TEST BANK FOR
Fundamentals of Taxation for Individuals
and Business Entities: A Practical Approach
Author: Gregory A. Carnes; Suzanne Youngberg
2025th Edition
1
,Chapter 1-18
Chapter 1 The Professional Practice Of Taxation
1) Which Of The Following Is False About Tax Planning?
A) The Appropriate Goal For Tax Planning Is To Maximize After-Tax Income.
B) The Appropriate Goal For Tax Planning Is To Minimize A Taxpayer's Tax Liability For The Year.
C) Once A Taxpayer Understands The Tax Consequences Of A Particular Transaction, They Can
Move On To The Tax Planning Stage.
D) Tax Evasion Is Not A Tax Planning
Strategy. Answer: B
Explanation: Minimizing A Taxpayer's Liability Is Not The Appropriate Goal For Tax Planning
Because If That Were The Goal, Then The Ultimate Success Would Be To Reduce A Taxpayer's
Tax Liability To Zero–Actually An Easy Goal To Meet. If A Taxpayer Has No Income For The
Year, Then There Would Be No Tax Liability, And You Will Have Minimized Their Taxes. But
Your Client Will Also Be A Very Poor And Hungry Person, So This Cannot Be The Proper
Goal.
Diff: 1
Learning Objective: LO 1.1
AACSB / AICPA: Knowledge / Accounting Competencies
Bloom's: Knowledge
Section Reference: Sec. 1.1
Time On Task: 5 Min
2) Jessica Has Received Several Job Offers From Various Accounting Firms Located In 4
Different States. She Has Performed An Analysis To Determine Her Income, Her Non-Income
Tax Costs (E.G. Cost Of Living, Etc.) And Income Tax. Jessica Is Trying To Make A Decision
On Which Offer To Accept, And She Has Asked For Your Advice. Based On The Appropriate
Goal Of Tax Planning, Which Of The Following States Would You Advise Jessica To Choose?
Gross Wages Non-Income Tax Costs Income Tax
California 120,000 52,000 24,000
New York 100,000 37,000 20,000
Virginia 70,000 10,800 10,500
Texas 50,000 6,000 5,000
A) Texas
B) California
C) Virginia
D) New York
Answer: C
Explanation: The Appropriate Goal For Tax Planning Is To Maximize After-Tax Income. After-
Tax Income Is Net Income After Reducing Revenue For All Expenses, Including Federal Income
Taxes. See Table Below For Calculation Of After-Tax Income For Each State. With That In Mind,
You Should Advise
2
,Jessica To Choose Virginia Because Doing So Maximizes Her After-Tax Income. The State
With The Lowest Income Tax (I.E., Texas) Is Not The Right Answer Because Minimizing A
Taxpayer's Liability Is Not The Appropriate Goal For Tax Planning Because If That Were The
Goal, Then The Ultimate Success Would Be To Reduce A Taxpayer's Tax Liability To Zero–An
Easy Goal To Meet. If A Taxpayer Has No Income For The Year, Then There Would Be No Tax
Liability, And You Will Have Minimized Their Taxes. But Your Client Will Also Be A Very
Poor And Hungry Person, So This Cannot Be The Proper Goal.
Gross Non-Income After-Tax
Wages Tax Costs Income Tax Income
(A) (B) (C) (D) = (A) - (B) - (C)
California 20,000 52,000 24,000 44,000
New York 100,000 37,000 20,000 43,000
Virginia 70,000 10,800 10,500 48,700
Texas 50,000 6,000 5,000 39,000
Diff: 2
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 8 Min
3) Which Of The Following Is Not Correct Regarding Tax And Non-Tax Costs?
A) Both Tax And Non-Tax Costs Must Be Considered When Making Financial And
Investment Decisions.
B) Tax Costs Include Any Type Of Tax Paid To A Local, State, Federal, Or Foreign
Government. C) Non-Tax Costs Are All Costs Other Than Tax Costs.
D) Effective Tax Planning Requires Prioritizing Tax
Costs. Answer: D
Explanation: Effective Tax Planning Requires Consideration Of Both Tax And Non-Tax
Costs. Diff: 1
Learning Objective: LO 1.1
AACSB / AICPA: Knowledge / Accounting Competencies
Bloom's: Knowledge
Section Reference: Sec. 1.1
Time On Task: 5 Min
4) Samson's Wages Are $100,000. He Lives In Maryland And His Expenses Include $25,000
Rent,
$12,000 Other Living Expenses, $27,000 Income Tax, $6,200 Payroll Tax And $5,500 Property
Tax. What Are Samson's Tax Costs?
A) $27,000
B) $33,200
C) $61,300
D) $38,700
Answer: D
Explanation: $38,700 = $27,000 + $6,200 + $5,500. Tax Costs Include Any Type Of Tax Paid
3
, To A Local, State, Federal, Or Foreign Government.
Diff: 1
4
Fundamentals of Taxation for Individuals
and Business Entities: A Practical Approach
Author: Gregory A. Carnes; Suzanne Youngberg
2025th Edition
1
,Chapter 1-18
Chapter 1 The Professional Practice Of Taxation
1) Which Of The Following Is False About Tax Planning?
A) The Appropriate Goal For Tax Planning Is To Maximize After-Tax Income.
B) The Appropriate Goal For Tax Planning Is To Minimize A Taxpayer's Tax Liability For The Year.
C) Once A Taxpayer Understands The Tax Consequences Of A Particular Transaction, They Can
Move On To The Tax Planning Stage.
D) Tax Evasion Is Not A Tax Planning
Strategy. Answer: B
Explanation: Minimizing A Taxpayer's Liability Is Not The Appropriate Goal For Tax Planning
Because If That Were The Goal, Then The Ultimate Success Would Be To Reduce A Taxpayer's
Tax Liability To Zero–Actually An Easy Goal To Meet. If A Taxpayer Has No Income For The
Year, Then There Would Be No Tax Liability, And You Will Have Minimized Their Taxes. But
Your Client Will Also Be A Very Poor And Hungry Person, So This Cannot Be The Proper
Goal.
Diff: 1
Learning Objective: LO 1.1
AACSB / AICPA: Knowledge / Accounting Competencies
Bloom's: Knowledge
Section Reference: Sec. 1.1
Time On Task: 5 Min
2) Jessica Has Received Several Job Offers From Various Accounting Firms Located In 4
Different States. She Has Performed An Analysis To Determine Her Income, Her Non-Income
Tax Costs (E.G. Cost Of Living, Etc.) And Income Tax. Jessica Is Trying To Make A Decision
On Which Offer To Accept, And She Has Asked For Your Advice. Based On The Appropriate
Goal Of Tax Planning, Which Of The Following States Would You Advise Jessica To Choose?
Gross Wages Non-Income Tax Costs Income Tax
California 120,000 52,000 24,000
New York 100,000 37,000 20,000
Virginia 70,000 10,800 10,500
Texas 50,000 6,000 5,000
A) Texas
B) California
C) Virginia
D) New York
Answer: C
Explanation: The Appropriate Goal For Tax Planning Is To Maximize After-Tax Income. After-
Tax Income Is Net Income After Reducing Revenue For All Expenses, Including Federal Income
Taxes. See Table Below For Calculation Of After-Tax Income For Each State. With That In Mind,
You Should Advise
2
,Jessica To Choose Virginia Because Doing So Maximizes Her After-Tax Income. The State
With The Lowest Income Tax (I.E., Texas) Is Not The Right Answer Because Minimizing A
Taxpayer's Liability Is Not The Appropriate Goal For Tax Planning Because If That Were The
Goal, Then The Ultimate Success Would Be To Reduce A Taxpayer's Tax Liability To Zero–An
Easy Goal To Meet. If A Taxpayer Has No Income For The Year, Then There Would Be No Tax
Liability, And You Will Have Minimized Their Taxes. But Your Client Will Also Be A Very
Poor And Hungry Person, So This Cannot Be The Proper Goal.
Gross Non-Income After-Tax
Wages Tax Costs Income Tax Income
(A) (B) (C) (D) = (A) - (B) - (C)
California 20,000 52,000 24,000 44,000
New York 100,000 37,000 20,000 43,000
Virginia 70,000 10,800 10,500 48,700
Texas 50,000 6,000 5,000 39,000
Diff: 2
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 8 Min
3) Which Of The Following Is Not Correct Regarding Tax And Non-Tax Costs?
A) Both Tax And Non-Tax Costs Must Be Considered When Making Financial And
Investment Decisions.
B) Tax Costs Include Any Type Of Tax Paid To A Local, State, Federal, Or Foreign
Government. C) Non-Tax Costs Are All Costs Other Than Tax Costs.
D) Effective Tax Planning Requires Prioritizing Tax
Costs. Answer: D
Explanation: Effective Tax Planning Requires Consideration Of Both Tax And Non-Tax
Costs. Diff: 1
Learning Objective: LO 1.1
AACSB / AICPA: Knowledge / Accounting Competencies
Bloom's: Knowledge
Section Reference: Sec. 1.1
Time On Task: 5 Min
4) Samson's Wages Are $100,000. He Lives In Maryland And His Expenses Include $25,000
Rent,
$12,000 Other Living Expenses, $27,000 Income Tax, $6,200 Payroll Tax And $5,500 Property
Tax. What Are Samson's Tax Costs?
A) $27,000
B) $33,200
C) $61,300
D) $38,700
Answer: D
Explanation: $38,700 = $27,000 + $6,200 + $5,500. Tax Costs Include Any Type Of Tax Paid
3
, To A Local, State, Federal, Or Foreign Government.
Diff: 1
4
