ACC 330 Exam 1 True/False

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A tax meets the standard of efficiency if it generates enough revenue to pay for the public goods and services provided by the government

False

A tax meets the standard of sufficiency if it is easy for people to pay the tax

False

Losses realized on the sale of personal use assets are deductible

False

Payment of a tax entitles the payer to a specific good or service from the government

False

Tax avoidance is the reduction of a person's tax liability through illegal means

False

Tax liability divided by taxable income equals marginal tax rate

False

Under 2018 law, an individual's taxable income equals adjusted gross income less the greater of the standard deduction or itemized deductions less the exemption amount

False

the tax cost of a transaction represents a cash inflow

False

The tax cost of a transaction depends on the taxpayers average tax rate for the year

False (marginal tax rate)

The goal of tax planning is to reduce tax costs or increase tax savings as much as posisble

False (the goal is to maximize NPV)

A convenient tax has low compliance costs for taxpayers and low collection and enforcement costs for the government

True

A dollar today is always worth more than a dollar not available until a future period

True

A static forecast of the revenue effect of a tax rate change assumes that the tax base does not change

True

A tax with a graduated rate structure must have at least two brackets of base

True

An above-the-line deduction reduces both adjusted gross income and taxable income

True

An itemized deduction doesn't result in any tax savings in a year in which the individual taxpayer takes the standard deduction

True

Congress provides an indirect subsidy to charities by allowing an itemized deduction for charitable contributions

True

Gains realized on the sale of personal use assets are taxable

True

Horizontal equity means that two taxpayers with similar economic conditions pay roughly the same amount of tax

True

Income shifting generally occurs between related parties

True

Net cash flow from a transaction equals the difference between cash received and cash disbursed in a transaction

True

The federal income tax system provides incentives for individual taxpayers to meet their housing needs by purchasing instead of renting a home

True

The individual income tax rate schedule is progressive

True

The rate at which an item of income is taxed depends on the character of the income

True

The standard deduction for single individuals is one-half the standard deduction for married individuals filing jointly

True

The substance over form doctrine allows the IRS to look through the legal formalities of a transaction to determine its true economic condition

True

The tax rates for individuals who qualify as head-of-household are lower than the tax rates for single individuals

True

The tax savings from a transaction represents a cash inflow

True

The theory of distributional justice is a rationale for a progressive income tax system

True

Tax systems with regressive rate structures result in a proportionally heavier tax burden on persons with smaller tax bases

True`


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