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Fundamentals of Taxation 2018 Ed 11Th Edition By Ana Cruz - Test Bank
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,Fundamentals of Taxation 2018 Edition, 11e (Cruz)Chapter 1 Introduction to Taxation, the Income Tax Formula, and Form 1040EZ
1) The U.S. individual income tax system is an example of a progressive tax rate structure.
Answer: TRUE
Difficulty: 1 Easy
Topic: Tax Rate Structures
Learning Objective: 01-01 Understand progressive, proportional, and regressive tax structures.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
2) A proportional tax rate structure is a tax where the tax rate remains at the same rate regardless
of the tax base.
Answer: TRUE
Difficulty: 1 Easy
Topic: Tax Rate Structures
Learning Objective: 01-01 Understand progressive, proportional, and regressive tax structures.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
3) Under a flat tax, the marginal tax rate and the average tax rate are different.
Answer: FALSE
Difficulty: 1 Easy
Topic: Tax Rate Structures
Learning Objective: 01-01 Understand progressive, proportional, and regressive tax structures.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
4) State and local taxes levied on either property or sales are examples of progressive taxes.
Answer: FALSE
Difficulty: 1 Easy
Topic: Tax Rate Structures
Learning Objective: 01-01 Understand progressive, proportional, and regressive tax structures.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
1
Copyright ©2018 McGraw-Hill
,5) With a regressive tax, the tax rate decreases as the tax base gets larger.
Answer: TRUE
Difficulty: 1 Easy
Topic: Tax Rate Structures
Learning Objective: 01-01 Understand progressive, proportional, and regressive tax structures.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
6) The marginal tax rate is the total tax liability divided by the taxable income.
Answer: FALSE
Explanation: The marginal tax rate represents the proportion of tax that is paid on the next dollar
of taxable income.
Difficulty: 1 Easy
Topic: Average Tax Rate
Learning Objective: 01-02 Understand the concepts of marginal and average tax rates as well as
a simple income tax formula.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
7) The average tax rate is the total tax liability divided by the taxable income.
Answer: TRUE
Difficulty: 1 Easy
Topic: Average Tax Rate
Learning Objective: 01-02 Understand the concepts of marginal and average tax rates as well as
a simple income tax formula.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
8) All individual income tax returns follow the basic structure of the simplified tax formula.
Answer: TRUE
Difficulty: 1 Easy
Topic: Average Tax Rate
Learning Objective: 01-02 Understand the concepts of marginal and average tax rates as well as
a simple income tax formula.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
2
Copyright ©2018 McGraw-Hill
, 9) With a progressive rate structure, the average tax rate is always smaller than the marginal tax
rate.
Answer: FALSE
Explanation: If the tax rate structure is progressive, the average tax rate is either smaller than or
is equal to the marginal tax rate. Since the two can be equal, the average is not always smaller.
Difficulty: 2 Medium
Topic: Average Tax Rate
Learning Objective: 01-02 Understand the concepts of marginal and average tax rates as well as
a simple income tax formula.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
10) At high levels of taxable income, the average tax rate and the marginal tax rate will always
be the same.
Answer: FALSE
Difficulty: 2 Medium
Topic: Average Tax Rate
Learning Objective: 01-02 Understand the concepts of marginal and average tax rates as well as
a simple income tax formula.
EA: No
Accessibility: Keyboard Navigation
Gradable: automatic
11) Wages, salaries, and tips are compensation for services rendered. However, commissions,
bonuses, and severance pay are not taxable.
Answer: FALSE
Difficulty: 1 Easy
Topic: The Components of Form 1040EZ
Learning Objective: 01-03 Understand the components of a Form 1040EZ income tax return.
EA: Yes
Accessibility: Keyboard Navigation
Gradable: automatic
12) Federal unemployment compensation benefits are not taxable.
Answer: FALSE
Difficulty: 1 Easy
Topic: The Components of Form 1040EZ
Learning Objective: 01-03 Understand the components of a Form 1040EZ income tax return.
EA: Yes
Accessibility: Keyboard Navigation
Gradable: automatic
3
Copyright ©2018 McGraw-Hill
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