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Exam 1: An Introduction to Tax

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Question 61

True/False

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In addition to raising revenues,specific U.S.taxes may have other objectives (e.g. ,economic or social objectives) .

A) True
B) False

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Question 62

Multiple Choice

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Jackson has the choice to invest in city of Mitchell bonds or Sundial,Inc.corporate bonds that pay 10% interest.Jackson is a single taxpayer who earns $50,000 annually.Assume that the city of Mitchell bonds and the Sundial,Inc.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,Inc.bonds for year 2013?

A) 7.50%
B) 10.00%
C) 8.00%
D) 7.20%
E) None of these

F) A) and B)
G) A) and C)

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Question 63

Multiple Choice

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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 2013,what is his current marginal tax rate?

Heather,a single taxpayer who files as a head of household,earns $60,000 in taxable income and $5,000 in interest from an investment in city of Oxford Bonds.Using the U.S.tax rate schedule for year 2013,how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $20,000 of tax deductions,what is her marginal tax rate on these deductions? (Round the tax rates to 2 decimal places,e.g. ,.12345 as 12.35%)

Dynamic forecasting does not take into consideration taxpayers' responses to a tax change when estimating tax revenues.

The largest federal tax,in terms of revenue collected,is the social security tax.The most significant tax assessed by the U.S.government is the income tax.

Given the following tax structure,what amount of tax would need to be assessed on Carrie to make the tax horizontally equitable? What is the minimum tax that Simon should pay to make the tax structure vertically equitable based on Fantasia's tax rate? This would result in what type of tax rate structure?

Curtis invests $250,000 in a city of Athens bond that pays 7% interest.Alternatively,Curtis could have invested the $250,000 in a bond recently issued by Initech,Inc.that pays 9% interest with similar risk as the city of Athens bond.Assume that Curtis's marginal tax rate is 28%.If Curtis invested in the Initech,Inc.bonds,what would be his after-tax rate of return from this investment?