Federal Taxation Test 1 Questions &
Answers 100% Solved!!
Which of the following is an example of a progressive tax system?
Social Security Tax
A sales tax
A proportional tax
U.S. Federal Income Tax - ANSWERSU.S. Federal Income Tax
Which of the following is considered a tax?
Fees to register an automobile
Speeding ticket
Entrance fee for a national museum
Local surcharge for a homeowner to connect to city sewer service
1% local surcharge on hotel rooms to pay for city government - ANSWERS1% local
surcharge on hotel rooms to pay for city government
Mitch, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from
an investment in the city of Birmingham Bonds. Using the U.S. tax rate schedule for
year 2018, how much federal tax will he owe?
$22,000
$18,289.50
$13,879
$24,000
None of the choices are correct. - ANSWERS$18,289.50
$100,000 - 82,500 = 17,500 * 24% = 4,200 + 14,089.50 = $18,289.50
Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from
an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year
2018, what is his average tax rate (rounded)?
,22.00%
13.88%
18.29%
24.00% - ANSWERS18.29%
Total Tax -> $18,289.50 ÷ Taxable Income -> $100,000
Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from
an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year
2018, what is his effective tax rate (rounded)?
22.00%
24.00%
18.29%
16.63% - ANSWERS16.63%
Total Tax -> $18,289.50 ÷ Total Income -> $110,000
Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from
an investment in city of Birmingham Bonds. If Marc earned an additional $80,000, what
would his 2018 marginal tax rate be on the $80,000 (rounded)?
26.25%
24.00%
32.48%
32.00% - ANSWERS26.25%
$57,500 (remaining in previous tax bracket) * 24% = $13,800
$22,500 (applying to next tax bracket) * 32% = $7,200
$13,800 + $7,200 = $21,000
$21,,000 = 26.25%
James invests $100,000 in the city of Athens bond that pays 8% interest. Alternatively,
James could have invested the $100,000 in a bond recently issued by HighTech, Inc.
, that pays 10% interest with similar risk as the city of Athens bond. Assume that James's
marginal tax rate is 25%. Which bond should James choose and why?
The HighTech, Inc. bond because it earns a higher pre-tax rate of return.
The HighTech, Inc. bond because it earns a high after-tax rate of return.
The city of Athens bond because it earns a high pre-tax rate of return.
The city of Athens bond because it earns a higher after-tax rate of return.
James should be indifferent between the two bonds. - ANSWERSThe city of Athens
bond because it earns a higher after-tax rate of return.
City of Athens bond
$100,000 * 8% interest = $8,000
No tax repercussions
HighTech, Inc. bond
$100,000 * 10% = $10,000
$10,000 * 24% tax = $2,400 tax
$10,000 - 2,400 = 7,600 after tax return
Chuck, a single taxpayer, earns $58,500 in taxable income and $20,800 in interest from
an investment in City of Heflin bonds.
a. How much federal tax will he owe?
b. What is his average tax rate?
c. What is his effective tax rate?
d. What is his current marginal tax rate? - ANSWERSa. $8,743.50
$4,453.50 (base tax) + 19,500 * 22% (in excess * marginal tax rate) = 8,743.50
b. $8,743.,200 = 15.02%
(total tax / taxable income)
c.
Jackie's return was selected for audit because she did not report her salary (from her
Form W-2 from her employer) on her tax return. Which IRS program likely identified
Jackie's oversight?
DIF System
Document Perfection
Answers 100% Solved!!
Which of the following is an example of a progressive tax system?
Social Security Tax
A sales tax
A proportional tax
U.S. Federal Income Tax - ANSWERSU.S. Federal Income Tax
Which of the following is considered a tax?
Fees to register an automobile
Speeding ticket
Entrance fee for a national museum
Local surcharge for a homeowner to connect to city sewer service
1% local surcharge on hotel rooms to pay for city government - ANSWERS1% local
surcharge on hotel rooms to pay for city government
Mitch, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from
an investment in the city of Birmingham Bonds. Using the U.S. tax rate schedule for
year 2018, how much federal tax will he owe?
$22,000
$18,289.50
$13,879
$24,000
None of the choices are correct. - ANSWERS$18,289.50
$100,000 - 82,500 = 17,500 * 24% = 4,200 + 14,089.50 = $18,289.50
Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from
an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year
2018, what is his average tax rate (rounded)?
,22.00%
13.88%
18.29%
24.00% - ANSWERS18.29%
Total Tax -> $18,289.50 ÷ Taxable Income -> $100,000
Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from
an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year
2018, what is his effective tax rate (rounded)?
22.00%
24.00%
18.29%
16.63% - ANSWERS16.63%
Total Tax -> $18,289.50 ÷ Total Income -> $110,000
Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from
an investment in city of Birmingham Bonds. If Marc earned an additional $80,000, what
would his 2018 marginal tax rate be on the $80,000 (rounded)?
26.25%
24.00%
32.48%
32.00% - ANSWERS26.25%
$57,500 (remaining in previous tax bracket) * 24% = $13,800
$22,500 (applying to next tax bracket) * 32% = $7,200
$13,800 + $7,200 = $21,000
$21,,000 = 26.25%
James invests $100,000 in the city of Athens bond that pays 8% interest. Alternatively,
James could have invested the $100,000 in a bond recently issued by HighTech, Inc.
, that pays 10% interest with similar risk as the city of Athens bond. Assume that James's
marginal tax rate is 25%. Which bond should James choose and why?
The HighTech, Inc. bond because it earns a higher pre-tax rate of return.
The HighTech, Inc. bond because it earns a high after-tax rate of return.
The city of Athens bond because it earns a high pre-tax rate of return.
The city of Athens bond because it earns a higher after-tax rate of return.
James should be indifferent between the two bonds. - ANSWERSThe city of Athens
bond because it earns a higher after-tax rate of return.
City of Athens bond
$100,000 * 8% interest = $8,000
No tax repercussions
HighTech, Inc. bond
$100,000 * 10% = $10,000
$10,000 * 24% tax = $2,400 tax
$10,000 - 2,400 = 7,600 after tax return
Chuck, a single taxpayer, earns $58,500 in taxable income and $20,800 in interest from
an investment in City of Heflin bonds.
a. How much federal tax will he owe?
b. What is his average tax rate?
c. What is his effective tax rate?
d. What is his current marginal tax rate? - ANSWERSa. $8,743.50
$4,453.50 (base tax) + 19,500 * 22% (in excess * marginal tax rate) = 8,743.50
b. $8,743.,200 = 15.02%
(total tax / taxable income)
c.
Jackie's return was selected for audit because she did not report her salary (from her
Form W-2 from her employer) on her tax return. Which IRS program likely identified
Jackie's oversight?
DIF System
Document Perfection
