Question 1

An exemption affects a person's tax situation by:

Accepted Answer

A)  increasing the standard deduction.
B)  increasing the taxpayer's marginal tax rate.
C)  decreasing itemized deductions.
D)  reducing the taxpayer's taxable income.
E)  decreasing tax credits.F) None of the above
G) C) and E)

Question 2

An exclusion is earnings not included in gross income.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following is included in gross income?

Accepted Answer

A)  Tax credit
B)  Exemption
C)  Exclusion
D)  Earned income
E)  Tax deductionF) A) and E)
G) A) and D)

Question 4

John Camey goes into a local department store and purchases a new suit.He pays $43 in taxes on this purchase.What type of tax is this most likely to be?

Accepted Answer

A)  General sales tax
B)  Excise tax
C)  Personal property tax
D)  Income tax
E)  Estate taxF) A) and B)
G) C) and D)

Question 5

An estate tax is imposed on the value of an individual's property at the time of his or her death.

Accepted Answer

A) True 
 B)False

Question 6

Interest earnings of $1,600 from a taxable investment for a person in a 28 percent tax bracket would result in after-tax earnings of:

Accepted Answer

A)  $1,600
B)  $1,152
C)  $1,100
D)  $448
E)  $152F) A) and B)
G) A) and C)

Question 7

Mary Watson bought 20 shares of stock one and a half years ago.She recently sold her stock making a profit of $1,400.She is in the 28% tax bracket.Her tax on this investment is:

Accepted Answer

A)  $140.
B)  $210.
C)  $280.
D)  $392.
E)  $462.F) B) and D)
G) C) and D)

Question 8

An exclusion affects a person's taxes by:

Accepted Answer

A)  reducing the amount of gross income.
B)  increasing itemized deductions.
C)  decreasing itemized deductions.
D)  decreasing the number of exemptions a person can claim.
E)  increasing the number of exemptions a person can claim.F) A) and D)
G) A) and B)

Question 9

Which of the following good or service is subject to an excise tax?

Accepted Answer

A)  Gasoline
B)  Tires
C)  Cigarettes
D)  Air travel
E)  All of theseF) A) and B)
G) C) and E)

Question 10

Which one of the following is a tax-deferred retirement plan sponsored by an employer?

Accepted Answer

A)  Roth IRA
B)  Education IRA
C)  Keogh Account
D)  401 Plan
E)  Traditional IRAF) A) and E)
G) C) and D)

Question 11

Which of the following would qualify a person for an exemption when computing taxable income?

Accepted Answer

A)  Mortgage interest
B)  A tax shelter
C)  A dependent
D)  Charitable contributions
E)  Passive incomeF) All of the above
G) D) and E)

Question 12

What kind of audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return?

Accepted Answer

A)  Office audit
B)  Correspondence audit
C)  Field audit
D)  Taxpayer compliance measurement program audit
E)  Random auditF) A) and B)
G) All of the above

Question 13

A $2,000 deposit to a tax-deferred individual retirement account (IRA) for a person in a 25 percent tax bracket would result in a reduced tax bill of:

Accepted Answer

A)  $2,000
B)  $1,500
C)  $1,200
D)  $500
E)  $300F) All of the above
G) B) and D)

Question 14

A drawback of Flexible Spending Accounts is that any account funds must be used to pay for expenses incurred before year's end or the money is lost.

Accepted Answer

A) True 
 B)False

Question 15

Why would tax-exempt income provide greater short-term financial benefits than tax-deferred income?

Accepted Answer

Tax exempt income is not taxed...

Question 16

An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return.

Accepted Answer

A) True 
 B)False

Question 17

When a taxpayer's income increases $1,000 and the taxes owed increases from $7,867 to $8,177,the marginal tax rate is ______ percent.

Accepted Answer

A)  15
B)  20
C)  25
D)  28
E)  31F) B) and C)
G) None of the above

Question 18

Which statement is true regarding a tax credit?

Accepted Answer

A)  A tax credit is the same as a tax deduction.
B)  A tax credit reduces the amount of taxes owed.
C)  Medical expenses is an example of a tax credit.
D)  A tax credit reduces taxable income.
E)  None of these are true.F) A) and C)
G) B) and C)

Question 19

Capital gains refer to profits from the sale of stocks,bonds,or real estate.

Accepted Answer

A) True 
 B)False

Question 20

Earned income is money received from:

Accepted Answer

A)  dividends.
B)  interest.
C)  wages.
D)  rent from investments.
E)  All of theseF) B) and E)
G) A) and D)

Exam 4: Planning Your Tax Strategy

Which of the following good or service is subject to an excise tax?

Correct AnswerverifiedShow Answer

What kind of audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return?

Correct AnswerverifiedShow Answer

An exemption affects a person's tax situation by:

Correct AnswerverifiedShow Answer

Which one of the following is included in gross income?

Correct AnswerverifiedShow Answer

When a taxpayer's income increases $1,000 and the taxes owed increases from $7,867 to $8,177,the marginal tax rate is ______ percent.

Correct AnswerverifiedShow Answer

An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return.

Correct AnswerverifiedShow Answer

Mary Watson bought 20 shares of stock one and a half years ago.She recently sold her stock making a profit of $1,400.She is in the 28% tax bracket.Her tax on this investment is:

Correct AnswerverifiedShow Answer

Which one of the following is a tax-deferred retirement plan sponsored by an employer?

Correct AnswerverifiedShow Answer

Why would tax-exempt income provide greater short-term financial benefits than tax-deferred income?

Correct AnswerverifiedTax exempt income is not taxed...View AnswerShow Answer

An exclusion affects a person's taxes by:

Correct AnswerverifiedShow Answer

Capital gains refer to profits from the sale of stocks,bonds,or real estate.

Correct AnswerverifiedShow Answer

Which statement is true regarding a tax credit?

Correct AnswerverifiedShow Answer

An exclusion is earnings not included in gross income.

Correct AnswerverifiedShow Answer

Interest earnings of $1,600 from a taxable investment for a person in a 28 percent tax bracket would result in after-tax earnings of:

Correct AnswerverifiedShow Answer

Earned income is money received from:

Correct AnswerverifiedShow Answer

An estate tax is imposed on the value of an individual's property at the time of his or her death.

Correct AnswerverifiedShow Answer

A $2,000 deposit to a tax-deferred individual retirement account (IRA) for a person in a 25 percent tax bracket would result in a reduced tax bill of:

Correct AnswerverifiedShow Answer

Which of the following would qualify a person for an exemption when computing taxable income?

Correct AnswerverifiedShow Answer

A drawback of Flexible Spending Accounts is that any account funds must be used to pay for expenses incurred before year's end or the money is lost.

Correct AnswerverifiedShow Answer

John Camey goes into a local department store and purchases a new suit.He pays $43 in taxes on this purchase.What type of tax is this most likely to be?

Correct AnswerverifiedShow Answer

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Tax exempt income is not taxed...
View Answer

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