Test Bank for McGraw-Hill’s Essentials of Federal Taxation 2024 Edition, 15th Edition By Brian Spilker

Test Bank for McGraw-Hill’s Essentials of Federal Taxation 2024 Edition, 15th Edition By Brian Spilker 1 Version 1 Student name: 1) The following are a series of tables that may be referred to in several questions throughout your test. Please refer to these tables as needed or as directed. 2023 Tax Rate SchedulesIndividualsSchedule X-Single If taxable income is over: The tax is: $ 0 But not over: $ 11,000 10% of taxable income $ 11,000 $ 44,725 $1,100 plus 12% of the excess over $11,000 $ 44,725 $ 95,375 $5,147 plus 22% of the excess over $44,725 $ 95,375 $ 182,100 $16,290 plus 24% of the excess over $95,375 $ 182,100 $ 231,250 $37,104 plus 32% of the excess over $182,100 $ 231,250 $ 578,125 $52,832 plus 35% of the excess over $231,250 $ 578,125 — $174,238.25 plus 37% of the excess over $578,125 Schedule Y-1-Married Filing Jointly or Qualifying Widow(er) If taxable income is over: The tax is: $ 0 But not over: $ 22,000 10% of taxable income $ 22,000 $ 89,450 $2,200 plus 12% of the excess over $22,000 $ 89,450 $ 190,750 $10,294 plus 22% of the excess over $89,450 $ 190,750 $ 364,200 $32,580 plus 24% of the excess over $190,750 $ 364,200 $ 462,500 $74,208 plus 32% of the excess over $364,200 $ 462,500 $ 693,750 $105,664 plus 35% of the excess over $462,500 $ 693,750 — $186,601.50 plus 37% of the excess over $693,750 Schedule Z-Head of Household If taxable income is over: But not over: The tax is: 2 Version 1 $ 0 $ 15,700 10% of taxable income 3 Version 1 $ 15,700 $ 59,850 $1,570 plus 12% of the excess over $15,700 $ 59,850 $ 95,350 $6,868 plus 22% of the excess over $59,850 $ 95,350 $ 182,100 $14,678 plus 24% of the excess over $95,350 $ 182,100 $ 231,250 $35,498 plus 32% of the excess over $182,100 $ 231,250 $ 578,100 $51,226 plus 35% of the excess over $231,250 $ 578,100 — $172,623.50 plus 37% of the excess over $578,100 Schedule Y-2-Married Filing Separately If taxable income is over: The tax is: $ 0 But not over: $ 11,000 10% of taxable income $ 11,000 $ 44,725 $1,100 plus 12% of the excess over $11,000 $ 44,725 $ 95,375 $5,147 plus 22% of the excess over $44,725 $ 95,375 $ 182,100 $16,290 plus 24% of the excess over $95,375 $ 182,100 $ 231,250 $37,104 plus 32% of the excess over $182,100 $ 231,250 $ 346,875 $52,832 plus 35% of the excess over $231,250 $ 346,875 — $93,300.75 plus 37% of the excess over $346,875 2) Taxes influence many types of business decisions but generally do not influence personal decisions. ⊚ true ⊚ false Version 1 4 3) Taxes influence business decisions such as where a business should locate or how a business should be structured. ⊚ true ⊚ false 4) Tax policy rarely plays an important part in presidential campaigns. ⊚ true ⊚ false 5) Margaret recently received a parking ticket. This is a common example of a local tax. ⊚ true ⊚ false 6) George recently paid $50 to renew his driver's license. The $50 payment is considered a tax. ⊚ true ⊚ false 7) A 1 percent charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools. ⊚ true ⊚ false 8) One key characteristic of a tax is that it is a required payment to a governmental agency. ⊚ true ⊚ false 9) Common examples of sin taxes include the taxes imposed on airline tickets and gasoline. ⊚ true ⊚ false 5 Version 1 10) One benefit of a sin tax (e.g., a tax on cigarettes) is that it should increase the demand for the products being taxed. ⊚ true ⊚ false 11) In addition to raising revenues, specific U.S. taxes may have other objectives (e.g., economic or social objectives). ⊚ true ⊚ false 12) The two components of the tax calculation are the tax rate and the taxpayer's status. ⊚ true ⊚ false 13) The tax base for the federal income tax is taxable income. ⊚ true ⊚ false 14) A flat tax is an example of a graduated tax system. ⊚ true ⊚ false 15) The main difficulty in calculating an income tax is determining the correct amount of the tax base. ⊚ true ⊚ false 16) A taxpayer's average tax rate is the most appropriate tax rate to use in tax planning. ⊚ true ⊚ false 6 Version 1 17) The effective tax rate, in general, provides a better depiction of a taxpayer's tax burden than the average tax rate. ⊚ true ⊚ false 18) The effective tax rate expresses the taxpayer's total tax as a percentage of the taxpayer's taxable and nontaxable income. ⊚ true ⊚ false 19) In a proportional (flat) tax rate system, the marginal tax rate will always equal the average tax rate. ⊚ true ⊚ false 20) In a regressive tax rate system, the marginal tax rate will often be greater than the average tax rate. ⊚ true ⊚ false 21) A sales tax is a common example of a progressive tax rate structure. ⊚ true ⊚ false 22) In terms of effective tax rates, the sales tax can be viewed as a regressive tax. ⊚ true ⊚ false 23) While sales taxes are quite common, currently the U.S. federal government does not impose a sales tax. ⊚ true ⊚ false 7 Version 1 24) The largest federal tax, in terms of revenue collected, is the Social Security tax. ⊚ true ⊚ false 25) The 9th Amendment to the U.S. Constitution removed all doubt that a federal income tax was allowed under the U.S. Constitution. ⊚ true ⊚ false 26) A common example of an employment-related tax is the Medicare tax. ⊚ true ⊚ false 27) Self-employment taxes are charged on self-employment income in addition to any federal income tax. ⊚ true ⊚ false 28) Excise taxes are typically levied on the value of a good purchased. ⊚ true ⊚ false 29) The estate tax is assessed based on the fair market values of transfers made during a taxpayer's life. ⊚ true ⊚ false 30) A use tax is typically imposed by a state on goods purchased within the state. ⊚ true ⊚ false 8 Version 1 31) Property taxes may be imposed on both real and personal property. ⊚ true ⊚ false 32) Relative to explicit taxes, implicit taxes are much easier to estimate. ⊚ true ⊚ false 33) Implicit taxes are indirect taxes on tax-favored assets. ⊚ true ⊚ false 34) Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues. ⊚ true ⊚ false 35) The income and substitution effects are two opposing effects that one could consider in static forecasting. ⊚ true ⊚ false 36) Horizontal equity is defined in terms of taxpayers in similar situations whereas vertical equity is defined in terms of taxpayers in different situations. ⊚ true ⊚ false 37) Regressive tax rate structures are typically considered to be vertically equitable. ⊚ true ⊚ false 9 Version 1 38) Estimated tax payments are one way the federal income tax system addresses the "certainty" criterion in evaluating tax systems. ⊚ true ⊚ false 39) One must consider the "economy" criterion in evaluating tax systems from both the taxpayer's and the government's perspective. ⊚ true ⊚ false 40) Taxes influence which of the following decisions? A) Business decisions B) Personal decisions C) Political decisions D) Investment decisions E) All of the choices are correct. 41) Margaret was issued a $150 speeding ticket. This is: A) a tax because payment is required by law. B) a tax because the payment is not related to any specific benefit received from the government agency collecting the ticket. C) not a tax because it is considered a fine intended to punish illegal behavior. D) a tax because it is imposed by a government agency. E) not a tax because Margaret could have avoided payment if she did not speed. 10 Version 1 42) Which of the following is a tax? 1. A 1 percent special sales tax for funding local road construction. 2. A fee paid to the state for a license to practice as an attorney. 3. An income tax imposed by Philadelphia on persons working within the city limits. 4. A special property assessment for installing a new water system in the taxpayer's neighborhood. A) Only I is correct. B) Only IV is correct. C) Only III is correct. D) III and IV are correct. E) I and III are correct. 43) Which of the following is considered a tax? A) Tolls B) Parking meter fees C) Annual licensing fees D) A local surcharge paid on retail sales to fund public schools E) Entrance fees paid at national parks 44) Earmarked taxes are: A) taxes assessed only on certain taxpayers. B) taxes assessed to fund a specific purpose. C) taxes assessed for only a specific time period. D) taxes assessed to discourage less desirable behavior. E) None of the choices are correct. 45) Sin taxes are: A) taxes assessed by religious organizations. B) taxes assessed on certain illegal acts. C) taxes assessed to discourage less desirable behavior. D) taxes assessed to fund a specific purpose. E) None of the choices are correct. 11 Version 1 46) To calculate a tax, you need to know: 1. the tax base 2. the taxing agency 3. the tax rate 4. the purpose of the tax A) Only I is correct. B) Only IV is correct. C) Only III is correct. D) Items I through IV are correct. E) I and III are correct. 47) Which of the following is not an example of a graduated tax rate structure? A) Progressive tax rate structure B) Proportional tax rate structure C) U.S. federal income tax D) Regressive tax rate structure E) None of the choices are correct. 48) The difficulty in calculating a tax is typically in the determination of: A) the correct tax rate. B) where to file the tax return. C) the tax base. D) the due date for the return. E) None of the choices are correct. 49) Which of the following is not one of the basic tax rate structures? A) Proportional B) Equitable C) Regressive D) Progressive E) All of these are different kinds of the basic tax rate structures. 12 Version 1 50) Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for 2023, how much federal tax will he owe? (Use tax rate schedule.) Note: Round your final answer to the nearest whole dollar. A) $13,200 B) $8,508 C) $7,200 D) $6,901 E) None of the choices are correct. 51) Marc, a single taxpayer, earns $61,400 in taxable income and $5,140 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for 2023, how much federal tax will he owe? (Use tax rate schedule.) A) $13,550 B) $8,816 C) $7,368 D) $7,209 E) None of the choices are correct. 52) Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for 2023, what is his average tax rate? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 14.18 percent B) 11.50 percent C) 11.27 percent D) 22.00 percent E) None of the choices are correct. 13 Version 1 53) Marc, a single taxpayer, earns $61,600 in taxable income and $5,160 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for 2023, what is his average tax rate? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 14.38 percent B) 11.70 percent C) 11.47 percent D) 22.00 percent E) None of the choices are correct. 54) Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for year 2023, what is his effective tax rate? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 22 percent B) 13.09 percent C) 14.98 percent D) 10.62 percent E) None of the choices are correct. 55) Marc, a single taxpayer, earns $61,200 in taxable income and $5,120 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for year 2023, what is his effective tax rate? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 22.14 percent B) 13.23 percent C) 15.13 percent D) 10.76 percent E) None of the choices are correct. 14 Version 1 56) Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for year 2023, what is his current marginal tax rate? (Use tax rate schedule.) A) 12.00 percent B) 22.00 percent C) 24.00 percent D) 32.00 percent E) None of the choices are correct. 57) Marc, a single taxpayer, earns $260,000 in taxable income and $8,000 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for year 2023, what is his current marginal tax rate? (Use tax rate schedule.) A) 25.00 percent B) 35.00 percent C) 37.00 percent D) 45.00 percent E) None of the choices are correct. 58) The city of Granby, Colorado, recently enacted a 1.5 percent surcharge on vacation cabin rentals that will fund the city's new elementary school. This surcharge is an example of . A) a sin tax to discourage undesirable behavior B) a government fine C) an earmarked tax D) a sin tax to discourage undesirable behavior and an earmarked tax E) None of the choices are correct. 59) The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this? A) A sin tax B) An excise tax C) It is not a tax; it is a fine D) A sin tax and an excise tax are correct. E) None of the choices are correct. 15 Version 1 60) Which of the following is false? A) A proportional tax rate structure imposes a constant tax rate while a progressive tax rate structure imposes an increasing marginal rate related to the tax base. B) The average tax rate changes under a proportional tax rate structure, but it is static for a progressive tax rate system. C) An example of a proportional tax is the tax on gasoline. D) An example of a progressive tax is the federal tax on gifts. E) None of the choices are correct. 61) Which of the following is true? A) A regressive tax rate structure imposes an increasing marginal tax rate as the tax base increases. B) Regressive tax structures are the most common tax rate structure. C) An example of a regressive tax is an excise tax. D) In terms of effective tax rates, a sales tax can be viewed as a regressive tax. E) None of the choices are correct. 62) The ultimate economic burden of a tax is best captured by: A) the marginal tax rate. B) the effective tax rate. C) the average tax rate. D) the proportional tax rate. E) None of the choices are correct. 63) Which of the following taxes represents the largest portion of U.S. federal tax revenues? A) Employment taxes B) Corporate income taxes C) Individual income taxes D) Estate and gift taxes E) None of the choices are correct. 16 Version 1 64) Which of the following represents the largest percentage of average state tax revenue? A) Sales tax B) Individual income tax C) Other D) Property tax E) None of the choices are correct. 65) Which of the following is true regarding use taxes? A) A use tax is relatively easy to enforce compared to a sales tax. B) Use taxes attempt to eliminate any tax advantage of purchasing goods out of state. C) Use taxes encourage taxpayers to buy goods out of state to avoid paying sales tax in their home state. D) A use tax is generally a progressive tax. E) None of the choices are correct. 66) Which of the following is true regarding real property taxes and personal property taxes? A) Personal property taxes are assessed on permanent structures and land. B) Real property taxes are assessed on cars and boats. C) All U.S. states currently impose personal property taxes. D) Real property taxes are generally easier to administer than personal property taxes. E) None of the choices are correct. 67) Which of the following statements is true? A) Municipal bond interest is subject to explicit federal tax. B) Municipal bond interest is subject to implicit tax. C) Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk. D) All of these statements are true. E) None of these statements are true. 17 Version 1 68) The concept of tax sufficiency: A) suggests the need for tax forecasting. B) suggests that a government should estimate how taxpayers will respond to changes in the current tax structure. C) suggests that a government should consider the income and substitution effects when changing tax rates. D) All of the choices are correct. E) None of the choices are correct. 69) The substitution effect: A) predicts that taxpayers will work harder to pay for consumer products when tax rates increase. B) is one of the effects considered in static forecasting. C) results in the government collecting more aggregate tax revenue than under the income effect. D) is typically more descriptive for taxpayers with lower disposable income. E) None of the choices are correct. 70) Which of the following federal government actions would make sense if a tax system fails to provide sufficient tax revenue? A) Only issue treasury bonds B) Only cut funding to various federal projects C) Only increase federal spending D) Issue treasury bonds and cut funding to various federal projects but not increase federal spending E) None of the choices are correct. 71) Geronimo files his tax return as a head of household for year 2023. If his taxable income is $72,000, what is his average tax rate? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 13.25 percent B) 15.48 percent C) 11.45 percent D) 22.00 percent E) None of the choices are correct. 18 Version 1 72) Geronimo files his tax return as a head of household for year 2022. If his taxable income is $73,600, what is his average tax rate? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 13.44 percent B) 15.67 percent C) 11.64 percent D) 22.00 percent E) None of the choices are correct. 73) Al believes that SUVs have negative social and environmental effects because of their increased carbon monoxide emissions. He proposes eliminating sales taxes on smaller automobiles in favor of higher sales taxes levied on SUVs. Al performs some calculations and comes to the conclusion that based on the current number of SUVs owned in the U.S., exactly the same amount of total sales tax will be collected under his reformed system. Which of the following concepts explains why Al's idea may not work? A) The ability to pay principle B) Horizontal equity C) Substitution effect D) Vertical equity E) None of the choices are correct. 74) Which of the following would not be a failure of the horizontal equity concept? A) Two taxpayers with identical income pay different amounts of tax because one taxpayer's income includes tax-exempt interest. B) Two taxpayers pay different property tax amounts on similar plots of land (i.e., same value) because one plot of land is used to raise crops. C) Two taxpayers pay different amounts of estate tax because one taxpayer's estate is worth significantly more. D) All of the choices are correct. E) None of the choices are correct. 19 Version 1 75) Which of the following is true regarding tax-advantaged assets? A) They are typically subject to excise taxes to account for their low explicit taxes. B) A corporate bond is typically considered a tax-advantaged asset. C) They are often subject to implicit taxes. D) A corporate bond is typically considered a tax-advantaged asset. They are often subject to implicit taxes but they are not typically subject to excise taxes to account for their low explicit taxes. E) None of the choices are correct. 76) Congress recently approved a new, smaller budget for the IRS. What taxation concept evaluates the cost of administering our tax law? A) Convenience B) Economy C) Certainty D) Equity E) None of the choices are correct. 77) Employers often withhold federal income taxes directly from workers' paychecks. This is an example of which principle in practice? A) Convenience B) Certainty C) Economy D) Equity E) None of the choices are correct. 78) Which of the following principles encourages a vertically equitable tax system? A) Pay-as-you-go B) Economy C) Income effects D) Ability to pay principle E) None of the choices are correct. 20 Version 1 79) Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds. What is Manny's current marginal tax rate for 2023? (Use tax rate schedule.) A) 11.32 percent B) 12.00 percent C) 12.47 percent D) 15.26 percent E) None of the choices are correct. 80) Manny, a single taxpayer, earns $68,800 per year in taxable income and an additional $12,380 per year in city of Boston bonds. What is Manny's current marginal tax rate for 2023? (Use tax rate schedule.) A) 10.37 percent B) 12.00 percent C) 11.71 percent D) 14.35 percent E) None of the choices are correct. 81) Manny, a single taxpayer, earns $65,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds. If Manny earns an additional $35,000 in taxable income in 2023, what is his marginal tax rate on this income? (Use tax rate schedule.) Note: Do not round intermediate calculations. Round your final answer to two decimal places. A) 15.01 percent B) 22.00 percent C) 22.26 percent D) 24.00 percent E) None of the choices are correct. 21 Version 1 82) Manny, a single taxpayer, earns $66,200 per year in taxable income and an additional $12,120 per year in city of Boston bonds. If Manny earns an additional $36,200 in taxable income in 2023, what is his marginal tax rate on this income? (Use tax rate schedule.) Note: Do not round intermediate calculations. Round your final answer to two decimal places. A) 15.14 percent B) 22.00 percent C) 22.39 percent D) 24.00 percent E) None of the choices are correct. 83) Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo earned an additional $30,000 of taxable income this year, what would be the marginal tax rate on the extra income for 2023? (Use tax rate schedule.) Note: Do not round intermediate calculations. Round your final answer to two decimal places. A) 22.00 percent B) 13.91 percent C) 24.00 percent D) 22.98 percent E) None of the choices are correct. 84) Leonardo, who is married but files separately, earns $83,000 of taxable income. He also has $18,000 in city of Tulsa bonds. His wife, Theresa, earns $53,000 of taxable income. If Leonardo earned an additional $33,000 of taxable income this year, what would be the marginal tax rate on the extra income for 2023? (Use tax rate schedule.) Note: Do not round intermediate calculations. Round your final answer to two decimal places. A) 22.00 percent B) 14.18 percent C) 24.00 percent D) 23.25 percent E) None of the choices are correct. 22 Version 1 85) Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo instead had $30,000 of additional tax deductions for 2023, his marginal tax rate on the deductions would be: (Use tax rate schedule.) A) 12.00 percent. B) 15.26 percent. C) 22.00 percent. D) 24.00 percent. E) None of the choices are correct. 86) Leonardo, who is married but files separately, earns $81,400 of taxable income. He also has $18,000 in city of Tulsa bonds. His wife, Theresa, earns $53,000 of taxable income. If Leonardo instead had $31,500 of additional tax deductions for 2023, his marginal tax rate on the deductions would be: (Use tax rate schedule.) A) 12.00 percent. B) 14.14 percent. C) 22.00 percent. D) 24.00 percent. E) None of the choices are correct. 87) Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo and his wife file married filing jointly in 2023, what would be their average tax rate? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 12.00 percent B) 22.00 percent C) 14.78 percent D) 18.92 percent E) None of the choices are correct. 23 Version 1 88) Leonardo, who is married but files separately, earns $60,000 of taxable income. He also has $15,200 in city of Tulsa bonds. His wife, Theresa, earns $50,200 of taxable income. If Leonardo and his wife file married filing jointly in 2023, what would be their average tax rate? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 12.00 percent B) 22.00 percent C) 13.48 percent D) 17.62 percent E) None of the choices are correct. 89) Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo and his wife are married filing jointly in 2023, what is Leonardo and Theresa's effective tax rate for 2023? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 12.00 percent B) 16.96 percent C) 19.26 percent D) 22.00 percent E) None of the choices are correct. 90) Leonardo, who is married but files separately, earns $72,000 of taxable income. He also has $20,000 in city of Tulsa bonds. His wife, Theresa, earns $55,000 of taxable income. If Leonardo and his wife are married filing jointly in 2023, what is Leonardo and Theresa's effective tax rate for 2023? (Use tax rate schedule.) Note: Round your final answer to two decimal places. A) 12.00 percent B) 16.34 percent C) 18.64 percent D) 22.00 percent E) None of the choices are correct. 24 Version 1 91) Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. How much money would Leonardo and Theresa save if they file jointly instead of separately for 2023? (Use tax rate schedule.) A) Nothing B) $103.50 C) $309.75 D) $13,497 E) None of the choices are correct. 92) Leonardo, who is married but files separately, earns $62,500 of taxable income. He also has $16,200 in city of Tulsa bonds. His wife, Theresa, earns $51,200 of taxable income. How much money would Leonardo and Theresa save if they file jointly instead of separately for 2023? (Use tax rate schedule.) A) Nothing B) $137.70 C) $412.35 D) $8,350.00 E) None of the choices are correct. 93) If Susie earns $750,000 in taxable income, how much tax will she pay as a single taxpayer for 2023? (Use tax rate schedule.) A) $207,414 B) $277,500 C) $237,832 D) $189,625 E) None of the choices are correct. 94) If Susie earns $794,000 in taxable income, how much tax will she pay as a single taxpayer for 2023? (Use tax rate schedule.) A) $223,694 B) $293,780 C) $254,112 D) $205,905 E) None of the choices are correct. 25 Version 1 95) If Susie earns $750,000 in taxable income and files as head of household for year 2023, what is Susie's average tax rate? (Use tax rate schedule.) Note: Do not round intermediate calculations. Round your final answer to two decimal places. A) 31.71 percent B) 32.05 percent C) 35.00 percent D) 37.00 percent E) None of the choices are correct. 96) If Susie earns $798,000 in taxable income and files as head of household for year 2023, what is Susie's average tax rate? (Use tax rate schedule.) Note: Do not round intermediate calculations. Round your final answer to two decimal places. A) 32.03 percent B) 32.37 percent C) 35.00 percent D) 37.00 percent E) None of the choices are correct. 97) Eliminating the current system of withholding income taxes directly from employee paychecks would: A) violate the convenience criterion of federal taxation. B) increase the rate of compliance. C) make collection of federal income taxes easier. D) All of the choices are correct. E) None of the choices are correct. 26 Version 1 98) Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. What is Curtis's after-tax rate of return on the city of Athens bond? A) 5.32 percent B) 6.84 percent C) 7.00 percent D) 9.00 percent E) None of the choices are correct. 99) Curtis invests $225,000 in a city of Athens bond that pays 4.25 percent interest. Alternatively, Curtis could have invested the $225,000 in a bond recently issued by Initech, Incorporated that pays 5.5 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. What is Curtis's after-tax rate of return on the city of Athens bond? A) 2.57 percent B) 4.09 percent C) 4.25 percent D) 6.25 percent E) None of the choices are correct. 100) Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much implicit tax would Curtis pay on the city of Athens bond? A) $17,500 B) $1,400 C) $1,300 D) $5,000 E) None of the choices are correct. 27 Version 1 Curtis invests $250,000 in a city of Athens bond that pays 6 percent interest. 101) Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 8 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much implicit tax would Curtis pay on the city of Athens bond? A) $15,000.00 B) $1,050.00 C) $950.00 D) $5,000.00 E) None of the choices are correct. 102) Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. If Curtis invested in the Initech, Incorporated bonds, what would be his after-tax rate of return from this investment? A) 5.32 percent B) 7.00 percent C) 6.84 percent D) 2.52 percent E) None of the choices are correct. 103) Curtis invests $775,000 in a city of Athens bond that pays 9.75 percent interest. Alternatively, Curtis could have invested the $775,000 in a bond recently issued by Initech, Incorporated that pays 12.00 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. If Curtis invested in the Initech, Incorporated bonds, what would be his after-tax rate of return from this investment? A) 7.60 percent B) 9.75 percent C) 9.12 percent D) 5.80 percent E) None of the choices are correct. 28 Version 1 Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. 104) Alternatively, Curtis could have invested the $250,000 in a bond recently issued by Initech, Incorporated that pays 9 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond? A) $17,500 B) $5,400 C) $4,200 D) $12,600 E) None of the choices are correct. 105) Curtis invests $825,000 in a city of Athens bond that pays 10.25 percent interest. Alternatively, Curtis could have invested the $825,000 in a bond recently issued by Initech, Incorporated that pays 13.00 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond? A) $81,910.00 B) $25,740.00 C) $20,295.00 D) $63,567.50 E) None of the choices are correct. 106) Jackson has the choice to invest in city of Mitchell bonds or Sundial, Incorporated corporate bonds that pay 10 percent interest. Jackson is a single taxpayer who earns $55,000 annually. Assume that the city of Mitchell bonds and the Sundial, Incorporated bonds have similar risk. What interest rate would the city of Mitchell have to pay in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Incorporated bonds for 2023? (Use tax rate schedule.) A) 7.80 percent B) 10.00 percent C) 8.00 percent D) 7.20 percent E) None of the choices are correct. 29 Version 1 107) Jackson has the choice to invest in city of Mitchell bonds or Sundial, Incorporated corporate bonds that pay 9 percent interest. Jackson is a single taxpayer who earns $70,500 annually. Assume that the city of Mitchell bonds and the Sundial, Incorporated bonds have similar risk. What interest rate would the city of Mitchell have to pay in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Incorporated bonds for 2023? (Use tax rate schedule.) A) 7.02 percent B) 9.00 percent C) 7.22 percent D) 6.42 percent E) None of the choices are correct. 108) Jackson has the choice to invest in city of Mitchell bonds or Sundial, Incorporated corporate bonds that pay 10 percent interest. Jackson is a single taxpayer who earns $55,000 annually. Assume that the city of Mitchell bonds and the Sundial, Incorporated bonds have similar risk. Assume the original facts as given except that Jackson is a head of household taxpayer and the city of Mitchell pays interest of 8 percent. How would you advise Jackson to invest his money? A) Invest in Sundial, Incorporated bonds because their explicit tax is greater than the implicit tax on city of Mitchell bonds. B) Invest in city of Mitchell bonds because their implicit tax is greater than the explicit tax on Sundial, Incorporated bonds. C) Invest in Sundial, Incorporated bonds because their explicit tax is less than the implicit tax on city of Mitchell bonds. D) Invest in city of Mitchell bonds because their implicit tax is less than the explicit tax on Sundial, Incorporated bonds. E) None of the choices are correct. 30 Version 1 109) Oswald is beginning his first tax course and does not really have a solid understanding of the role that taxes play in various decisions. Please describe for Oswald the various types of decisions that taxes may influence. 110) Determine if each of the following is a tax and why or why not. a. $2.50 toll paid on the Florida Turnpike b. $300 ticket for reckless driving c. 1 percent local surcharge on hotel rooms to fund public roadways d. 2 percent city surcharge on wages earned in the city of Philadelphia 111) Although the primary purpose of a tax system is to raise revenue, Congress uses the federal tax system for other purposes as well. Describe the other ways in which Congress uses the federal tax system. Be specific. 112) There are several different types of tax rates that taxpayers might use in different contexts. Describe each tax rate and how a taxpayer might use it. 31 Version 1 113) Ricky and Lucy are debating several types of taxes. Their debate has focused on the different types of tax rate structures and whether they are "fair." Please define each tax rate structure, provide examples of each structure, and discuss how each structure may be viewed with respect to vertical equity. 114) Bart is contemplating starting his own business. His new business would operate as a sole proprietorship and would require hiring several employees. Describe the employment-related taxes that Bart should be aware of as he starts his new business as a self-employed business owner. 115) Raquel recently overheard two journalism students discussing the merits of the federal tax system. One student offered as an example of unfairness a well-known politician’s spouse, who paid little income tax, as most of the spouse's income was earned in the form of municipal bond interest. What type of taxes is the journalism student considering in his example? What type of taxes is he ignoring? Define each type of tax. What role does each type of tax play in calculating relative tax burdens? What role does each type of tax play in evaluating fairness? 32 Version 1 116) Mandy, the mayor of Bogart and a strong advocate of a clean downtown, is proposing an increase in the city sales tax from 7 percent to 50 percent on all packs of chewing gum purchased in Bogart. Based on the current gum sales, Mandy estimates that this tax will actually reduce the tax revenue on gum sales. What type of forecasting is Mandy using to derive her tax revenue estimates? What "effect" is her estimate based on? Does this necessarily imply that Mandy will be happy given her desire to have a clean downtown? 117) Milton and Rocco are having a heated debate regarding a national sales tax. Milton argues that a national sales tax is a proportional, vertically equitable tax. Rocco argues that a national sales tax would be a regressive, vertically inequitable tax. Explain both sides of the argument. 118) 119) Evaluate the U.S. federal tax system on the certainty and economy criteria. Jonah, a single taxpayer, earns $150,000 in taxable income and $10,000 in interest from an investment in city of Denver bonds. Using the U.S. tax rate schedule for year 2023, how much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate? If Jonah earned an additional $40,000 of taxable income, what is his marginal tax rate on this income? (Use tax rate schedule.) Note: Round the tax rates to two decimal places, e.g., 0.12345 as 12.35 percent. 33 Version 1 120) Jonah, a single taxpayer, earns $151,000 in taxable income and $11,000 in interest from an investment in city of Denver bonds. Using the U.S. tax rate schedule for year 2023, how much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate? If Jonah earned an additional $41,000 of taxable income, what is his marginal tax rate on this income? (Use tax rate schedule.) Note: Round the tax rates to two decimal places, e.g., 0.12345 as 12.35 percent. 121) Heather, a single taxpayer who files as a head of household, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Oxford bonds. Using the U.S. tax rate schedule for year 2023, how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $20,000 of tax deductions, what is her marginal tax rate on these deductions? (Use tax rate schedule.) Note: Round the tax rates to two decimal places, e.g., 0.12345 as 12.35 percent. 122) Heather, a single taxpayer who files as a head of household, earns $64,800 in taxable income and $9,800 in interest from an investment in city of Oxford bonds. Using the U.S. tax rate schedule for year 2023, how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $24,800 of tax deductions, what is her marginal tax rate on these deductions? (Use tax rate schedule.) Note: Round the tax rates to two decimal places, e.g., 0.12345 as 12.35 percent. 34 Version 1 123) Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock bonds. Using the U.S. tax rate schedule for married filing jointly for year 2023, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income, what is their marginal tax rate on this income? (Use tax rate schedule.) Note: Round the tax rates to two decimal places, e.g., 0.12345 as 12.35 percent. 124) Nick and Jessica are married taxpayers that file married filing separately. Jessica earns $250,000 of taxable income per year. Nick earns $130,000 of taxable income per year. Using the appropriate U.S. tax rate schedule for year 2023, how much tax does each of them pay? What are their marginal and average tax rates? How much tax would they save, if any, if they filed jointly? (Use tax rate schedule.) Note: Round the tax rates to two decimal places, e.g., 0.12345 as 12.35 percent.) 125) Ariel invests $50,000 in a city of Las Vegas bond that pays 5 percent interest. Alternatively, Ariel could have invested the $50,000 in a bond recently issued by Jittery Joe's, Incorporated that pays 8 percent interest with similar non-tax characteristics as the city of Las Vegas bond (e.g., similar risk). Assume that Ariel's marginal tax rate is 24 percent. What is her after-tax rate of return for the city of Las Vegas bond? For the Jittery Joe's, Incorporated bond? How much explicit tax does Ariel pay on the city of Las Vegas bond? How much implicit tax does she pay on the city of Las Vegas bond? How much explicit tax would she have paid on the Jittery Joe's, Incorporated bond? Which bond should she choose? 35 Version 1 126) Nelson has the choice between investing in a city of Fruithurst bond at 4 percent or a J.B. Ribs, Incorporated bond at 6.5 percent. Assuming that both bonds have the same nontax characteristics and that Nelson has a 40 percent marginal tax rate, in which bond should he invest? What interest rate offered by J.B. Ribs, Incorporated would make Nelson indifferent between investing in the two bonds? 127) Nelson has the choice between investing in a city of Fruithurst bond at 5.3 percent or a J.B. Ribs, Incorporated bond at 7.5 percent. Assuming that both bonds have the same nontax characteristics and that Nelson has a 40 percent marginal tax rate, in which bond should he invest? What interest rate offered by J.B. Ribs, Incorporated would make Nelson indifferent between investing in the two bonds? 128) Namratha has the choice between investing in a city of Watkinsville bond at 4.5 percent or a Moe's, Incorporated bond at 7 percent. Assuming that both bonds have the same nontax characteristics and that Namratha has a 32 percent marginal tax rate, in which bond should she invest? What interest rate offered by Moe's, Incorporated would make Namratha indifferent between investing in the two bonds? 36 Version 1 129) Given the following tax structure, what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to effective tax rates? Taxpayer Salary Muni-Bond Interest Mort Total Tax $ 20,000 $ 5,000 Lizzy $ 4,000 $ 80,000 $ 30,000 130) ??? Given the following tax structure, what is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Lizzy to make the tax progressive with respect to effective tax rates? Taxpayer Salary Muni-Bond Interest Mort Total Tax $ 25,000 $ 6,250 Lizzy $ 5,000 $ 82,000 $ 31,000 131) ??? Given the following tax structure, what is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to effective tax rates? Taxpayer Salary Muni-Bond Interest Diego Total Tax $ 30,000 $ 10,000 Dora $ 1,500 $ 50,000 $ 5,000 ??? 37 Version 1 132) Junior earns $80,000 taxable income as a regional circuit stock car driver and is taxed at an average rate of 25 percent (i.e., $20,000 of tax). If Congress increases the income tax rate such that Junior's average tax rate increases from 25 percent to 30 percent, how much more income tax will he pay assuming that the income effect is larger than the substitution effect? What effect will this tax rate change have on the tax base and tax collected? What will happen to the government's tax revenues if Junior chooses to spend more time pursuing his other passions besides work (e.g., earns only $60,000 in taxable income) in response to the tax rate change? What is the term that describes this type of reaction to a tax rate increase? Note: Round your answers to two decimal places 133) Given the following tax structure, what amount of tax would need to be assessed on Carrie to make the tax horizontally equitable? What is the minimum tax that Simon should pay to make the tax structure vertically equitable based on Fantasia's tax rate? This would result in what type of tax rate structure? Taxpayer Salary Fantasia $ 20,000 Total Tax Simon $ 1,500 $ 30,000 Carrie $ 2,000 $ 20,000 ??? 38 Version 1 134) Consider the following tax rate structures. Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not? Taxpayer Salary Lucy Total Tax $ 40,000 Ricky $ 4,500 $ 20,000 Ethel $ 4,500 $ 40,000 $ 4,500 135) Consider the following tax rate structure. Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not? Taxpayer Salary Moe Total Tax $ 20,000 Larry $ 1,500 $ 40,000 Curly $ 8,500 $ 100,000 $ 25,500 136) Jed Clampett is expanding his family-run beer distributorship into Georgia or Tennessee. His parents began the business many years ago and now three generations of Clampetts work in the family business. Jed will relocate the entire family (his parents, spouse, children, etc.) to either state after the move. What types of taxes may influence his decision of where to locate his business? What nontax factors may influence the decision? 39 Version 1 137) Congress would like to increase tax revenues by 20 percent. Assume that the average taxpayer in the United States earns $80,000 and pays an average tax rate of 17.5 percent. If the income effect is larger than the substitution effect, what average tax rate will result in a 20 percent increase in tax revenues? This is an example of what type of forecasting? 138) Congress would like to increase tax revenues by 25 percent. Assume that the average taxpayer in the United States earns $78,000 and pays an average tax rate of 17 percent. If the income effect is larger than the substitution effect, what average tax rate will result in a 25 percent increase in tax revenues? This is an example of what type of forecasting? 40 Version 1 Answer Key Test name: Chapter 01 Test Bank - Static and Algo 1) Essay 2) FALSE 3) TRUE 4) FALSE 5) FALSE 6) FALSE 7) FALSE 8) TRUE 9) FALSE 10) FALSE 11) TRUE 12) FALSE 13) TRUE 14) FALSE 15) TRUE 16) FALSE 17) TRUE 18) TRUE 19) TRUE 20) FALSE 21) FALSE 22) TRUE 23) TRUE 24) FALSE 25) FALSE 26) TRUE 27) TRUE 28) FALSE 29) FALSE 30) FALSE 31) TRUE 32) FALSE 33) TRUE 34) FALSE 35) FALSE 36) TRUE 37) FALSE 41 Version 1 38) FALSE 39) TRUE 40) E 41) C 42) E 43) D 44) B 45) C 46) E 47) B 48) C 49) B 50) B 51) B 52) A 53) A 54) B 55) B 56) B 57) B 58) C 59) D 60) B 61) D 62) B 63) C 64) A 65) B 66) D 67) B 68) D 69) E 70) D 71) A 72) A 73) C 74) C 75) C 76) B 77) A 42 Version 1 78) D 79) E 80) E 81) C 82) C 83) D 84) D 85) C 86) C 87) C 88) C 89) E 90) E 91) A 92) A 93) C 94) C 95) A 96) A 97) A 98) C 99) C 100) 101) 102) 103) 104) 105) 106) 107) 108) 109) 110) 111) 112) 113) 114) 115) 116) 117) D D C C B B A A D Essay Essay Essay Essay Essay Essay Essay Essay Essay 43 Version 1 Essay 118) 119) 120) 121) 122) 123) 124) 125) 126) 127) 128) 129) 130) 131) 132) 133) 134) 135) 136) 137) 138) Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay Essay 44 Version 1 Student name: 1) Corporations are required to file a tax return annually regardless of their taxable income. ⊚ true ⊚ false 2) The tax return filing requirements for individual taxpayers only depend on the taxpayer's filing status. ⊚ true ⊚ false 3) If a taxpayer is due a refund, she does not have to file a tax return. ⊚ true ⊚ false 4) If April 15th falls on a Saturday, the due date for individual tax returns will be on Monday, April 17th (assuming it is not a holiday). ⊚ true ⊚ false 5) If an individual taxpayer is unable to file a tax return by its original due date, the taxpayer can request an automatic nine-month extension to file the return. ⊚ true ⊚ false 6) An extension to file a tax return does not extend the due date for tax payments. ⊚ true ⊚ false 7) The statute of limitations for IRS assessment generally ends four years after the date a tax return is filed. ⊚ true ⊚ false 1 Version 1 8) For fraudulent tax returns, the statute of limitations for IRS assessment is 10 years. ⊚ true ⊚ false 9) The IRS DIF system checks each tax return for mathematical mistakes and errors. ⊚ true ⊚ false 10) Joel reported a high amount of charitable contributions as a deduction on his individual tax return relative to taxpayers with similar income levels. The information matching program is the IRS program most likely to identify Joel's tax return for audit. ⊚ true ⊚ false 11) Office examinations are the most common type of IRS audit. ⊚ true ⊚ false 12) The three basic types of IRS examinations are computer exams, office exams, and business exams. ⊚ true ⊚ false 13) The "30-day" letter gives the taxpayer the opportunity to request an appeals conference or agree to a proposed IRS adjustment on the taxpayer's income tax return. ⊚ true ⊚ false 14) The "90-day" letter gives the taxpayer the opportunity to pay a proposed IRS tax adjustment or file a petition in the U.S. District Court to contest the adjustment and hear the case. ⊚ true ⊚ false 2 Version 1 15) If a taxpayer has little cash and a very technical tax case about which she feels very strongly that the tax rules are "on her side," she should prefer to have her case tried in the U.S. Tax Court. ⊚ true ⊚ false 16) In researching a tax issue, Eric finds that the U.S. Circuit Court of Appeals for the Federal Circuit previously has ruled in favor of his tax position, whereas the 11th Circuit (Eric's circuit) previously has ruled against his tax position. If Eric is contemplating litigating his tax position with the IRS, he should prefer to have his case first tried by the U.S. Tax Court. ⊚ true ⊚ false 17) If a taxpayer loses a case at the circuit court level, he is granted an automatic appeal hearing with the Supreme Court. ⊚ true ⊚ false 18) Secondary authorities are official sources of the tax law with a lesser "weight" than primary authorities. ⊚ true ⊚ false 19) Revenue rulings and revenue procedures are examples of primary authorities. ⊚ true ⊚ false 20) The Internal Revenue Code and tax treaties are examples of statutory authorities. ⊚ true ⊚ false 3 Version 1 21) Because the U.S. District Court hears a broader set of cases, decisions by the U.S. District Court may be considered to have more authoritative weight than those by the U.S. Court of Federal Claims. ⊚ true ⊚ false 22) Temporary regulations have more authoritative weight than revenue rulings. ⊚ true ⊚ false 23) Proposed and temporary regulations have the same authoritative weight. ⊚ true ⊚ false 24) An acquiescence indicates that the IRS lost a court case and that it has decided to follow the court's ruling in the future. ⊚ true ⊚ false 25) The Internal Revenue Code of 1986 is the name of the current income tax code of the United States of America. ⊚ true ⊚ false 26) As required by the Constitution, all tax bills are supposed to originate in the House of Representatives. ⊚ true ⊚ false 27) The Senate Ways and Means Committee is in charge of drafting tax bills in the U.S. Senate. ⊚ true ⊚ false 4 Version 1 28) Closed facts are especially conducive to tax planning. ⊚ true ⊚ false 29) Of the two basic types of tax services, beginning tax researchers often prefer topical tax services. ⊚ true ⊚ false 30) In researching a question of fact, the researcher should focus her efforts on identifying authorities with fact patterns similar to her client's facts. ⊚ true ⊚ false 31) Under the Statements on Standards for Tax Services, a CPA may recommend a tax return position if the position is frivolous and the position is not disclosed on the tax return. ⊚ true ⊚ false 32) In general, a CPA will satisfy his professional responsibilities under the Statements on Standards for Tax Services when recommending a tax return position if he complies with the standards imposed by the applicable tax authority. ⊚ true ⊚ false 33) Under the tax law, taxpayers may be subject to both civil and criminal penalties for underpaying their tax liability (e.g., due to fraud). ⊚ true ⊚ false 5 Version 1 34) A taxpayer can avoid an underpayment penalty if there is substantial authority that supports her tax return position. ⊚ true ⊚ false 35) If the IRS assesses additional tax on a tax return upon audit, a taxpayer may be subject to interest and penalties on the underpayment. ⊚ true ⊚ false 36) Which of the following is not a factor that determines whether a taxpayer is required to file a tax return? A) Filing status B) Taxpayer's gross income C) Taxpayer's employment D) Taxpayer's age E) None of the choices are correct. 37) If Paula requests an extension to file her individual tax return in a timely manner, the latest she could file her return without a failure-to-file penalty is (assuming the extended due date does not fall on a weekend or holiday): A) September 15thSeptember 15th. B) October 15thOctober 15th. C) August 15thAugust 15th. D) November 15thNovember 15thth. E) None of the choices are correct. 38) If Lindley requests an extension to file her individual tax return in a timely manner, the latest she could pay her tax due without penalty is (assuming the due date does not fall on a weekend or holiday): A) April 15thApril 15th. B) October 15thOctober 15th. C) August 15thAugust 15th. D) November 15November 15thth. E) None of the choices are correct. 6 Version 1 39) Corporations are required to file a tax return only if their taxable income is greater than: A) $0. B) $1,000. C) $600. D) $750. E) None of the choices are correct. Corporations are always required to file a tax return. 40) Generally, if April 15th falls on a Saturday, individual tax returns will be due on: A) April 14thApril 14th. B) April 15thApril 15th. C) April 16thApril 16th. D) April 17thApril 17th. E) None of the choices are correct. 41) Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic is single, 30 years old, and will have zero tax liability this year, he: A) is required to file a tax return. B) is not required to file a tax return but should file a return anyway. C) is required to file a tax return but should not file because he owes no tax. D) is not required to file a tax return and should not file a return. E) None of the choices are correct. 42) Greg earned $25,500 in 2023 and had $1,500 of federal income taxes withheld from his salary. Assuming that Greg is single, 25 years old, and will have a total tax liability of $1,301 (and thus will receive a $199 refund), he: A) is required to file a tax return. B) is not required to file a tax return but should file a return anyway. C) is required to file a tax return but should not file because he owes no tax. D) is not required to file a tax return and should not file a return. E) None of the choices are correct. 7 Version 1 43) Bill filed his 2023 tax return on March 15th, 2024. The statute of limitations for IRS assessment on Bill's 2023 tax return should end: A) March 15thMarch 15th, 2026. B) April 15thApril 15th, 2026. C) March 15thMarch 15th, 2027. D) April 15thApril 15th, 2027. E) None of the choices are correct. 44) Henry filed his 2023 tax return on May 15th, 2024. The statute of limitations for IRS assessment on Henry's 2023 tax return should end: A) May 15thMay 15th, 2026. B) April 15thApril 15th, 2026. C) May 15thMay 15th, 2027. D) April 15thApril 15th, 2027. E) None of the choices are correct. 45) Allen filed his 2023 tax return on May 15th, 2024, and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2023 tax return should end: A) May 15thMay 15th, 2026. B) April 15thApril 15th, 2026. C) May 15thMay 15th, 2027. D) April 15thApril 15th, 2027. E) None of the choices are correct. 46) Andy filed a fraudulent 2023 tax return on May 1, 2024. The statute of limitations for IRS assessment on Andy's 2023 tax return should end: A) May 1stMay 1st, 2027. B) April 15thApril 15th, 2027. C) May 1stMay 1st, 2030. D) April 15thApril 15th, 2030. E) None of the choices are correct. 8 Version 1 47) Martin has never filed a 2023 tax return despite earning approximately $30,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2023 tax return? A) 2026 B) 2027 C) 2030 D) 2031 E) None of the choices are correct. 48) Which of the following is not a common method that the IRS uses to select returns for audit? A) DIF system B) Tax Select system C) Information matching D) Document perfection E) None of the choices are correct. 49) Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake? A) DIF system B) Mathematical correction C) Document perfection D) Information matching E) None of the choices are correct. 50) Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions, which audit program likely identified Tyrone's tax return for audit? A) DIF system B) Deduction Detective C) Document perfection D) Information matching E) None of the choices are correct. 9 Version 1 51) Ramon's tax return was randomly selected for audit. Which IRS program likely selected Ramon's return for audit? A) DIF system B) National Research Program C) Document perfection D) Information matching E) None of the choices are correct. 52) Which of the following audits is the most common and typically less comprehensive? A) Correspondence B) Random C) Office D) Field E) None of the choices are correct. 53) Which of the following audits is the least common, broadest in scope, and typically most complex? A) Correspondence B) Targeted C) Office D) Field E) None of the choices are correct. 54) Dan received a letter from the IRS that gave him the choice of 1. requesting a conference with an appeals officer or 2. agreeing to a proposed tax adjustment. Dan received the: A) 30-day letter. B) 90-day letter. C) Appeals letter. D) Tax adjustment letter. E) None of the choices are correct. 10 Version 1 55) Basu received a letter from the IRS that gave him the choice of (1) paying a proposed deficiency or (2) filing a petition with the U.S. Tax Court. Basu received the: A) 30-day letter. B) 90-day letter. C) Appeals letter. D) Tax adjustment letter. E) None of the choices are correct. 56) Which of the following courts is the only court that provides for a jury trial? A) Tax Court B) U.S. Court of Federal Claims C) U.S. District Court D) U.S. Circuit Court of Appeals E) None of the choices are correct. 57) Lavonda discovered that the 5th Circuit (where Lavonda resides) has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case? A) Tax Court only B) U.S. Court of Federal Claims only C) U.S. District Court only D) Tax Court or the U.S. District Court E) Tax Court or the U.S. Court of Federal Claims 58) Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case? A) Tax Court only B) U.S. Court of Federal Claims only C) U.S. District Court only D) Tax Court or the U.S. District Court E) Tax Court or the U.S. Court of Federal Claims 11 Version 1 59) Rowanda could not settle her tax dispute with the IRS at the appeals conference. If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency, Rowanda should litigate in the: A) U.S. District Court. B) U.S. Circuit Court of Appeals. C) U.S. Court of Federal Claims. D) Tax Court. E) None of the choices are correct. 60) Which of the following is not considered a primary authority? A) Tax Court case B) Treasury Regulation C) Revenue ruling D) Tax service E) None of the choices are correct. 61) Which of the following is not considered a secondary authority? A) Textbook B) Private letter ruling C) Tax article D) Tax service E) None of the choices are correct. 62) Which of the following has the highest authoritative weight? A) Textbook B) Private letter ruling C) Revenue ruling D) Tax service E) Tax article 12 Version 1 63) Which of the following has the highest authoritative weight? A) Legislative regulation B) Private letter ruling C) Revenue ruling D) Action on decision E) Revenue procedure 64) Josephine is considering taking a six-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris? A) Determination letter B) Private letter ruling C) Tax treaty D) Regulation E) Revenue procedure 65) Generally, code sections are arranged (grouped together): A) chronologically. B) by topic. C) randomly. D) by length. E) None of the choices are correct. 66