _________ tax

income

Most states and the District of Columbia impose __________ _________ on individuals and corporations who earn income within the state

income tax

Which of the following federal taxes comprises the highest percentage (almost half) of all tax revenues collected by the U.S. government?

income tax

Mary Beth is considering accepting some additional contract work. She is trying to evaluate whether the compensation for the job is worth the effort. Which tax rate should she use to calculate her after-tax proceeds of accepting the job?

marginal tax rate

Is it true that a "tax" is essentially the same as a fine or penalty?

no

Leonardo, who is married but files separately, earns $61,000 of taxable income. He also has $15,600 in city of Tulsa bonds. His wife, Theresa, earns $50,600 of taxable income. If Leonardo and his wife are married filing jointly in 2024, what is Leonardo and Theresa's effective tax rate for 2024?

none

Margaret was issued a $150 speeding ticket. This is:

not a tax because it is considered a fine intended to punish illegal behavior.

The federal individual income tax system in the United States uses a(n) ______ tax rate structure

progressive

A sales tax is an example of a tax that uses a(n) _________ tax rate structure when compared to its tax base

proportional

Blade pays tax of $5,000 on taxable income of $50,000 while Caden pays tax of $10,000 on taxable income of $100,000. What type of tax rate structure appears to be in force?

proportional

A(n) ______ tax structure applies the same tax rate to all levels of income, while a(n) ______ tax structure applies higher tax rates as the tax base increases and a(n) ______ tax structure applies lower tax rates as the tax base increases.

proportional, progressive, regressive

The tax base for sales tax is the ____________ of goods and certain services provided

retail sales price

Curtis invests $800,000 in a city of Athens bond that pays 10.00 percent interest. Alternatively, Curtis could have invested the $800,000 in a bond recently issued by Initech, Incorporated that pays 12.50 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. If Curtis invested in the Initech, Incorporated bonds, what would be his after-tax rate of return from this investment?

second highest% 6.27% RIGHT

The _________ ________ tax pays the monthly retirement, survivor, and disability benefits for qualifying individuals, whereas the _________t ax pays for medical insurance for individuals who are elderly or disabled. (Enter one word per blank)

social, security, medicare

A payment required by a government that is unrelated to any specific benefit or service received from the government is a(n)

tax

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

the tax base

Taxes influence personal decisions such as whether to buy or rent a house.

true

The marginal tax rate is often used in tax planning.

true

the purpose of ___________ tax is to provide temporary income for individuals terminated from their jobs without cause.

unemployment

Which type of tax is based on the retail price of goods owned, possessed, or consumed within a state that were NOT purchased within the state?

use tax

Eliminating the current system of withholding income taxes directly from employee paychecks would:

violate the convenience criterion of federal taxation.