chapter 1

22. which of the following is an example of a progressive tax? a. federal income tax b. state and local taxes levied on property c. sales tax d. social security tax

a. federal income tax

18. a tax rate that decreases as the tax base decreases is an example of what kind of tax rate structure? a. progressive b. proportional c. regressive d. recessive

a. progressive

10. define and compare average tax rate and marginal tax rate

average tax rate- tax liability/taxable income. the percentage that a taxpayer pays given a certain amount of taxable income marginal tax rate- what you are going to pay on the next dollar of taxable income

24. jennifer and paul, who file a joint return, have taxable income of $82,825 and have tax liability of $9,938.50. their average tax rate is a. 10% b. 12% c. 13% d. 22%

b. 12%

19. jake earned $15,000 and paid $1,500 of income tax; jill earned $40,000 and paid $4,000 of income tax. the tax rate structure they are subject to is a. progressive b. proportional c. regressive d. recessive

b. proportional

68. why might a district court's opinion regarding a tax decision be more likely to be reversed on appeal?

because the jury aren't tax experts and made by jury of peers

17. a tax rate that decreases as the tax base increases is an example of what kind of tax rate structure? a. progressive b. proportional c. regressive d. recessive

c. regressive

20. margaret earned $15,000 and paid $1,500 of income tax; mike earned $50,000 and paid $4,000 of income tax. the tax rate structure they are subject to is a. progressive b. proportional c. regressive d. recessive

c. regressive

23. jennifer and paul, who file a joint return, have taxable income of $82,825 and have tax liability of $9,938.50. their marginal tax rate is a. 10% b. 12% c. 13% d. 22%

d. 22%

21. which of the following is an example of a regressive tax? a. federal income tax b. state and local taxes levied on property. c. sales tax d. social security tax

d. social security tax

t/f- one major disadvantage the taxpayer has when filing a petition with the Tax Court is that the IRS's proposed tax assessment must be paid prior to trial.

false

t/f- state and local taxes levied on either property or sales are examples of progressive taxes.

false

t/f- the marginal tax rate is the proportion of tax paid on the first dollar of taxable income.

false

t/f- the us individual income tax system is an example of a proportional tax rate structure.

false

t/f- there are two types of primary tax authority: statutory and judicial.

false

t/f- typically, federal tax legislation is introduced in the senate finance committee.

false

t/f- with a regressive tax, the tax rate increases as the tax base gets larger.

false

61. differentiate between a general regulation and a legislative regulation. which one is the stronger tax authority?

general- helps interpret the law legislative- takes place of IRC and has full effect of the law. the stronger tax authority

64. what are the advantages of petitioning the Tax Court versus other trial courts?

heard by a tax expert and don't pay taxes first.

65. when would a taxpayer want to sue the government in a district court versus the Tax Court?

if a similar case has gone in favor in district court. more emotional appeal

60. can a taxpayer rely on a temporary regulation as authority on how to treat a certain tax item? if so, how long is a temporary regulation valid?

no, for 3 years after it is issued.

70. what is the difference between a revenue ruling and a revenue procedure? how does the level of authority of a ruling or procedure compare with regulations and statutory authority?

rulings- reacting to a problem procedures- proactive, comes out in advanced before anything happens

49. sheniqua, a single taxpayer, had taxable income of $93,678. her employer withheld $16,509 in federal income tax from her paychecks throughout the year. using the tax tables, would sheniqua receive a refund or would she be required to pay additional tax? what is the amount?

she would be required to pay additional tax

53. discuss the concept of statutory tax authority. why is there a need for additional types of authority when statutory authority is the law?

statutory authority is issued by congress. it has a legislative process for U.S. tax laws. the IRC is extremely broad and sometimes difficult to apply to specific tax situations, so other authority has evolved.

63. in what courts are disputes between the IRS and a taxpayer heard?

the US Tax Court, the US District Court, and US Court of Federal Claims

59. what is a proposed regulation? can a taxpayer rely on a proposed regulation as authority on how to treat a certain tax item?

they don't have effect of law. they are written during hearing process leading up to general

t/f- a proportional tax rate structure is a tax where the tax rate remains at the same rate regardless of the tax base.

true

t/f- congress issues internal revenue code and the IRS issues regulations

true

t/f- the 16th amendment to the us constitution provides the legal and statutory authority for the administration and enforcement of income taxes.

true

56. what is the purpose of a Joint Conference Committee? Its reports are considered more important or more authoritative. why?

used for if there is a difference in decision between the House of Representatives and the Senate

66. if a taxpayer loses a case against the IRS in one of the three trial courts, does the taxpayer have any avenue for appeals?

yes

67. after the court of appeals, does a taxpayer have any additional avenue for appeals? if so, what are the taxpayer's probabilities of receiving an appeal after the court of appeals? why?

yes, but not likely because U.S. Supreme Court chooses the cases they hear and keep it relatively low.

54. what is the legislative process concerning tax laws? where does tax legislation often begin?

-U.S. House of Representatives Ways and Means Committee -voted on by the House of Representatives -U.S. Senate Finance Committee -voted on by the Senate -Joint Conference Committee (if differences between the House and Senate versions) -Joint Conference bill voted on by the House of Representatives and the Senate -if the bill passes the House and Senate- signed or vetoed by the president of the United States -if signed- incorporated into the Internal Revenue Code

52. what are the three types of tax authority? who issues each type?

1. statutory- Congress 2. administrative- IRS 3. judiciary- U.S. court system

1. give a brief history of the income tax in the United States.

1861- the first federal income tax was created because of Civil War but when war was over, the tax ended. 1864- major growth in US economy and federal income tax was brought back 1865- U.S. Supreme Court rules federal income tax unconstitutional 1913- creation of 16th amendment