SOUTH WESTERN FEDERAL TAXATION
EXAM SCRIPT FINAL PAPER ACTUAL
QUESTIONS AND ANSWERS FULLY SOLVED
PREMIUM RESOURCE
●● largest sources of federal revenues
Answer: *individual income taxes--largest
*Social Security (FICA) taxes and corporate income taxes are two other
major revenue sources.
●● tax base
Answer: amount to which the tax rate is applied to determine tax due.
i.e. (taxable income)
●● tax rate
Answer: percentage rate applied to the tax base.
●● progressive tax rate
Answer: where the rate of tax increases as the tax base increases.
i.e. federal income tax.
●● proportional tax rate (flat rate)
, Answer: the rate of tax is the same for all taxpayers, regardless of the
level of their tax base. This is generally used for real estate taxes, state
and local sales tax, personal property taxes, customs duties, and excise
taxes.
●● regressive tax rate
Answer: tax rate decreases with an increase in the tax base (e.g.,
income). The Social Security (FICA) tax is regressive because a fixed
rate of tax for both the employer and employee is levied up to a ceiling
of $110,000 for 2012.
**sales tax, which is levied by many states, is also regressive when
measured against the income base.
●● corporations
Answer: federal corporate income tax reflects a stair-step pattern of
progression that tends to benefit small corporations.
●● marginal tax rate
Answer: the tax rate applied to an incremental amount of taxable income
that is added to the tax base. (tax rate based on applicable tax base....
e.g., taxable income of $100,000.....marginal tax rate is 28%)
●● average tax rate
Answer: computed by dividing the total tax liability by the amount of
taxable income.
EXAM SCRIPT FINAL PAPER ACTUAL
QUESTIONS AND ANSWERS FULLY SOLVED
PREMIUM RESOURCE
●● largest sources of federal revenues
Answer: *individual income taxes--largest
*Social Security (FICA) taxes and corporate income taxes are two other
major revenue sources.
●● tax base
Answer: amount to which the tax rate is applied to determine tax due.
i.e. (taxable income)
●● tax rate
Answer: percentage rate applied to the tax base.
●● progressive tax rate
Answer: where the rate of tax increases as the tax base increases.
i.e. federal income tax.
●● proportional tax rate (flat rate)
, Answer: the rate of tax is the same for all taxpayers, regardless of the
level of their tax base. This is generally used for real estate taxes, state
and local sales tax, personal property taxes, customs duties, and excise
taxes.
●● regressive tax rate
Answer: tax rate decreases with an increase in the tax base (e.g.,
income). The Social Security (FICA) tax is regressive because a fixed
rate of tax for both the employer and employee is levied up to a ceiling
of $110,000 for 2012.
**sales tax, which is levied by many states, is also regressive when
measured against the income base.
●● corporations
Answer: federal corporate income tax reflects a stair-step pattern of
progression that tends to benefit small corporations.
●● marginal tax rate
Answer: the tax rate applied to an incremental amount of taxable income
that is added to the tax base. (tax rate based on applicable tax base....
e.g., taxable income of $100,000.....marginal tax rate is 28%)
●● average tax rate
Answer: computed by dividing the total tax liability by the amount of
taxable income.
