I need help with multiple-choice questions. Please open the Excel chart to answer some of these questions thanks.
What is the definition of graduated income tax structure, as it applies to the Internal Revenue Code? O A taxpayer with lower taxable income will pay a higher percentage of tax than a taxpayer with higher taxable income O A taxpayer with higher taxable income will pay a higher percentage of tax than a taxpayer with lower taxable income O A modification in the tax law that relates to a specific provision of the existing law rather than changing the entire law O A modification in the tax law that changes the entire law rather than a specific provision of the existing law What is a primary source of legal authority for tax law in the United States? Tax Law Review Federal Tax Form Instructions Congressional committee report Internal Revenue Code What are three primary sources of tax law in the United States? Choose 3 answers IRS publications Income tax regulations Court decisions CCH's Master Tax Guide Internal Revenue Code What is an example of convenience when evaluating a tax system? O The public knows their tax rate in advance. O The IRS collection costs are minimal A family pays less tax than a single individual with the same income O Taxpayers can pay their tax bill online Which tax system requires a taxpayer to know when, where, and how to determine and pay federal income tax? O Economy O Convenience O Equity Certainty Which tax structure applies one rate to all individual taxpayers without considering income level? O Proportional O Progressive 0 Effective O Regressive What is the structure of income tax rates when the tax rate increases as the taxpayer's base increases? O Proportional O Flat O Regressive Progressive A single, salaried individual who is not operating a business earned $80,000 in wages for 2021 and has $13 000 of itemized deductions. What is the individual's tax liability? O $7,728 O $10,489 (=(67000-40525)*22%) O 510,588 0 513, 349 Which type of tax is subject to a $15,000 exclusion in 2021? income tax Inheritance tax Gift tax Property tax Which item is subject to a transfer tax? income Estate Sales Property What is the least common IRS audit? Field office Correspondence Telephone Which publication contains the IRS regulations governing a tax practice and applies to all persons practicing before the IRS? Circular 130 Circular 230 Circular 360 Circular 460 What is the definition of gross income for federal income tax purposes? Exam alds taxable income O "All income from whatever source derived O "All active income" O "All economic income" O" All compassion on, business income, rents, royalties, interest and dividends A single individual earned wages of $65,000 working at a bank. The individual received a $12,000 gift from a parent to go to Europe, inherited $10.000 from a relative and received $1 000 interest from a municipal bond. The individual has two dependents and itemized deductions of $13.000 What is this individual's tax liability for 2021? - $5.260 O $5,380 O $5,956 - $6,010 A single individual has taxable wages of $70,000 for 2021. The individual received an inheritance of $5,000 in cash, earned $500 in dividends on a stock portfolio, and had $1 200 interest from municipal bonds The individual has itemized deductions of $13 000 What is the individual's tax liability for 2021? O 58,399 O 58,553 O $8,663 O $9,499 Which type of income satisfies all three requirements for the income to be taxable? O An agreement to sell one's boat for $5.000 © A sale of stock for a gain of $5,000 0 A receipt of a bank loan for $5 000 O An increase in stock value by $5,000 A new business owner started a calendar-year business on December 1 of the current year and paid 12 months of rent on a store at the rate of $2,000 per month. At most, how much may this business owner deduct this year under the cash method versus the accrual method? O Cash: $2,000; Accrual: $24,000 © Cash: $24,000; Accrual: $2,000 'O Cash: $24,000; Accrual: $24,000 O Cash: $2,000; Accrual: $2,000 Which payment is included in gross income according to Internal Revenue Code Section 61 (a)? O Health insurance premiums under an employer benefit plan O Cash from the sale of illegal drugs O Property settlement pursuant to a divorce O Welfare distribution Which item is excluded from gross income? O Gain from sale of business properties O Salaries • Sales commissions O Municipal band interest Which educational expense, paid for by scholarship, qualifies for exclusion from gross income? Room and board Tuition and fees Laundry expenses Transportation What is not a major statutory exclusion from gross income? O Life insurance proceeds O Gift and inheritance O Qualified adoption expenses O Annual bonus During a current tax year, a taxpayer sells property for $100,000. for which he has an adjusted basis of $75,000. How should this sale be reported on his individual tax return? O He has a realized and recognized gain of $25,000. O He has a recognized gain of $75,000. O He has a realized gain of $75,000. 0 He has a realized and recognized gain of $100,000. Which event is an example of a recognized loss? O The market value of stock in an individual's portfolio decreased by $3.000 © A taxpayer sold a personal-use automobile for $3,000 less than the original purchase price. O The market value of a taxpayer's home decreased by $2,000. O A taxpayer sold stock $2,000 less than the cost basis. A taxpayer converts equipment purchased five years ago for $10,000 for personal use to business use. The fair market value (FMV) of the equipment at the date of conversion is $8,000. One year later, the business sells the equipment for $5,000 when the FMV is 56,000. What is the basis of the equipment at the date of conversion? O $5.000 O $6,000 O $8,000 O $10,000 The sale of which asset could trigger a capital gain? O Inventory O A note receivable signed by a customer O Accounts receivable O A personal automobile In the current tax year, a taxpayer sells a painting for $12,000. She purchased the painting two years ago for $8,000. The short-term capital gains rate is 25%. The long-term capital gains rate is 15%. What is the taxpayer's gain for the current tax year? O S600 short-term capital gain O $600 long-term capital gain. ($12000 - $8000) *15% = 600 O $1,000 long-term capital gain. O $1,000 short-term capital gain An individual with a taxable income of $50.000 sells 300 shares of stock at a market price of $100 per share. At the individual's present level of income, there is a marginal ordinary income tax rate of 25% and a long-term capital gains rate of 15%. 200 shares of the stock were acquired 13 months earlier at a price of $80 per share, and 100 shares were acquired two years earlier at a price of $60 per share What is this individual's tax liability after this transaction? O $2,000 O $1,800 0 $8,000 0 51,200 In order to minimize tax liability this year, a taxpayer invests $10 000 in municipal bonds. Which tax planning strategy would accomplish this goal? Tax-exempt income O Tax-deferred income O Income shifting O Prepaid income Which item is excluded from gross income by the Internal Revenue Code? O Self-employment income O Income from babysitting O A corporate cash dividend - A scholarship for tuition Which item is excluded from gross income by the Internal Revenue Code? Corporate bond interest • Municipal bond interest O Partnership income © Wages from part-time work A company expanded its operation by purchasing a new building for $1,000 000 and spent $4,000 for an assessment of the adaptability of the building for manufacturing. The company also paid $70,000 for the realtor's fee associated with this sale What is the company's cost basis for the building? $1,000,000 $1,004,000 $1,070,000 (1,000,000+70,000) $1.074.000 Which capital assets are subject to the most preferential tax treatment? Sale of personal use property Sale of coins Long term capital gains Short term capital gains Maria purchased 200 shares of stock for $5 500 on January 6 of year 1. On March 8 of year 1, Daniel received the stock as a gift from Maria ($6 500 in fair market value) What is the earliest date that Daniel can sell the stock and receive long-term capital gain treatment on the gains of the stock? O March 8 of year 2 O January 6 of year 2 O January 7 of year 2 © March 9 of year 2 Which item reduces adjusted gross income for an individual in the military? O Child support payments after a divorce O Moving expenses for a job Commuting expenses for a job O Moving expenses after a divorce What is the role of deductions for adjusted gross income? O It replaces the personal exemption O It reduces the standard deduction. O It replaces the standard deduction 0 It reduces taxable income What is an example of a deductible business expense? Payment of a bribe to a public official Payment of property taxes on business real estate Broker fees incurred when buying municipal bonds Political contributions and lobbying expenses Which item is an immediately deductible business expense? O Taking out a loan to purchase land for future parking O Installing a boiler O Installing a security fence around an office parking lot Repairing office walls Which item is a deductible business expense? O Insurance on a truck used in the business • Purchase of land to be used for the business O Withdrawal by the owner O Incentive fee paid to a union official to stop a strike In the current tax year, a taxpayer sells a painting for $12,000. She purchased the painting two years ago for $8,000. The short-term capital gains rate is 25%. The long-term capital gains rate is 15%. What is the taxpayer's gain for the current tax year? O $600 short-term capital gain. O S600 long-term capital gain. O $1,000 long-term capital gain. • $1,000 short-term capital gain An individual with a taxable income of $50,000 sells 300 shares of stock at a market price of $100 per share. At the individual's present level of income, there is a marginal ordinary income tax rate of 25% and a long-term capital gains rate of 15%. 200 shares of the stock were acquired 13 months earlier at a price of $80 per share, and 100 shares were acquired two years earlier at a price of $60 per share. What is this individual's tax liability after this transaction? O $2,000 O $1,800 (The individual's tax liability after this transaction is $1,800. The capital gains tax on the 300 shares sold is calculated as follows: (100 x $100 - $60) x 15% = $300 and (200 x $100 - $80) x 15% = $600. This totals $900 in capital gains taxes. The individual's ordinary income tax on the $30,000 in profits from the sale is calculated as follows: $30,000 x 25% = $7,500. The total tax liability after the transaction is then $900 + $7,500 = $8,400. However, the individual is eligible for a $1,600 capital gains tax credit, which reduces their total tax liability to $1,800.) O $8,000 O $1,200 Which business expenses are restricted? Expenses related to a marketing campaign Expenses incurred before the associated income was earned Expenses related to commuting between home and a regular place of business Expenses incurred in a separate geographical location An individual buys rental property in Year 1. At closing, the individual pays up-front interest costs and charges $2,000 in property taxes to a credit card. The credit card bill is due in Year 2. The individual uses the cash method of accounting. When will the interest expense and property taxes be deductible? O The interest expense and property taxes are both deductible in Year 1 (The interest expense is deductible in Year 2 and the property taxes are deductible in Year 1.) O The interest expense and property taxes are both deductible in Year 2. O The interest expense is deductible in Year 1, and the property taxes are capitalized to the cost of the property and depreciated over time O The interest expense is deductible in Year 2, and the property taxes are deductible when the property is sold. Year 1: December 15-The owner of a sole proprietorship spends $2,000 on supplies from Vendor A on credit. December 29-The owner spends $500 on supplies from Vendor B and pays with a check at the time of purchase. Year 2: January 5- The funds from the check to Vendor B are deducted from the owner's account. February 15-The owner pays the amount due to Vendor A. The owner uses the cash method of accounting. Which amount should be expensed in Year 1? 0 $0 O $500 O $2,000 O $2,500 An individual is trying to decide whether to claim a standardized tax deduction or itemize their deductions for 2021. The taxpayer calculates $9,800 of itemized deductions, the individual is single with no children, but the individual's unemployed 27-year-old sibling with no income or other means of support has lived with the taxpayer for the last 18 months. Which deduction should this individual claim? O 59,800 of itemized deductions O A $12,550 standard deduction O An $18,800 standard deduction O A $25,100 standard deduction Which item is a deduction from adjusted gross income (AGI)? © Home mortgage interest deduction O IRA deduction O Health savings account deduction O Student loan interest deduction What qualifies as a deductible medical expenditure? O Elective cosmetic surgery that is not for the purpose of correcting a deformity personal injury, or disfigurement O Dental examinations O Nonprescription medicines 0 Controlled substances for medical purposes legal in the state a taxpayer resides in