©THEBRIGHT EXAM SOLUTIONS
11/05/2024 12:06 PM
Tax 3001 Gottlieb Test 1 Chp 1, 2, 4, 5, Exam
Questions With Correct Answers
What are some of the taxes that currently are unique to state and local governments? - answer✔The
sales, use, and property, - personal, real, intangible-, taxes are unique to state and local governments.
Taxes that are common among the federal, state, and local governments. - answer✔Include income
taxes, excise taxes, and estate and gift taxes.
Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in
City of Heflin bonds. What is included as taxable income? Using the U.S. tax rate schedule, 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? - answer✔The city bond interest is not included in gross income. Taxable income is
$75,000.
How are federal taxes figured on $75,000 of taxable income? - answer✔Follow the 2016 Individual Tax
Rate Schedule for single taxpayers. Chuck made over $37,650, but not over $91,150. So his tax is the flat
amount of $5,183.75, plus the amount earned over $37,650 times 25%. Total tax is $14,521.25.
How is the average tax rate calculated? - answer✔Total taxes paid divided by taxable income gives the
average tax rate.
How is the effective tax rate calculated? - answer✔Total taxes paid divided by total income gives the
effective tax rate.
How is the marginal tax rate calculated? - answer✔Total change in taxes divided by the total change in
income.
What is the marginal tax rate used for? - answer✔The tax rate of each additional dollar over base up to
the next income bracket. This rate is used for tax planning. The most important figure for making
decisions.
What items are needed to calculate income taxed due? - answer✔Tax base and tax rate for the amount
over base.
Proportional taxes - answer✔As base rises, the rate stays the same. This is a flat rate. An example is
sales tax.
, ©THEBRIGHT EXAM SOLUTIONS
11/05/2024 12:06 PM
Progressive taxes - answer✔As base rises, marginal rate increases. An example - income taxes.
Regressive taxes - answer✔AS base goes up the marginal rate goes down. An example is social security
tax.
Fergie has the choice of investing in a State of New York bond at 5 % and a Surething bond at 8 %.
Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent
marginal tax rate, in which bond should she invest? - answer✔Fergie's after tax rate of return on the tax
exempt State of New York bond is 5 percent. The Surething bond pays taxable interest of 8 percent.
Fergie's after tax rate
of return on the Surething bond is 5.6 percent. Which equals the 8% interest income on the bond minus
8% times her 30% marginal tax rate.
Given the following tax structure, if Milwah made a salary of $10,000 with taxes paid of $600 and
Shameika made $50,000, what minimum tax would need to be assessed on Shameika to make the tax
progressive with respect to average tax rates? - answer✔First figure the average tax rate using the
information provided for Milwah which is 6%. Next, figure Shameika's taxes due at the average tax rate
which is $3,000. She would need to pay more than $3,000 in order for the tax structure to be
progressive in respect to effective tax rates.
Who must file a tax return? - answer✔Those whose gross income is greater than their standard
deduction plus personal exemption, plus any additional deductions such as for age or blindness.
What are two reasons to file if your income is not more that the minimum required to file? - answer✔To
obtain a refund of over paid taxes and to begin the statute of limitations.
What is the length of the statute of limitations? - answer✔Three years from the later of the due date to
file or the date filed if after the due date.
What is the statute of limitations for understated income? - answer✔For income understated by 25% or
more the statute of limitations is six years.
Statute of limitations for a fraudulent return? - answer✔No statute of limitations
Statute of limitations on a return that was never filed? - answer✔No statute of limitations.
What items does the filing status provide? - answer✔The standard deduction amount and the tax rate.
What amendments gives congress the right to collect taxes? - answer✔Amendment 16
Primary tax law authorities - answer✔1. Legislative branch
2. Judicial branch
3. Executive / administrative branch
Legislative branch - answer✔Statutory authority was issued by congress in the IRS Code of 1986.
11/05/2024 12:06 PM
Tax 3001 Gottlieb Test 1 Chp 1, 2, 4, 5, Exam
Questions With Correct Answers
What are some of the taxes that currently are unique to state and local governments? - answer✔The
sales, use, and property, - personal, real, intangible-, taxes are unique to state and local governments.
Taxes that are common among the federal, state, and local governments. - answer✔Include income
taxes, excise taxes, and estate and gift taxes.
Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in
City of Heflin bonds. What is included as taxable income? Using the U.S. tax rate schedule, 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? - answer✔The city bond interest is not included in gross income. Taxable income is
$75,000.
How are federal taxes figured on $75,000 of taxable income? - answer✔Follow the 2016 Individual Tax
Rate Schedule for single taxpayers. Chuck made over $37,650, but not over $91,150. So his tax is the flat
amount of $5,183.75, plus the amount earned over $37,650 times 25%. Total tax is $14,521.25.
How is the average tax rate calculated? - answer✔Total taxes paid divided by taxable income gives the
average tax rate.
How is the effective tax rate calculated? - answer✔Total taxes paid divided by total income gives the
effective tax rate.
How is the marginal tax rate calculated? - answer✔Total change in taxes divided by the total change in
income.
What is the marginal tax rate used for? - answer✔The tax rate of each additional dollar over base up to
the next income bracket. This rate is used for tax planning. The most important figure for making
decisions.
What items are needed to calculate income taxed due? - answer✔Tax base and tax rate for the amount
over base.
Proportional taxes - answer✔As base rises, the rate stays the same. This is a flat rate. An example is
sales tax.
, ©THEBRIGHT EXAM SOLUTIONS
11/05/2024 12:06 PM
Progressive taxes - answer✔As base rises, marginal rate increases. An example - income taxes.
Regressive taxes - answer✔AS base goes up the marginal rate goes down. An example is social security
tax.
Fergie has the choice of investing in a State of New York bond at 5 % and a Surething bond at 8 %.
Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent
marginal tax rate, in which bond should she invest? - answer✔Fergie's after tax rate of return on the tax
exempt State of New York bond is 5 percent. The Surething bond pays taxable interest of 8 percent.
Fergie's after tax rate
of return on the Surething bond is 5.6 percent. Which equals the 8% interest income on the bond minus
8% times her 30% marginal tax rate.
Given the following tax structure, if Milwah made a salary of $10,000 with taxes paid of $600 and
Shameika made $50,000, what minimum tax would need to be assessed on Shameika to make the tax
progressive with respect to average tax rates? - answer✔First figure the average tax rate using the
information provided for Milwah which is 6%. Next, figure Shameika's taxes due at the average tax rate
which is $3,000. She would need to pay more than $3,000 in order for the tax structure to be
progressive in respect to effective tax rates.
Who must file a tax return? - answer✔Those whose gross income is greater than their standard
deduction plus personal exemption, plus any additional deductions such as for age or blindness.
What are two reasons to file if your income is not more that the minimum required to file? - answer✔To
obtain a refund of over paid taxes and to begin the statute of limitations.
What is the length of the statute of limitations? - answer✔Three years from the later of the due date to
file or the date filed if after the due date.
What is the statute of limitations for understated income? - answer✔For income understated by 25% or
more the statute of limitations is six years.
Statute of limitations for a fraudulent return? - answer✔No statute of limitations
Statute of limitations on a return that was never filed? - answer✔No statute of limitations.
What items does the filing status provide? - answer✔The standard deduction amount and the tax rate.
What amendments gives congress the right to collect taxes? - answer✔Amendment 16
Primary tax law authorities - answer✔1. Legislative branch
2. Judicial branch
3. Executive / administrative branch
Legislative branch - answer✔Statutory authority was issued by congress in the IRS Code of 1986.
