Ch. 4 per fin

Alex Bates goes on Jeopardy and earns $875,000 in winnings. What type of income is this?

Other Income

Many taxpayers with high incomes and high amounts of deductions must pay an additional tax referred to as the ________________ tax.

alternative minimum

Union dues, fees for tax return preparation, and other miscellaneous expenses are

deductible to the extent they exceed two percent of adjusted gross income

Money received by an individual for personal effort is classified as ______________ income.

earned

For which of the following types of credit plans is the interest tax deductible?

home equity loan

Money received in the form of dividends or interest is classified as ____________ income.

investment

The Form 1040 is most helpful to a person who

itemizes deductions

The ______________ property tax is based on the value of land and buildings at some point in time.

real estate

Approximately what percent of tax filers are audited each year?

1%

The principal purpose of taxes is to control economic conditions.

FALSE

Real-estate property taxes are a major source of revenue for local governments.

False

A state may impose a personal property tax.

True

A tax on the value of automobiles, boats, or furniture is referred to as a personal property tax.

True

An estate tax is imposed on the value of an individual's property at the time of his or her death.

True

An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return.

True

Which type of audit is the least complicated for taxpayers?

correspondence audit

What type of tax is imposed on the value of an individual's property at the time of his or her death?

estate

Most people pay federal income tax by:

having amounts withheld from income

Drew Davis earns $4,500 per month from his job at Cisco Systems; $900 is withheld from this amount each month for taxes. What type of tax is this most likely to be?

Normal income tax