Tax Final Exam 1 Questions And
Already Passed Answers.
Four standards of a good tax - Answer 1)Sufficient
2)Efficient
3)Convenient
4)Fair
A tax is sufficient if - Answer it generates enough funds to pay for the public goods and
services and allows a government to balance its budget
A tax is efficient if - Answer it is an effective fiscal policy tool for regulating the economy
static forecast - Answer assumes base stays the same
dynamic forecast - Answer estimate change in base due to change in rate
income effect - Answer work to maintain after-tax income
substitution effect - Answer substitute between labor and leisure
a tax is convenient if - Answer government view: tax is easy to administer, understand, and
offers few opportunities for noncompliance
taxpayer vie: easy to pay, easy to compute, and requires minimal time to comply
a tax is fair if - Answer the taxpayer has the ability to pay the tax
horizontal equity - Answer the same ability for everyone to pay
vertical equity - Answer the greater the ability to pay then the greater of tax
, effective tax rate - Answer the average rate of taxation on each dollar of total income
marginal tax rate - Answer the tax rate that applies to the next additional dollar of taxable
income
if cash inflow is not taxable, after-tax cash flow = - Answer before-tax cash flow
if cash outflow is not deductible, after-tax cash flow = - Answer before-tax cash flow
if cash flow is taxable, after-tax cash flow = - Answer before-tax cash flow x (1-t)
what do taxes do in relation to borrowing? - Answer they reduce the cost of borrowing if
interest is deductible
tax avoidance - Answer legitimate means of reducing taxes legally
tax evasion - Answer willful attempt to defraud the government of revenue
tax consequences of a transaction depend on the interaction of 4 variables - Answer 1)time
period variable
2)entity variable
3)jurisdiction variable
4)character variable
time period variable types of deferral strategies - Answer 1) defer recognition of income into
the future
2)accelerate recognition of deductions
constructive receipt requires most taxpayers to recognize service revenue if - Answer the
taxpayer has control over the payment and there are no substantial restrictions on the use of
the property or a substantial risk of forfeiture
Already Passed Answers.
Four standards of a good tax - Answer 1)Sufficient
2)Efficient
3)Convenient
4)Fair
A tax is sufficient if - Answer it generates enough funds to pay for the public goods and
services and allows a government to balance its budget
A tax is efficient if - Answer it is an effective fiscal policy tool for regulating the economy
static forecast - Answer assumes base stays the same
dynamic forecast - Answer estimate change in base due to change in rate
income effect - Answer work to maintain after-tax income
substitution effect - Answer substitute between labor and leisure
a tax is convenient if - Answer government view: tax is easy to administer, understand, and
offers few opportunities for noncompliance
taxpayer vie: easy to pay, easy to compute, and requires minimal time to comply
a tax is fair if - Answer the taxpayer has the ability to pay the tax
horizontal equity - Answer the same ability for everyone to pay
vertical equity - Answer the greater the ability to pay then the greater of tax
, effective tax rate - Answer the average rate of taxation on each dollar of total income
marginal tax rate - Answer the tax rate that applies to the next additional dollar of taxable
income
if cash inflow is not taxable, after-tax cash flow = - Answer before-tax cash flow
if cash outflow is not deductible, after-tax cash flow = - Answer before-tax cash flow
if cash flow is taxable, after-tax cash flow = - Answer before-tax cash flow x (1-t)
what do taxes do in relation to borrowing? - Answer they reduce the cost of borrowing if
interest is deductible
tax avoidance - Answer legitimate means of reducing taxes legally
tax evasion - Answer willful attempt to defraud the government of revenue
tax consequences of a transaction depend on the interaction of 4 variables - Answer 1)time
period variable
2)entity variable
3)jurisdiction variable
4)character variable
time period variable types of deferral strategies - Answer 1) defer recognition of income into
the future
2)accelerate recognition of deductions
constructive receipt requires most taxpayers to recognize service revenue if - Answer the
taxpayer has control over the payment and there are no substantial restrictions on the use of
the property or a substantial risk of forfeiture
