Federal Tax Accounting (Exam 1) UPDATED
ACTUAL Exam Questions and CORRECT
Answers
T or F: Taxes influence personal decisions such as whether to buy or rent a house. - CORRECT
ANSWER - True
True or False: Taxes are voluntary payments paid to a government for a specific benefit received
by the specific taxpayer. - CORRECT ANSWER - Fasle
T or F: Taxes influence personal, business, and political decisions - CORRECT ANSWER -
True
What are the Key components of the word "Tax" - CORRECT ANSWER - Required
Imposed by a government agency(federal,state, or local)
Not tied directly to the benefit received by the taxpayer
The equation for calculating tax? - CORRECT ANSWER - Tax= Tax Base * Rate
The three different types to Measure Tax Rates - CORRECT ANSWER - 1. Regressive Tax
rate
2. Proportional Tax rate
3. Progressive Tax rate
Progressive Tax Rate - CORRECT ANSWER - Impose an increase on marginal tax rate as the
tax base increase ( "U.S Federal Government use this)/(Graduated taxes/Brackets)
Regressive Tax Rate - CORRECT ANSWER - imposes a decreasing marginal tax rate as the
tax base increases
, Proportional Tax Rate - CORRECT ANSWER - imposes a constant tax rate throughout the tax
base (Flat Rate)
Marginal Tax Rate - CORRECT ANSWER - the tax rate that applies to the next additional
increment of a taxpayer's taxable income
Earmarked Tax - CORRECT ANSWER - a tax assessed for a specific purpose (e.g., for
education).
Tax Base - CORRECT ANSWER - defines what is actually taxed and is usually expressed in
monetary terms
Tax Rate - CORRECT ANSWER - determines the level of taxes imposed on the tax base and
is usually expressed as a percentage
Taxable income equals - CORRECT ANSWER - gross income - deductions
Marginal Tax Rate is useful in ? - CORRECT ANSWER - Tax planning
Average Tax Rate is useful in? - CORRECT ANSWER - budgeting tax expense
Effective Tax Rate is useful in? - CORRECT ANSWER - comparing the relative tax burdens
of taxpayers
Implicit Taxes are defined as ? - CORRECT ANSWER - the reduced before-tax return that a
tax-favored asset produces because of its tax advantage status. Also, they are indirect taxes that
result from a tax advantage the government grants to certain transactions to satisfy social,
economic, or other objectives.
ACTUAL Exam Questions and CORRECT
Answers
T or F: Taxes influence personal decisions such as whether to buy or rent a house. - CORRECT
ANSWER - True
True or False: Taxes are voluntary payments paid to a government for a specific benefit received
by the specific taxpayer. - CORRECT ANSWER - Fasle
T or F: Taxes influence personal, business, and political decisions - CORRECT ANSWER -
True
What are the Key components of the word "Tax" - CORRECT ANSWER - Required
Imposed by a government agency(federal,state, or local)
Not tied directly to the benefit received by the taxpayer
The equation for calculating tax? - CORRECT ANSWER - Tax= Tax Base * Rate
The three different types to Measure Tax Rates - CORRECT ANSWER - 1. Regressive Tax
rate
2. Proportional Tax rate
3. Progressive Tax rate
Progressive Tax Rate - CORRECT ANSWER - Impose an increase on marginal tax rate as the
tax base increase ( "U.S Federal Government use this)/(Graduated taxes/Brackets)
Regressive Tax Rate - CORRECT ANSWER - imposes a decreasing marginal tax rate as the
tax base increases
, Proportional Tax Rate - CORRECT ANSWER - imposes a constant tax rate throughout the tax
base (Flat Rate)
Marginal Tax Rate - CORRECT ANSWER - the tax rate that applies to the next additional
increment of a taxpayer's taxable income
Earmarked Tax - CORRECT ANSWER - a tax assessed for a specific purpose (e.g., for
education).
Tax Base - CORRECT ANSWER - defines what is actually taxed and is usually expressed in
monetary terms
Tax Rate - CORRECT ANSWER - determines the level of taxes imposed on the tax base and
is usually expressed as a percentage
Taxable income equals - CORRECT ANSWER - gross income - deductions
Marginal Tax Rate is useful in ? - CORRECT ANSWER - Tax planning
Average Tax Rate is useful in? - CORRECT ANSWER - budgeting tax expense
Effective Tax Rate is useful in? - CORRECT ANSWER - comparing the relative tax burdens
of taxpayers
Implicit Taxes are defined as ? - CORRECT ANSWER - the reduced before-tax return that a
tax-favored asset produces because of its tax advantage status. Also, they are indirect taxes that
result from a tax advantage the government grants to certain transactions to satisfy social,
economic, or other objectives.
