Chapter 1 Taxation of Individuals and Business Entities
Questions with complete solution 2025
1. What is the purpose
raise revenue to fund government operations
of taxes?
other goals: encourage certain behavior (charitable contributions) &
discourage undesirable legal behavior (sin taxes)
2. What qualifies as a tax? tax is a payment required by a government that is unrelated
to any
specific benefit or service received from the government
key components: payment required, payment imposed by
government agency (federal, state, local), payment not tired
directly to benefits re- ceived by the tax payer
3. How do you must know: tax base and tax
calculate tax? rate tax= tax base* tax rate
4. What are the three ways -marginal tax rate
to measure tax rates? 9. Which tax rate tells you more about a
person's tax burden?
5. What is marginal
tax rate?
6. What is average
tax rate?
7. What is effective
tax rate?
8. Which tax rate is
most helpful for tax
planning?
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11
, Chapter 1 Taxation of Individuals and Business Entities
Questions with complete solution 2025
average tax rate
ettective tax rate
he tax rate that applies to the next
additional increment of a taxpayer's
taxable income
change in tax/ change in taxable income)
he taxpayer's average level of taxation on
each dollar of taxable income (total
tax/ taxable income)
he taxpayer's average rate of taxation on
each dollar of total income (both
taxable and non-taxable)
marginal tax rate
ttective tax rate
2/
11
Questions with complete solution 2025
1. What is the purpose
raise revenue to fund government operations
of taxes?
other goals: encourage certain behavior (charitable contributions) &
discourage undesirable legal behavior (sin taxes)
2. What qualifies as a tax? tax is a payment required by a government that is unrelated
to any
specific benefit or service received from the government
key components: payment required, payment imposed by
government agency (federal, state, local), payment not tired
directly to benefits re- ceived by the tax payer
3. How do you must know: tax base and tax
calculate tax? rate tax= tax base* tax rate
4. What are the three ways -marginal tax rate
to measure tax rates? 9. Which tax rate tells you more about a
person's tax burden?
5. What is marginal
tax rate?
6. What is average
tax rate?
7. What is effective
tax rate?
8. Which tax rate is
most helpful for tax
planning?
1/
11
, Chapter 1 Taxation of Individuals and Business Entities
Questions with complete solution 2025
average tax rate
ettective tax rate
he tax rate that applies to the next
additional increment of a taxpayer's
taxable income
change in tax/ change in taxable income)
he taxpayer's average level of taxation on
each dollar of taxable income (total
tax/ taxable income)
he taxpayer's average rate of taxation on
each dollar of total income (both
taxable and non-taxable)
marginal tax rate
ttective tax rate
2/
11
