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Acc 555 Midterm Exam Answers

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ACC 555 Midterm Exam Answers

1) The federal income tax is the dominant form of taxation by the federal government.

2) The Sixteenth Amendment permits the passage of a federal income tax.

3) When a change in the tax law is deemed necessary by Congress, the entire Internal Revenue Code must be revised.

4) A progressive tax rate structure is one where the rate of tax increases as the tax base increases.

5) The terms “progressive tax” and “flat tax” are synonymous.

6) A proportional tax rate is one where the rate of the tax is the same for all taxpayers, regardless of income levels.

7) Regressive tax rates decrease as the tax base increases.

8) The marginal tax rate is useful in tax planning because it measures the tax effect of a proposed transaction.

9) A taxpayer’s average tax rate is the tax rate applied to an incremental amount of taxable income that is added to the tax base.

10) If a taxpayer’s total tax liability is $30,000, taxable income is $100,000, and economic income is $120,000, the average tax rate is 30 percent.

11) If a taxpayer’s total tax liability is $4,000, taxable income is $20,000, and total economic income is $40,000, then the effective tax rate is 20 percent.

12) All states impose a state income tax which is generally based on an individual’s federal adjusted gross income (AGI) with minor adjustments.

13) The unified transfer tax system, comprised of the gift and estate taxes, is based upon the total property transfers an individual makes during lifetime and at death.

14) Gifts between spouses are generally exempt from transfer taxes.

15) The primary liability for payment of the gift tax is imposed upon the donee.

16) For gift tax purposes, a $14,000 annual exclusion per donee is permitted.

17) Property is generally included on an estate tax return at its historical cost basis.

18) Property transferred to the...


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