Instructions

Unless otherwise indicated, assume all taxpayers are calendar-year, cash-method taxpayers.

Question 1

Which of the following is most accurate:

a)Tax laws are the same as financial accounting principles because both are designed to serve the same purpose.

b)The sole purpose of taxes is to generate revenue.

c)The sole purpose of taxes is to keep accountants employed.

d) Taxes can be used to influence behavior.

e) None of the above.

Question 3

Bob, single, has total income of $112,000 in 2019. His taxable income is $100,000, and his tax liability is $18,175.

Bob's average tax rate is .... , and his effective tax rate is ...... Bob's marginal tax rate is ......

Note: Enter your answer as a decimal rounded to three places (e.g. 23.175231% would be entered as .232 and 39% would be entered as .390).

Question 4

Jose is trying to decide whether to pay a tax-deductible expense in 2019 or in 2020.

Which one of the following items will be most useful to Jose in calculating the tax benefit of the tax deduction in each year (i.e. how much his tax liability will be reduced each year as a result of the deduction)?

a)Jose's average tax rate

b)Jose's regressive tax rate

c)Jose's marginal tax rate

d)Jose's effective tax rate

e)None of the above

Question 5

Same facts as the previous question. If Jose thinks that overall tax rates and his marginal tax bracket are going to increase substantially in 2020, then which of the following is most accurate?

Assume Jose is able to deduct the expense in the year paid.

a)Jose should pay the expense in 2019 so that he gets the deduction in 2019. This is an example of a timing strategy.

b)Jose should delay the expense until 2020 so that he can defer the deduction until 2020. This is an example of a timing strategy.

c)Jose should pay the expense in 2019 so that he gets the deduction in 2019. This is an example of a conversion strategy.

d)Jose should delay the expense until 2020 so that he can defer the deduction until 2020. This is an example of a conversion strategy.

e)None of the above

Question 6

If Jose thought that overall tax rates and his marginal tax bracket would be the same for 2019 and 2020, then:

a)Jose would want to pay the expense in 2019

b)Jose would want to pay the expense in 2020

c)It wouldn't matter if Jose pays the expense in 2019 or 2020

Question 7

Arjun, single, has an average tax rate of 10.8%, an effective tax rate of 9.9%, and a marginal tax rate of 22% in 2018. If Arjun generates an additional $1,000 tax deduction which lowers his taxable income by $1,000, what is Arjun's federal income tax savings as a result of the $1,000 deduction?

Question 8

Claire and her business partner are starting a business this year, but they are uncertain as to which entity structure they will select. Which of the following is most accurate:

a) If the business is taxed as a C corporation, the income from the business will not be subject to federal income tax

b) If the business is taxed as an S corporation, the income from the business will be subject to double taxation at the federal level

c)If the business is taxed as a partnership, the partnership will not pay federal income tax but the partners may

d)All business entities are taxed the same None of the above

Question 9

Which of the following sources of tax law is enacted by Congress?

a)Internal Revenue Code

b)Case Law

c)Regulations

d)Google Search Results

e)None of the above

Question 10

Which of the following sources of tax law is issued by the Internal Revenue Service/Treasury Department?

a)Internal Revenue Code

b)Case Law

c)Regulations (Regs.)

d)Google Search Results

e)None of the above