FINA 2770: EXAM 1 With 100% Correct Answers 2023

FINA 2770: EXAM 1 With 100% Correct Answers 2023 excise tax a tax on the production, sale, or consumption of goods produced within a country. i.e. gas, cigarettes, alcoholic beverages, tires, air travel, telephone service Real estate property tax based on the value of land and buildings, major source of revenue for local government Estate Tax A tax on the estate, or total value of the money and property, of a person who has died inheritance tax a state tax collected on the property left by a person to his or her heir(s) in a will taxable income income on which tax must be paid; total income minus exemptions and deductions Earned Income Money earned from working for pay investment income earnings from dividends, interest, and rent Passive Income Money earned on a regular basis with little or no effort required to maintain it. Some things that produce passive income are real estate, intellectual property like books or internet content, or a business in which the owner is not actively involved.(limited partnerships) tax-exempt income income that is not taxed tax-deferred income income that is taxed at a later date Adjusted Gross Income Gross income after certain reductions have been made. Reductions could include contributions to IRA, or Keogh retirement plan, penalties for early withdrawal from savings, and alimony payments. Tax Shelters investments that provide immediate tax benefits and a reasonable expectation of a future financial return Tax deduction An expense, such as a charitable contribution, that can be deducted from one's adjusted gross income to arrive at taxable income. standard deduction A stated amount that you may subtract from adjusted gross income instead of itemizing your deductions itemized deductions expenses you can subtract from adjusted gross income to determine your taxable income Exemption a deduction from adjusted gross income for the taxpayer, the spouse, and qualified dependents marginal tax rate the extra taxes paid on an additional dollar of income Average Tax rate total taxes paid divided by total income tax credit An amount subtracted directly from the tax owed tax avoidance the use of legitimate methods to reduce one's taxes tax evasion the use of illegal actions to reduce one's taxes capital gains profits from the sale of a capital asset such as stocks, bonds, or real estate time value of money the increase of an amount of money due to earned interest or dividends Liquidity the ability to readily convert financial resources into cash without a loss in value Bankruptcy A legal process to get out of debt when you can no longer make all your required payments insolvency the inability to pay debts when they are due because liabilities far exceed the value of assets discretionary income the money left after paying for basic living necessities such as food, shelter, and clothing budget variance the difference between the budgeted amount and the actual amount that you spend budget deficit the amount by which actual spending exceeds planned spending budget surplus the amount by which actual spending is less than planned spending