Franklyn A Plus Pass
TEST BANK for Fundamentals of Taxation for Individuals
and Business Entities: A Practical Approach 2025th Edition
by Gregory A. Carnes, Suzanne Youngberg
All Chapters Fully Covered 1-18| Verified Questions with 100%
Accurate Solutions for Exam Preparations| A+ PASS ASSURED
Fr
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, Franklyn A Plus Pass
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. Correct 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
Fr
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
an
Jessica to choose?
kl
Gross Wages Non-Income Tax Costs Income Tax
yn
California 120,00052,000 24,000
e
New York 100,00037,000 20,000
A
Virginia 70,000 10,800 10,500
pl
Texas 50,000 6,000 5,000
A) Texas
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B) California
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, Franklyn A Plus Pass
C) Virginia
D) New York Correct 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 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
Wages (A) Non-Income
Tax Costs (B) Income Tax (C) After-Tax Income
(D) = (A) - (B) - (C)
California 20,000 52,000 24,000 44,000
New York 100,00037,000 20,000 43,000
Virginia 70,000 10,800 10,500 48,700
Texas 50,000 6,000 5,000 39,000
Fr
Diff: 2
an
Learning Objective: LO 1.1
kl
AACSB / AICPA: Analytic / Accounting Competencies Bloom's: Application
yn
Section Reference: Sec. 1.1 Time on Task: 8 min
e
3) Which of the following is not correct regarding tax and non-tax costs?
A
A) Both tax and non-tax costs must be considered when making financial and investment decisions.
pl
B) Tax costs include any type of tax paid to a local, state, federal, or foreign government.
us
C) Non-tax costs are all costs other than tax costs.
D) Effective tax planning requires prioritizing tax costs. Correct Answer: D
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, Franklyn A Plus Pass
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
Correct Answer: D
Explanation: $38,700 = $27,000 + $6,200 + $5,500. Tax costs include any type of tax paid to a local,
state, federal, or foreign government.
Diff: 1
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies Bloom's: Application
Fr
Section Reference: Sec. 1.1 Time on Task: 5 min
an
kl
5) Samson's wages are $100,000. He lives in Maryland and his expenses include $25,000 mortgage
interest, $12,000 other living expenses, $27,000 income tax, $6,200 payroll tax and
yn
$5,500 property tax. What is Samson's non-tax costs?
e
A) $37,000
A
B) $12,000
pl
C) $61,300
D) $38,700
us
Correct Answer: A
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TEST BANK for Fundamentals of Taxation for Individuals
and Business Entities: A Practical Approach 2025th Edition
by Gregory A. Carnes, Suzanne Youngberg
All Chapters Fully Covered 1-18| Verified Questions with 100%
Accurate Solutions for Exam Preparations| A+ PASS ASSURED
Fr
an
kl
yn
e
A
pl
us
Pa
Page | 1
ss
, Franklyn A Plus Pass
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. Correct 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
Fr
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
an
Jessica to choose?
kl
Gross Wages Non-Income Tax Costs Income Tax
yn
California 120,00052,000 24,000
e
New York 100,00037,000 20,000
A
Virginia 70,000 10,800 10,500
pl
Texas 50,000 6,000 5,000
A) Texas
us
B) California
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, Franklyn A Plus Pass
C) Virginia
D) New York Correct 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 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
Wages (A) Non-Income
Tax Costs (B) Income Tax (C) After-Tax Income
(D) = (A) - (B) - (C)
California 20,000 52,000 24,000 44,000
New York 100,00037,000 20,000 43,000
Virginia 70,000 10,800 10,500 48,700
Texas 50,000 6,000 5,000 39,000
Fr
Diff: 2
an
Learning Objective: LO 1.1
kl
AACSB / AICPA: Analytic / Accounting Competencies Bloom's: Application
yn
Section Reference: Sec. 1.1 Time on Task: 8 min
e
3) Which of the following is not correct regarding tax and non-tax costs?
A
A) Both tax and non-tax costs must be considered when making financial and investment decisions.
pl
B) Tax costs include any type of tax paid to a local, state, federal, or foreign government.
us
C) Non-tax costs are all costs other than tax costs.
D) Effective tax planning requires prioritizing tax costs. Correct Answer: D
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ss
, Franklyn A Plus Pass
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
Correct Answer: D
Explanation: $38,700 = $27,000 + $6,200 + $5,500. Tax costs include any type of tax paid to a local,
state, federal, or foreign government.
Diff: 1
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies Bloom's: Application
Fr
Section Reference: Sec. 1.1 Time on Task: 5 min
an
kl
5) Samson's wages are $100,000. He lives in Maryland and his expenses include $25,000 mortgage
interest, $12,000 other living expenses, $27,000 income tax, $6,200 payroll tax and
yn
$5,500 property tax. What is Samson's non-tax costs?
e
A) $37,000
A
B) $12,000
pl
C) $61,300
D) $38,700
us
Correct Answer: A
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