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Exam 1: An Introduction to Tax

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Question 21

Multiple Choice

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Leonardo, who is married but files separately, earns $62,000 of taxable income. He also has $16,000 in city of Tulsa bonds. His wife, Theresa, earns $51,000 of taxable income. How much money would Leonardo and Theresa save if they file jointly instead of separately for 2020? (Use tax rate schedule.)

A) Nothing
B) $132.00
C) $395.25
D) $9,840.00
E) None of the choices are correct

F) D) and E)
G) All of the above

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Question 22

Multiple Choice

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Curtis invests $575,000 in a city of Athens bond that pays 7.75 percent interest. Alternatively, Curtis could have invested the $575,000 in a bond recently issued by Initech, Incorporated that pays 10.50 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much implicit tax would Curtis pay on the city of Athens bond?

A) $44,562.50
B) $4,066.00
C) $3,966.00
D) $15,812.50
E) None of the choices are correct

F) All of the above
G) B) and D)

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Question 23

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Determine if eachof the following is a tax and why or why not. a. $2.50 toll paid on the Florida Turnpike b. $300 ticket for reckless driving c. 1 percent local surcharge on hotel rooms to fund public roadways d. 2 percent city surcharge on wages earned in the city of Philadelphia

Leonardo,who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo and his wife file married filing jointly in 2020, what would be their average tax rate? (Use tax rate schedule.) (Round your final answer to two decimal places.)

Jonah, a single taxpayer, earns $150,000 in taxable income and $10,000 in interest from an investment in city of Denver bonds. Using the U.S. tax rate schedule for year 2020, how much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate? If Jonah earned an additional $40,000 of taxable income, what is his marginal tax rate on this income? (Round the tax rates to two decimal places, e.g., .12345 as 12.35 percent.)(Use tax rate schedule.)

A flat tax is an example of a graduated tax system.

Given the following tax structure, what is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to effective tax rates?

One must considerthe "economy" criterion in evaluating tax systems from both the taxpayer's and the government's perspective.

A sales tax is a common example of a progressive tax rate structure.

Congress would like to increase tax revenues by 20 percent. Assume that the average taxpayer in the United States earns $80,000 and pays an average tax rate of 17.5 percent. If the income effect is larger than the substitution effect, what average tax rate will result in a 20 percent increase in tax revenues? This is an example of what type of forecasting?

Leonardo, who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo earned an additional $30,000 of taxable income this year, what would be the marginal tax rate on the extra income for 2020? (Use tax rate schedule.) (Round your final answer to two decimal places.)

Jackson has the choice to invest in city of Mitchell bonds or Sundial, Incorporated corporate bonds that pay 10 percent interest. Jackson is a single taxpayer who earns $55,000 annually. Assume that the city of Mitchell bonds and the Sundial, Incorporated bonds have similar risk. What interest rate would the city of Mitchell have to pay in order to make Jackson indifferent between investing in the city of Mitchell and the Sundial, Incorporated bonds for 2020? (Use tax rate schedule.)

Namratha has the choice between investing in a city of Watkinsville bond at 4.5 percent or a Moe's, Incorporated bond at 7 percent. Assuming that both bonds have the same nontax characteristics and that Namratha has a 32 percent marginal tax rate, in which bond should she invest? What interest rate offered by Moe's, Incorporated would make Namratha indifferent between investing in the two bonds?

Eliminating the current system of withholding income taxes directly from employee paychecks would:

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 2020, what is his current marginal tax rate? (Use tax rate schedule.)

Property taxes may be imposed on both real and personal property.

Which of the following represents the largest percentage of average state tax revenue?

The difficulty in calculating a tax is typically in the determination of:

Margaret recently received a parking ticket. This is a common example of a local tax.

Marc, a single taxpayer, earns $294,500 in taxable income and $9,050 in interest from an investment in city of Birmingham bonds. Using the U.S. tax rate schedule for year 2020, what is his current marginal tax rate?(Use tax rate schedule.)