ACC 331- Chapter1 LS

A(n) _______tax is an example of a tax assessed by a state or local government.

income, sales, use, excise, or property

implicit taxes

indirect taxes that result from a tax advantage the government grants to certain transactions to satisfy social, economic, or other objectives. They are defined as the reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status.

effective tax rate is always ____ ____ or ____ to the average tax rate

less than or equal to

transfer taxes

levied on the fair-market values of wealth transfers upon death or by gift

Which of the following statements is correct regarding state income tax? Many states also impose an income tax on corporations. The states are not allowed to deviate from the Internal Revenue Code, except for using a much lower tax rate schedule. All states and the District of Columbia impose some type of a state income tax on individuals. States with an income tax system generally do NOT impose a sales and use 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? Gift tax Medicare tax Excise tax Social Security tax

medicare tax

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

progressive

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

retail sales price

Which of the following taxes are commonly assessed by state and/or local governments? (Check all that apply.) Sales tax Income tax Estate tax Property tax Gift tax

sales, income, property

marginal tax rate

tax rate that applies to the next dollar of taxable income

true or false? employees and employers split medicare and social security

true

The purpose of ____tax is to provide temporary income for individuals terminated from their jobs without cause.

unemployment

employers are also required to pay federal and state ____ ____

unemployment taxes

Which of the following statements are correct regarding a flat tax? (Check all that apply.) 5.)With a flat tax, different portions of a tax base may be taxed at different rates. 1.)The term graduated tax has the same meaning as flat tax. 2.)With a flat tax, higher income brackets will be assessed at a higher tax rate than lower income brackets. 3.)A flat tax is a single tax rate applied to an entire tax base. 4.)The term proportional tax has the same meaning as flat tax.

3,4

Which of the following decisions would most likely NOT be influenced by our tax system? -Choosing investments -Estate planning -Saving for a college education -Choosing a vacation destination

Choosing a vacation destination

Is it true that a "tax" is essentially the same as a fine or penalty? No Yes

No

employment taxes consist of the

Old age, Survivors, and Disability insurance tax (aka the social security tax0 and the Medicare tax

Which of the following statements is true regarding taxes? -While taxes may affect many fundamental business decisions, they do NOT have a large impact in political decisions. -Taxes affect many business decisions, but are NOT important in personal financial decisions. -Political candidates often distinguish themselves from their opponents based on their tax policies.

Political candidates often distinguish themselves from their opponents based on their tax policies.

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

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

Which of the following statement is true regarding sin taxes? Sin taxes could be considered fines or penalties rather than taxes. Sin taxes discourage undesirable, yet legal, behaviors such as smoking and drinking. Sin taxes are imposed on illegal activities in order to discourage participation.

Sin taxes discourage undesirable, yet legal, behaviors such as smoking and drinking

income tax rates

-income on individuals (max rate of 37) -corporations (flat rate of 21 %) -estates (max rate of 37) -trusts(max rate of 37)

examples of products that have excise tax

alcohol,diesel fuel,gasoline, tobacco products services include: telephone use, air transportation, and the use of tanning beds

The city of Metropolis sold tax-exempt bonds that pay interest of 6 percent annually. Anderson, Inc. sold taxable bonds comparable to the city bonds that pay 8.5 percent interest annually. What is the implicit tax associated with investing $2,000 in city bonds.

$50 2.5 * 2000

employment and unemployment taxes

-2nd largest group of taxes imposed by the US government

effective tax rate

-a taxpayer's average rate of taxation on each dollar of total income (taxable and nontaxable income) - total tax/total income

income tax

-the most significant tax assessed by the US government -represents approximately 60 percent (combined corporate and individual of all tax revenues collected in the US -levied on individuals. corporations, estates, and trusts

Which of the following statements are correct regarding the history of the U.S. personal income tax? (Check all that apply.) 1.)The 16th Amendment to the U.S. Constitution gives Congress the power to assess income tax on individuals. 2.)The first personal income tax was enacted to fund the Spanish-American War. 3.)The income tax was once ruled unconstitutional. 4.)The first personal income tax contained a very high marginal tax rate.

1,3

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

10

Randall is single and has total income from all sources (taxable and nontaxable) of $83,000. His taxable income is $62,000. Randall's tax liability is $11,239. What is Randall's effective tax rate? 13.54% 25% 18.13%

13.54%

Steven and Sally have income from all sources (taxable and nontaxable) totaling $140,286. Their taxable income is $114,966. Their tax liability is $20,219. Their average tax rate is ___% (rounded to the nearest whole number).

18% 20219/114996

Randall is single and has total income from all sources (taxable and nontaxable) of $83,000. His taxable income is $62,000. Randall's tax liability is $11,239. What is Randall's average tax rate? 25.0% 18.13% 13.54%

18.13 % 11239/62000

Arlene is single and has taxable income of $34,000. 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? 15% 14.99% 25% 18.92%

18.92% (5771-4636)/6000

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

2,4,5

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 2019? $15,000 $75,000 $0 $11,200,000

75000

average tax rate

= total tax / taxable income - a taxpayer's average level of taxation on each dollar of taxable income

personal property

All property not classified as real property ex: cars, boats, planes, business inventory, equip, & furniture

excise taxes

Taxes levied on the retail sale of particular products. They differ from other taxes in that the tax base for an excise tax typically depends on the quantity purchased rather than a monetary amount.

What is the tax base for the gift tax? An amount agreed upon by the donor and the donee The fair market value of the gift on the date the gift is given The original purchase price of the gift paid by the donor An appraisal made by the Internal Revenue Service

The fair market value of the gift on the date the gift is given

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

The payment is required by a governmental body.

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 rate?" The $424 paid by Grant The $24 sales tax amount The $400 retail price of the generator The percentage of tax being charged (6%)

The percentage of tax being charged (6%)

Which of the following statements is INCORRECT regarding use tax? The use tax allows a state to collect tax on items purchased in another state but utilized or consumed within their own state. The retailer is responsible for collecting and remitting the tax to the state where the consumer resides. Many states offer a use tax credit for purchases made in another state where a sales tax was imposed. The tax base is the retail price of the goods purchased in another state.

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 average level of taxation on each dollar of the taxpayer's taxable income The average level of taxation on each dollar of the taxpayer's total income including taxable and nontaxable income The tax rate applied to the next additional increment of a taxpayer's taxable income (or deductions) The marginal tax rate that is constant and applies to each dollar of taxable income generated by the taxpayer

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

excise taxes

Third largest group of taxes imposed by the U.S. government levied on the quantity of products sold

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. 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. 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.

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.

What is the general purpose of a tax? To influence business decisions To punish or prevent illegal behavior To fund the operations of the government To stimulate the economy

To fund the operations of the government

proportional tax rate structure

also known as a flat tax, this tax rate structure imposes a constant tax rate throughout the tax base. As the tax base increases, the taxes paid increase proportionally. marginal tax rate = average tax rate

The tax ____ defines what is actually taxed and is usually expressed in monetary terms.

base

The formula to calculate the amount of tax is the tax ____ multiplied by the tax _____.

base, rate

transfer taxes

based on the fair market value of wealth transfers made upon death or by gift// a taxpayer can transfer up to $15,000 of gifts per donee without being taxed

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

car repair services

marginal tax rate equation

change in tax (New total tax-old total tax) / change in taxable income (New taxable income- old taxable income)

The first personal income tax was enacted in 1861 to fund the __ ___ .

civil war

real property

consists of land, improvements, and permanent structures on the land

Jack has $1,000 to invest. He has a choice between municipal bonds with an interest rate of 4% or corporate bonds with an interest rate of 6%. Jack has a marginal tax rate of 25%. Given this information, Jack should invest in the ____ bonds. The after-tax rate of return on the municipal bonds is ____% and the after tax rate of return on the corporate bonds is ___%. The difference in the rates of return is known as ___taxes.

corporate, 4,4.5,implicit

The ___ tax rate is the best measure of the tax burden because it is the average level of tax on all income from taxable and nontaxable sources. The ___tax rate measures the average level of tax on only taxable income. The __ tax rate indicates the rate of tax on the next additional increment of income.

effective, average, marginal

Which of the following taxes is based on the quantity of a product sold, rather than the selling price of the product sold?

exise tax

True or false: A tax can be defined as a fine or penalty. True False

false

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.

false

Which of the following taxes uses a proportional tax rate structure? -federal estate tax -social security tax -federal corporate income tax -federal individual income tax

federal corporate income tax

Which of the following taxes uses a progressive tax rate structure? Excise tax Federal corporate income tax Sales tax Federal individual income tax Social security tax

federal individual income tax

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

flat

A single tax rate applied to an entire base is known as a(n) __ tax. When the base is divided into a series of monetary amounts, or brackets, and each bracket is taxed at a different rate, this system is known as a(n)__ tax.

flat, graduated

unemployment taxes

fund temporary unemployment benefits for individuals terminated from their jobs without cause

Which of the following taxes are known as transfer taxes? (Check all that apply.) Excise tax Gift tax Income tax Sales tax Estate tax

gift and estate tax

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

government

Since municipal bonds are tax-exempt, they typically earn a lower rate of return than taxable bonds. The lower rate of return relative to taxable bonds is often referred to as a(n)

implicit tax

regressive tax rate

imposes a decreasing marginal tax rate as the tax base increases examples are social security tax and federal and state unemployement taxes

progressive tax rate structure

imposes an increasing marginal tax rate as the tax base increases EX: federal and most state income taxes average tax rate is always less than or equal to marginal

Which of the following federal taxes comprises the highest percentage (almost half) of all tax revenues collected by the U.S. government? Income tax Excise tax Value-added tax Estate tax

income tax

Most states and the District of Columbia impose ___ ___on individuals and corporations who either reside in or earn income within the state. (Enter one word per blank)

income taxes

medicare tax

pays for medical insurance for individuals who are elderly or disabled/ tax base is salary and the rate is 2.9%

social security tax

pays the monthly retirement, survivor, and disability benefits for qualifying individuals// tax base is salary and rate is 12.4%// capped at $132,900 (people who make more than this don't have to pay the tax)

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

proportional

use tax

retail price of goods owned, possessed, or consumed within a state that were not purchased within the state

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

sin tax

ad valorem tax

tax base is the fair market value of the property and both are generally collected annually// real and personal property taxes are examples of this

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

tax rate

The city of Atlantis sold bonds that pay interest of 4 percent annually. Pacific, Inc. sold taxable bonds comparable to the city bonds that pay 7 percent interest annually. Which of the following statements is correct when considering the purchase of a $1,000 bond?

the implicit tax associated with owning the city of Atlantis bond is $30

Which of the following statements regarding the tax base is correct? The tax base is NOT included in the calculation to determine the amount of tax to be paid. The tax base determines the level of taxes imposed. The tax base describes what is actually being taxed. The tax base is usually expressed as a percentage.

the tax base describes what is actually being taxed

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

unemployment, social security, medicare