Income Tax Exam 1 - Smartbook Questions

Please check which business decisions would likely be affected by tax laws. (Check all that apply.) 1. what organizational form should a business use? 2. where should a business locate? 3. which employees should be promoted? 4. what business name should be chosen? 5. how should the business compensate employees?

1, 2, 5

True or false: The estate tax is based on the fair market value of the estate upon death. a) true b) false

a

forecasting ignores that taxpayers may respond to a tax change by changing their behavior. a) static b) dynamic

a

True or false: A tax can be defined as a fine or penalty. a) true b)false

b

Which of the following common decisions would most likely NOT be influenced by the United States income tax laws? a) Evaluating alternative job opportunities b) Choosing a public school for your children c) Purchasing a home versus renting c) Determining how to save for retirement

b

forecasting attempts to account for possible taxpayer responses to the tax law change. a) static b) dynamic

b

Which of the following transactions would NOT likely be subject to an excise tax? a) Beer sales b) Gasoline sales c) Cigarette sales d) Car repair services

d

Which of the following statements are correct regarding a graduated tax? (Check all that apply.) 1. With a graduated tax, different portions of a tax base may be taxed at different rates. 2. A graduated tax is a single tax rate applied to an entire tax base. 3. The term graduated tax has the same meaning as flat tax. 4. With a graduated tax, higher income brackets may be assessed a higher tax rate than lower income brackets.

1, 4

Which of the following types of taxes are paid by employers based upon their employees' wages? (Check all that apply.) 1. Medicare tax 2. Unemployment tax 3. Excise tax 4. Sales tax 5. Social Security tax

1,2,5

How do taxpayers benefit from taxes paid to a government? a) hey benefit from government-provided programs and services, such as national defense and public schools. b) Taxpayers do NOT benefit from taxes paid because the money is used to fund the operations of the government, rather than benefit the taxpayers. c) They benefit directly by receiving a specific benefit, such as admittance to a national park when remitting their tax payments.

a

Jose has been offered a new job. The new job will pay more than his current job. Jose is hesitant to take the new job because it will cause his income to exceed the maximum amount in his current tax bracket. He is concerned that the increase in taxes will exceed his increased income from the new job. a) This is not possible. Only the portion of income that exceeds Jose's current bracket will be taxed at the higher rate, not his total taxable income. b) This is possible. Jose's entire taxable income will be taxed at the higher rate which could cause his increased taxes to exceed his increased salary.

a

Judging the sufficiency of a tax system is best described by which of the following? a) Considering whether tax revenues generated are adequate to meet the financial needs of the government b) Considering that the system should minimize compliance and administration costs c) Considering how the tax burden should be distributed across taxpayers d) Considering that taxpayers should be able to determine when, where, and how to calculate and pay the tax e) Suggesting that a tax system should be designed to facilitate the collection of tax revenue without undue hardship

a

Property taxes are ad valorem taxes which means that the tax base is the: a) fair market value of the property. b) quantity of items or property being taxed. c) original purchase price of the property.

a

True or false: Gasoline sales often have a state excise tax built in to the price that is based on the quantity of fuel purchased rather than the price of the fuel purchased. a) True b) False

a

True or false: While taxpayers benefit from government-provided programs and services, such as national defense and law enforcement, taxes paid are NOT directly related to any specific benefit received by the taxpayer. a) true b) false

a

True or false: While taxpayers benefit from government-provided programs and services, such as national defense and law enforcement, taxes paid are NOT directly related to any specific benefit received by the taxpayer. a. true b. false

a

True or false: the main purpose of a tax is to raise revenue to fund the operations of the government a) true b) false

a

Which of the following taxes uses a proportional tax rate structure? a) federal corporate income tax b) social security tax c) gift tax d) federal individual income tax e) federal estate tax

a

Andy has two nephews and three nieces. He wants to give each of them the maximum gift he can disburse without having to file a gift tax return. What is the total aggregate amount that Andy can give his two nephews and three nieces in 2021? Multiple choice question. a. $0 b. $75,000 c. $15,000 d. $11,700,000

b

The city of Tinderville imposed a 1% tourism tax on all restaurant sales. The proceeds from the tax will be used to promote tourism in the city. What is this type of tax called? a) a sin tax b) earmarked tax c) income tax d) shared-responsibility payment

b

True or 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. a) true b) false

b

True or false: The general purpose of a tax is to provide incentives that will stimulate and improve the economy. a) true b) false

b

Which of the following decisions would most likely NOT be influenced by our tax system? a) choosing investments b) choosing a vacation c) estate planning d) saving for a college education

b

Which of the following statements is true regarding taxes? a) taxes may affect many business decisions, but are not important for personal financial decisions b) political candidates often distinguish themselves from their opponents based on their tax policies c) while taxes may affect many fundamental business decisions, they do not have a large impact on political decisions

b

Which of the following taxes is based on the quantity of a product sold, rather than the selling price of the product sold? Multiple choice question. a. Gift tax b. Excise tax c. Transfer tax d. Sales tax

b

Which of the following taxes uses a regressive tax rate structure? a) federal corporate income tax b) social security tax c) gift tax d) federal individual income tax e) federal estate tax

b

A tax imposed on a legal product or service that may be addictive in nature is known as a(n): a) consumption tax b) earmarked tax c) sin tax c) excise tax

c

A tax that is assessed for a specific purpose is a(n) a) sin b) compensation c) earmarked d) fun

c

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? a) average b) marginal c) effective d) proportional

c

The federal individual income tax system in the United States uses a(n) what tax structure? a) graduated b) flat c) progressive

c

The state of Indiana charges a 6% sales tax on most consumer goods. Grant purchased a generator for $400 and paid an additional $24 in sales tax. In this example, what is the "tax base?" a) the percentage of tax being charged(6%) b) the $424 paid by Grant c) the $400 retail price of the generator d) the $24 tax amount

c

Which of the following criteria is NOT a characteristic of a good tax system? a) Sufficiency b) Convenience c) Complexity d) Equity

c

Which of the following federal taxes comprises the highest percentage (almost half) of all tax revenues collected by the U.S. government? a) excise tax b) value added tax c) income tax d) estate tax

c

Which of the following is necessary for a payment to be considered a tax? a) The payment is intended to prevent illegal behavior. b) The payment is imposed by an organization, business, or government agency. c) The payment is required by a governmental body. d) The payment is tied directly to an economic benefit received by the taxpayer.

c

Which of the following statements is INCORRECT regarding sales tax? Multiple choice question. a) The tax base is the sales price of goods or some services that are subject to the tax. b) The retailer is responsible for collecting and remitting the tax. c) Products purchased on the internet are never subject to sales tax. d) Some local governments may impose a sales tax in addition to the state sales tax.

c

Which of the following statements is true regarding sin taxes? a) sin taxes are imposed on illegal activities in order to discourage participation b) sin taxes could be considered fines or penalties c) sin taxes discourage undesirable, yet legal, behaviors such as smoking and drinking

c

In order to raise revenue in the city of Hamlet, the city considered assessing a local tax on food served in restaurants. When forecasting the amount of revenue that would be generated by the new tax, the budget officials suggested that about 10% of current customers would likely quit eating out in Hamlet and drive to the nearest town. This is an example of: a) substitution forecasting b) static forecasting c) zero-based budgeting d) dynamic forecasting

d

Sales tax is an example of a tax that uses what tax rate structure when compared to its tax base? a) average b) marginal c) effective d) proportional

d

Which of the following statements describes implicit taxes? a) The increased after-tax return that a tax-favored asset produces because of its tax-advantaged status b) The increased before-tax return that a tax-favored asset produces because of its tax-advantaged status c) The reduced after-tax return that a tax-favored asset produces because of its tax-advantaged status d) The reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status

d

Which of the following taxes uses a progressive tax rate structure? a) federal corporate income tax b) social security tax c) gift tax d) federal individual income tax e) federal estate tax

d

Which of the following terms describes the level of taxes imposed on the tax base and is usually expressed as a percentage? a) tax bracket b) tax ratio c) tax assessment d) tax rate

d

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? a) sales tax b) income tax c) excise tax d) use tax

d