Acct 405 Exam 1 | Actual study set |
Questions and verified Answers
tax - ANSW-payment required by a government unrelated to any specific benefit or service from the
government; NOT a fine or penalty
tax liability - ANSW-tax base * tax rate
tax base - ANSW-defines what is taxed, varies on type of tax and for income is taxable income;
1) helps raise revenue for govt
2) encourages citizens to act in a certain manner
taxable income - ANSW-income subject to tax less deductions
tax rates - ANSW-determines level someone will have to pay; can be constant or progressive (fed
income)
deduction - ANSW-expense that govt says reduces your taxable income
statutory tax rate - ANSW-rate of tax mandated by the government
marginal tax rate - ANSW-rate of tax or savings that applies to additional taxable income or deductions,
used for planning;
= tax/change in taxable income
= New tax-current tax / new TI - current TI
average tax rate - ANSW-average rate of tax on each dollar of taxable income, almost exclusively
budgeting;
= total income tax / taxable income
effective tax rate - ANSW-average rate of tax on economic income (taxable and nontaxable income),
evaluate;
indiv - how much tax you pay in relation to ability to pay
corp - how efficiently able to shelter income from taxation
= tax/economic income
excise tax - ANSW-tax based on quantity by fed, state, or local; ie gas, cigarettes, or alcohol
transfer tax - ANSW-tax assessed on the transfer of $ ie estate or gift tax
estate tax - ANSW-someone passes away and fed govt assesses tax on assets (over $5.12 million)
gift tax - ANSW-every time a gift is given one must pay tax on FMV; applies to gifts over $13000
implicit taxes - ANSW-reduced pre tax rate of return that a tax favored asset produces b/c of its tax
advantaged status (aka tax favor); either excluded from tax or pay lower rate, do NOT physically pay this
Goal of tax planning - ANSW-maximize after tax income, help clients dispose of assets in a tax efficient
manner; NOT minimize taxes
timing strategy - ANSW-shifts income/deductions through time to help maximize after tax wealth;
usually used for individuals, usually defer income and accelerate deduction in MTR is unchanged or
decreasing
shifting strategies - ANSW-shift income/deductions among taxpayers to the person with the lowest MTR;
corporations and small businesses
Questions and verified Answers
tax - ANSW-payment required by a government unrelated to any specific benefit or service from the
government; NOT a fine or penalty
tax liability - ANSW-tax base * tax rate
tax base - ANSW-defines what is taxed, varies on type of tax and for income is taxable income;
1) helps raise revenue for govt
2) encourages citizens to act in a certain manner
taxable income - ANSW-income subject to tax less deductions
tax rates - ANSW-determines level someone will have to pay; can be constant or progressive (fed
income)
deduction - ANSW-expense that govt says reduces your taxable income
statutory tax rate - ANSW-rate of tax mandated by the government
marginal tax rate - ANSW-rate of tax or savings that applies to additional taxable income or deductions,
used for planning;
= tax/change in taxable income
= New tax-current tax / new TI - current TI
average tax rate - ANSW-average rate of tax on each dollar of taxable income, almost exclusively
budgeting;
= total income tax / taxable income
effective tax rate - ANSW-average rate of tax on economic income (taxable and nontaxable income),
evaluate;
indiv - how much tax you pay in relation to ability to pay
corp - how efficiently able to shelter income from taxation
= tax/economic income
excise tax - ANSW-tax based on quantity by fed, state, or local; ie gas, cigarettes, or alcohol
transfer tax - ANSW-tax assessed on the transfer of $ ie estate or gift tax
estate tax - ANSW-someone passes away and fed govt assesses tax on assets (over $5.12 million)
gift tax - ANSW-every time a gift is given one must pay tax on FMV; applies to gifts over $13000
implicit taxes - ANSW-reduced pre tax rate of return that a tax favored asset produces b/c of its tax
advantaged status (aka tax favor); either excluded from tax or pay lower rate, do NOT physically pay this
Goal of tax planning - ANSW-maximize after tax income, help clients dispose of assets in a tax efficient
manner; NOT minimize taxes
timing strategy - ANSW-shifts income/deductions through time to help maximize after tax wealth;
usually used for individuals, usually defer income and accelerate deduction in MTR is unchanged or
decreasing
shifting strategies - ANSW-shift income/deductions among taxpayers to the person with the lowest MTR;
corporations and small businesses
