Chapter 17 The Personal Income Tax
Multiple Choice
1. AGI is
A) found by subtracting certain business expenses from H-S
income. B) found by subtracting exemptions from taxable income.
C) not used in modern tax
policy. D) none of the above.
Ans: a
2. The lowest marginal tax rate used in the United States is
A) 10 percent.
B) 28 percent.
C) 31 percent.
D) 39.6
percent. Ans: a
3. A Roth IRA differs from a traditional IRA in that
A) the Roth IRA allows for savings towards
retirement. B) the Roth IRA is phased out at certain
income levels.
C) the Roth IRA is not tax deductible at the time it is
deposited. D) all of the above.
Ans: c
4. Which of the following is an allowable deduction?
A) unreimbursed medical expenses that exceed 7.5% of
AGI B) state and local income and property taxes
C) interest on qualified education loans up to a certain limit
D) all of the above
Ans: d
5. The current federal tax structure has tax brackets.
A) 5
B) 6
C) 7
D) 8
Ans: b
6. The Haig-Simons definition of income
A) is measured over a given time.
B) measures an individual’s power to consume.
C) is a net change measure. D)
is all of the above.
Ans: d
, 7. Which of the following is (are) indexed to inflation? A)
standard deduction
B) employer contributions to pensions
C) gifts and inheritances D)
none of the above Ans: a
8. Actual taxes paid divided by the taxable base is the
A) adjusted gross tax rate. B)
gross tax rate.
C) effective tax rate. D)
individual tax rate.
Ans: c
9. The Tax Reform Act of 1986 did all of the following, except
A) increase taxes on wealthy corporations. B)
increase the standard deduction.
C) raise the amount of the personal exemption. D)
simplify tax filing for low income families.
Ans: a
10. Tax expenditures are revenues that
A) are always recouped during tax season. B)
only apply to large corporations.
C) are needed to get full exemptions.
D) are forgone due to preferential tax treatment.
Ans: d
11. The “making-work-pay” credit allows
A) credit for working.
B) people to file taxes on April 19th. C)
credit associated with learning.
D) all of the above.
Ans: c
12. Capital gains are
A) treated exactly like other sources of income.
B) taxed differently than other sources of income. C)
generally not associated with a “lock-in effect.”
D) only realized at death.
Ans: b
13. The Haig-Simons definition of income includes
A) employer pension contributions and insurance purchases.
B) transfer payments.
C) income in-kind.
D) all of the above.
Ans: d
Multiple Choice
1. AGI is
A) found by subtracting certain business expenses from H-S
income. B) found by subtracting exemptions from taxable income.
C) not used in modern tax
policy. D) none of the above.
Ans: a
2. The lowest marginal tax rate used in the United States is
A) 10 percent.
B) 28 percent.
C) 31 percent.
D) 39.6
percent. Ans: a
3. A Roth IRA differs from a traditional IRA in that
A) the Roth IRA allows for savings towards
retirement. B) the Roth IRA is phased out at certain
income levels.
C) the Roth IRA is not tax deductible at the time it is
deposited. D) all of the above.
Ans: c
4. Which of the following is an allowable deduction?
A) unreimbursed medical expenses that exceed 7.5% of
AGI B) state and local income and property taxes
C) interest on qualified education loans up to a certain limit
D) all of the above
Ans: d
5. The current federal tax structure has tax brackets.
A) 5
B) 6
C) 7
D) 8
Ans: b
6. The Haig-Simons definition of income
A) is measured over a given time.
B) measures an individual’s power to consume.
C) is a net change measure. D)
is all of the above.
Ans: d
, 7. Which of the following is (are) indexed to inflation? A)
standard deduction
B) employer contributions to pensions
C) gifts and inheritances D)
none of the above Ans: a
8. Actual taxes paid divided by the taxable base is the
A) adjusted gross tax rate. B)
gross tax rate.
C) effective tax rate. D)
individual tax rate.
Ans: c
9. The Tax Reform Act of 1986 did all of the following, except
A) increase taxes on wealthy corporations. B)
increase the standard deduction.
C) raise the amount of the personal exemption. D)
simplify tax filing for low income families.
Ans: a
10. Tax expenditures are revenues that
A) are always recouped during tax season. B)
only apply to large corporations.
C) are needed to get full exemptions.
D) are forgone due to preferential tax treatment.
Ans: d
11. The “making-work-pay” credit allows
A) credit for working.
B) people to file taxes on April 19th. C)
credit associated with learning.
D) all of the above.
Ans: c
12. Capital gains are
A) treated exactly like other sources of income.
B) taxed differently than other sources of income. C)
generally not associated with a “lock-in effect.”
D) only realized at death.
Ans: b
13. The Haig-Simons definition of income includes
A) employer pension contributions and insurance purchases.
B) transfer payments.
C) income in-kind.
D) all of the above.
Ans: d
