©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
UO ACTG 470 Midterm 1 Exam Questions
With Correct Answers 100% Verified.
Types of Taxes - Answer✔Transaction, property, privileges/rights, & income
Transaction taxes - Answer✔taxes on economic transactions such as the sale of goods and
services which consumption tax (sales, use, and excise), wealth transfer tax (gift and estate),
and employment tax (medicare and social security)
Property Taxes - Answer✔Taxes on property, especially real estate, but also can be on boats,
automobiles (often paid along with license fees), recreational vehicles, and business
inventories.
Taxes on Privileges and Rights - Answer✔Include customs duty, franchise tax, and occupational
taxes
Income Tax Levels - Answer✔federal, state, and local
Federal Income Tax - Answer✔the taxes that the federal government imposes on personal
income in order to provide services
State Income Taxes - Answer✔most states have this and it usually "piggybacks off federal taxes
Local Income Tax - Answer✔applies to those who earn money in that state not just reside there
4 Considerations of tax law - Answer✔Equity, economic, social, and political considerations
Equity Considerations - Answer✔a tax law is fair if: it has horizontal equity, vertical equity, and
the wherewithal to pay
Horizontal Equity - Answer✔the idea that taxpayers with similar abilities to pay taxes should
pay the same amount
Vertical Equity - Answer✔the idea that taxpayers with a greater ability to pay taxes should pay
larger amounts
Wherewithal to pay - Answer✔tax should be recognized and paid when the taxpayer has the
resources to pay
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
Economic Considerations - Answer✔when the amount of revenue it raises is at an optimum
level after the costs of administration and compliance are considered; can be an effective tool
for regulating the economy
Social Considerations - Answer✔Some tax provisions are designed to encourage socially
desirable practices
Political considerations - Answer✔tax provisions can represent special interest legislation and
reflect the effect of state and local laws
Tax Planning - Answer✔seeking legal ways to reduce, eliminate, or defer income taxes to
increase after tax cash flow
Business purpose doctrine - Answer✔if a transaction has no substantial business purpose other
than avoidance or reduction of tax liability, the transaction will be disregarded
Tax Planning Strategies - Answer✔Character, time, entity, jurisdiction, entity form
Character of income - Answer✔can affect the tax rate that applies and the deductibility of
losses; ordinary income vs capital income
Ordinary income - Answer✔income generated by routine business operations and
investmentsand is taxed at regular tax rate
Capital Income - Answer✔income generated by the scale of capital assets and is subject to
lower tax rates than ordinary
Time of Income - Answer✔In PV terms, tax costs decrease (and cash flow increase) when a tax
liability is deferred
Jurisdiction of Income - Answer✔tax costs decrease and cash flows increase when income is
generated in a jurisdiction with a lower tax rate
Entity - Answer✔generally taxable income is computed the same for different entities however
the tax rate that applies to the income may differ
Individuals/Sole Proprietorship - Answer✔(+): losses offset personal income, simplicity
(-): liability (creditors can go after personal assets)
C Corporation - Answer✔(+): limited liability, access to more capital
(-): double taxation (with dividends and income), may not get current benefit from losses
Partnership - Answer✔(+): losses offset partners income, tax free withdrawls
(-): liability
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UO ACTG 470 Midterm 1 Exam Questions
With Correct Answers 100% Verified.
Types of Taxes - Answer✔Transaction, property, privileges/rights, & income
Transaction taxes - Answer✔taxes on economic transactions such as the sale of goods and
services which consumption tax (sales, use, and excise), wealth transfer tax (gift and estate),
and employment tax (medicare and social security)
Property Taxes - Answer✔Taxes on property, especially real estate, but also can be on boats,
automobiles (often paid along with license fees), recreational vehicles, and business
inventories.
Taxes on Privileges and Rights - Answer✔Include customs duty, franchise tax, and occupational
taxes
Income Tax Levels - Answer✔federal, state, and local
Federal Income Tax - Answer✔the taxes that the federal government imposes on personal
income in order to provide services
State Income Taxes - Answer✔most states have this and it usually "piggybacks off federal taxes
Local Income Tax - Answer✔applies to those who earn money in that state not just reside there
4 Considerations of tax law - Answer✔Equity, economic, social, and political considerations
Equity Considerations - Answer✔a tax law is fair if: it has horizontal equity, vertical equity, and
the wherewithal to pay
Horizontal Equity - Answer✔the idea that taxpayers with similar abilities to pay taxes should
pay the same amount
Vertical Equity - Answer✔the idea that taxpayers with a greater ability to pay taxes should pay
larger amounts
Wherewithal to pay - Answer✔tax should be recognized and paid when the taxpayer has the
resources to pay
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
Economic Considerations - Answer✔when the amount of revenue it raises is at an optimum
level after the costs of administration and compliance are considered; can be an effective tool
for regulating the economy
Social Considerations - Answer✔Some tax provisions are designed to encourage socially
desirable practices
Political considerations - Answer✔tax provisions can represent special interest legislation and
reflect the effect of state and local laws
Tax Planning - Answer✔seeking legal ways to reduce, eliminate, or defer income taxes to
increase after tax cash flow
Business purpose doctrine - Answer✔if a transaction has no substantial business purpose other
than avoidance or reduction of tax liability, the transaction will be disregarded
Tax Planning Strategies - Answer✔Character, time, entity, jurisdiction, entity form
Character of income - Answer✔can affect the tax rate that applies and the deductibility of
losses; ordinary income vs capital income
Ordinary income - Answer✔income generated by routine business operations and
investmentsand is taxed at regular tax rate
Capital Income - Answer✔income generated by the scale of capital assets and is subject to
lower tax rates than ordinary
Time of Income - Answer✔In PV terms, tax costs decrease (and cash flow increase) when a tax
liability is deferred
Jurisdiction of Income - Answer✔tax costs decrease and cash flows increase when income is
generated in a jurisdiction with a lower tax rate
Entity - Answer✔generally taxable income is computed the same for different entities however
the tax rate that applies to the income may differ
Individuals/Sole Proprietorship - Answer✔(+): losses offset personal income, simplicity
(-): liability (creditors can go after personal assets)
C Corporation - Answer✔(+): limited liability, access to more capital
(-): double taxation (with dividends and income), may not get current benefit from losses
Partnership - Answer✔(+): losses offset partners income, tax free withdrawls
(-): liability
2|Page
