Concepts in Federal Taxation UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Marginal Tax Rate (MTR) - CORRECT ANSWER - The rate of tax that will be paid on the
next dollar of income or the rate of tax that will be saved by the next dollar of deduction.
Defferals - CORRECT ANSWER - An item that does not affect the current period's taxable
income but will affect taxable income in the future tax year.
Exclusions - CORRECT ANSWER - Represent increases in a tax-payers wealth and
recoveries of the taxpayer's capital investment that Congress has decided should not be subject to
income tax.
pay-as-you-go - CORRECT ANSWER - requires taxpayers to pay tax as they generate
income.
tax avoidance - CORRECT ANSWER - The use of legal methods allowed by the tax law to
minimize a tax liability. Tax avoidance generally involves planning an intended transaction to
obtain a specific tax treatment.
Rules for CPAs - CORRECT ANSWER -
Itemized Deductions - CORRECT ANSWER - Certain personal expenditures and other
specified nonpersonal expenditures are allowed to be deducted by individuals as deductions from
AGI. These deductions are commonly referred to as itemized deductions.
Tax Planning - CORRECT ANSWER - The structuring of transactions to reduce tax costs or
increase tax savings to maximize net present value.
ACTUAL Exam Questions and CORRECT
Answers
Marginal Tax Rate (MTR) - CORRECT ANSWER - The rate of tax that will be paid on the
next dollar of income or the rate of tax that will be saved by the next dollar of deduction.
Defferals - CORRECT ANSWER - An item that does not affect the current period's taxable
income but will affect taxable income in the future tax year.
Exclusions - CORRECT ANSWER - Represent increases in a tax-payers wealth and
recoveries of the taxpayer's capital investment that Congress has decided should not be subject to
income tax.
pay-as-you-go - CORRECT ANSWER - requires taxpayers to pay tax as they generate
income.
tax avoidance - CORRECT ANSWER - The use of legal methods allowed by the tax law to
minimize a tax liability. Tax avoidance generally involves planning an intended transaction to
obtain a specific tax treatment.
Rules for CPAs - CORRECT ANSWER -
Itemized Deductions - CORRECT ANSWER - Certain personal expenditures and other
specified nonpersonal expenditures are allowed to be deducted by individuals as deductions from
AGI. These deductions are commonly referred to as itemized deductions.
Tax Planning - CORRECT ANSWER - The structuring of transactions to reduce tax costs or
increase tax savings to maximize net present value.
