QUIZZES CHAPTER 4: PERSONAL
FINANCE KAPOOR 14e WITH SOLVED
SOLUTIONS.
Quiz 4-1 - Answer
How should you consider taxes in your financial planning? - Answer Tax planning should
include knowing current tax laws, maintaining complete tax records, and making financial
decisions that reduce your tax liability.
What types of taxes do people often overlook when making financial decisions? - Answer
While most people are aware of the impact of federal income taxes on their financial situation,
a wide variety of other taxes also affect financial planning. These include sales, excise, property,
estate, inheritance, gift, and state and local income taxes.
Quiz 4-2 - Answer
How does tax-exempt income differ from tax-deferred income? - Answer Tax-exempt income is
not subject to taxation. Tax-deferred income is income that will be taxed at a later date.
What information is needed to compute taxable income? - Answer Taxable income is the
result of subtracting adjustments to income, deductions, and exemptions from gross income.
When would you use the standard deduction instead of itemized deductions? - Answer The
standard deduction would be used when a person does not have at least that amount in
itemized deductions. A taxpayer with no or few itemized deductions still receives the standard
deduction—an amount on which no taxes are paid.
What is the difference between your marginal tax rate and your average tax rate? - Answer
The marginal tax rate refers to the rate used to calculate the last (and next) dollar of taxable
income. The average tax rate is based on the total tax due divided by taxable income.
How does a tax credit affect the amount owed for federal income tax? - Answer A tax credit is
a direct (dollar-for-dollar) reduction in the amount owed in taxes. One example of a tax credit is
child and dependent care expenses.
FINANCE KAPOOR 14e WITH SOLVED
SOLUTIONS.
Quiz 4-1 - Answer
How should you consider taxes in your financial planning? - Answer Tax planning should
include knowing current tax laws, maintaining complete tax records, and making financial
decisions that reduce your tax liability.
What types of taxes do people often overlook when making financial decisions? - Answer
While most people are aware of the impact of federal income taxes on their financial situation,
a wide variety of other taxes also affect financial planning. These include sales, excise, property,
estate, inheritance, gift, and state and local income taxes.
Quiz 4-2 - Answer
How does tax-exempt income differ from tax-deferred income? - Answer Tax-exempt income is
not subject to taxation. Tax-deferred income is income that will be taxed at a later date.
What information is needed to compute taxable income? - Answer Taxable income is the
result of subtracting adjustments to income, deductions, and exemptions from gross income.
When would you use the standard deduction instead of itemized deductions? - Answer The
standard deduction would be used when a person does not have at least that amount in
itemized deductions. A taxpayer with no or few itemized deductions still receives the standard
deduction—an amount on which no taxes are paid.
What is the difference between your marginal tax rate and your average tax rate? - Answer
The marginal tax rate refers to the rate used to calculate the last (and next) dollar of taxable
income. The average tax rate is based on the total tax due divided by taxable income.
How does a tax credit affect the amount owed for federal income tax? - Answer A tax credit is
a direct (dollar-for-dollar) reduction in the amount owed in taxes. One example of a tax credit is
child and dependent care expenses.
