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tax problems ch 1 mcq 2015




Question;63.;The concept;of tax sufficiency;A.;Suggests the need for tax forecasting;B.;Suggests that a government should estimate how taxpayers will;respond to changes in the current tax structure;C.;Suggests that a government should consider the income and;substitution effects when changing tax rates;D.;All of these;E.;None of these;64.;The;substitution effect;A.;Predicts that taxpayers will work harder to pay for consumer;products when tax rates increase;B.;Is one of the effects considered in static forecasting;C.;Results in the government collecting more aggregate tax;revenue than under the income effect;D.;Is typically more descriptive for taxpayers with lower;disposable income;E.;None of these;65.;Which of the;following federal government actions would make sense if a tax system fails;to provide sufficient tax revenue?;A.;Issue treasury bonds;B.;Cut funding to various federal projects;C.;Increase federal spending;D.;Issue treasury bonds and cut funding to various federal;projects but not increase federal spending;E.;None of these;66.;Geronimo;files his tax return as a head of household for year 2014. If his taxable;income is $72,000, what is his average tax rate (rounded)?;A.;17.24%;B.;18.24%;C.;19.24%;D.;25.00%;E.;None of these;67.;Al believes;that SUVs have negative social and environmental effects because of their;increased carbon monoxide emissions. He proposes eliminating sales taxes on;smaller automobiles in favor of higher sales taxes levied on SUVs. Al;performs some calculations and comes to the conclusion that based on the;current number of SUVs owned in the U.S. exactly the same amount of total;sales tax will be collected under his reformed system. Which of the following;concepts explains why Al's idea may not work?;A.;The ability to pay principle;B.;Horizontal equity;C.;Substitution effect;D.;Vertical equity;E.;None of these;68.;Which of the;following would not be a failure of the horizontal equity concept?;A.;Two taxpayers with identical income pay different amounts of;tax because one taxpayer's income includes tax exempt interest.;B.;Two taxpayers pay different amounts of property tax amounts on;similar plots of land (i.e., same value) because one plot of land is used;to raise crops.;C.;Two taxpayers pay different amounts of estate tax because one;taxpayer's estate is worth significantly more.;D.;All of these.;E.;None of these.;69.;Which of the;following is true regarding tax-advantaged assets?;A.;They are typically subject to excise taxes to account for;their low explicit taxes;B.;A corporate bond is typically considered a tax-advantaged;asset;C.;They are often subject to implicit taxes;D.;A corporate bond is typically considered a tax-advantaged;asset and they are often subject to implicit taxes are correct but not they;are typically subject to excise taxes to account for their low explicit;taxes;E.;None of these;70.;Congress;recently approved a new, bigger budget for the IRS. What taxation concept;evaluates the cost of administering our tax law?;A.;Convenience;B.;Economy;C.;Certainty;D.;Equity;E.;None of these;71.;Employers;often withhold federal income taxes directly from worker's paychecks. This is;an example of which principle in practice?;A.;Convenience;B.;Certainty;C.;Economy;D.;Equity;E.;None of these;72.;Which of the;following principles encourages a vertically equitable tax system?;A.;Pay as you go;B.;Economy;C.;Income effects;D.;Ability to pay principle;E.;None of these;Manny, a;single taxpayer, earns $65,000 per year in taxable income and an additional;$12,000 per year in city of Boston bonds.;73.;What is;Manny's current marginal tax rate for year 2014?;A.;18.63%;B.;28.00%;C.;15.72%;D.;22.86%;E.;None of these;74.;If Manny;earns an additional $35,000 in taxable income in year 2014, what is his;marginal tax rate (rounded) on this income?;A.;22.49%;B.;28.00%;C.;25.91%;D.;25.00%;E.;None of these;Leonardo, who;is married but files separately, earns $80,000 of taxable income. He also has;$15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable;income.;75.;If Leonardo;earned an additional $30,000 of taxable income this year, what would be the;marginal tax rate (rounded) on the extra income for year 2014?;A.;27.75%;B.;17.50%;C.;25.00%;D.;28.00%;E.;None of these;76.;If Leonardo;instead had $30,000 of additional tax deductions for year 2014, his marginal;tax rate (rounded) on the deductions would be;A.;28.00%;B.;25.00%;C.;25.57%;D.;17.07%;E.;None of these;Leonardo;earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds.;His wife, Theresa, earns $50,000 of taxable income.;77.;If Leonardo;and his wife file married filing jointly in 2014, what would be their average;tax rate (rounded)?;A.;15.00%;B.;25.00%;C.;18.63%;D.;23.73%;E.;None of these;78.;What is;Leonardo and Theresa's effective tax rate for year 2014 (rounded)?;A.;15.00%;B.;18.63%;C.;21.28%;D.;28.00%;E.;None of these;79.;How much;money would Leonardo and Theresa save if they filed jointly instead of;separately for year 2014?;A.;Nothing;B.;$167.50;C.;$309.75;D.;$5,907.00;E.;None of these;80.;If Susie;earns $750,000 in taxable income, how much tax will she pay as a single;taxpayer for year 2014?;A.;$243.752.90;B.;$252,500.00;C.;$254,045.75;D.;$270,376.45;E.;None of these;81.;If Susie;earns $750,000 in taxable income and files as head of household for year;2014, what is Susie's average tax rate (rounded)?;A.;33.24%;B.;33.87%;C.;35.00%;D.;39.60%;E.;None of these;82.;Eliminating;the current system of withholding income taxes directly from employee;paychecks would;A.;Violate the convenience criterion of federal taxation;B.;Increase the rate of compliance;C.;Make collection of federal income taxes easier;D.;All of these;E.;None of these;Curtis;invests $250,000 in a city of Athens bond that pays 7% interest.;Alternatively, Curtis could have invested the $250,000 in a bond recently;issued by Initech, Inc. that pays 9% interest with similar risk as the city;of Athens bond. Assume that Curtis's marginal tax rate is 28%.;83.;What is;Curtis's after-tax rate of return on the city of Athens bond?;A.;1.96%;B.;2.52%;C.;7.00%;D.;9.00%;E.;None of these;84.;How much;implicit tax would Curtis pay on the city of Athens bond?;A.;$17,500;B.;$1,400;C.;$1,300;D.;$5,000;E.;None of these;85.;If Curtis;invested in the Initech, Inc. bonds, what would be his after-tax rate of;return from this investment?;A.;5.04%;B.;7.00%;C.;6.48%;D.;2.52%;E.;None of these;86.;How much;explicit tax would Curtis incur on interest earned on the Initech, Inc.;bond?;A.;$16,200;B.;$6,300;C.;$4,900;D.;$12,600;E.;None of these;Jackson has;the choice to invest in city of Mitchell bonds or Sundial, Inc. corporate;bonds that pay 10% interest. Jackson is a single taxpayer who earns $50,000;annually. Assume that the city of Mitchell bonds and the Sundial, Inc. bonds;have similar risk.;87.;What interest;rate would the city of Mitchell have to pay in order to make Jackson;indifferent between investing in the city of Mitchell and the Sundial, Inc.;bonds for year 2014?;A.;7.50%;B.;10.00%;C.;8.00%;D.;7.20%;E.;None of these;88.;Assume the;original facts as given except that Jackson is a head of household taxpayer;and the city of Mitchell pays interest of 7.8%. How would you advise Jackson;to invest his money?;A.;Invest in Sundial, Inc. bonds because their explicit tax is;greater than the implicit tax on city of Mitchell bonds.;B.;Invest in city of Mitchell bonds because their implicit tax is;greater than the explicit tax on Sundial, Inc. bonds.;C.;Invest in Sundial, Inc. bonds because their explicit tax is;less than the implicit tax on city of Mitchell bonds.;D.;Invest in city of Mitchell bonds because their implicit tax is;less than the explicit tax on Sundial, Inc. bonds.;E.;None of these.


Paper#38050 | Written in 18-Jul-2015

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