1. The timing strategy becomes more attractive if a taxpayer is able to accelerate deductions by two or more years (versus one year).
True False
2. When considering cash inflows, higher present values are preferred.
True False
3. One limitation of the timing strategy is the difficulties in accelerating a tax deduction without accelerating the actual cash outflow that generates the tax deduction.
True False
4. Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2012, how much federal tax will he owe?
A. $15,000.00
B. $12,375.00
C. $11,030.00
D. $9,645.00
E. None of these
5. Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2012, what is his effective tax rate (rounded)?
A. 23.08%
B. 16.97%
C. 14.84%
D. 25.00%
E. None of these
6. The city of Granby, Colorado recently enacted a 1.5% surcharge on vacation cabin rentals that will help pay for the city's new elementary school. This surcharge is an example of _______.
A. A sin tax to discourage undesirable behavior
B. A government fine
C. An earmarked tax
D. Both A and C
E. None of these
7. Al believes that SUVs have negative social and environmental effects because of their increased carbon monoxide emissions. He proposes eliminating sales taxes on smaller automobiles in favor of higher sales taxes levied on SUVs. Al performs some calculations and comes to the conclusion that based on the current number of SUVs owned in the U.S. exactly the same amount of total sales tax will be collected under his reformed system. Which of the following concepts explains why Al's idea may not work?
A. The ability to pay principle
B. Horizontal equity
C. Substitution effect
D. Vertical equity
E. None of these
8. If Susie earns $750,000 in taxable income and files as head of household for year 2012, what is Susie's average tax rate (rounded)?
A. 31.44%
B. 31.90%
C. 33.00%
D. 35.00%
E. None of these
9. Which of the following is not a factor that determines whether a taxpayer is required to file a tax return?
A. Filing status.
B. Taxpayer's gross income.
C. Taxpayer's employment.
D. Taxpayer's age.
E. None of these.
10. Which of the following is not a common method that the IRS uses to select returns for audit?
A. DIF system.
B. Tax Select system.
C. Information matching.
D. Document perfection.
E. None of these.