Federal Income Taxation: An Overview

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Chapter 1—Federal Income Taxation - An Overview

MATCHING

Match each term with the correct statement below.
a.
Average tax rate
b.
Effective tax rate
c.
Horizontal equity
d.
Marginal tax rate
e.
Progressive rate structure
f.
Proportional rate structure
g.
Regressive rate structure
h.
Tax avoidance
i.
Tax evasion
j.
Vertical equity

1.A tax rate that increases as the tax base increases.

2.A tax rate that decreases as the tax base increases.

3.Fraudulent methods are used to reduce the actual tax liability.

4.A tax rate that remains the same at all levels of the tax base.

5.Tax planning using legal methods to minimize the tax liability.

6.The tax rate that will apply to the next dollar of taxable income.

7.The tax rate obtained by dividing total tax liability by taxable income.

8.The tax rate obtained by dividing total tax liability by economic income.

9.The result when two similarly situated taxpayers are taxed the same.

10.The result when two differently situated taxpayers are taxed differently but fairly.

1.ANS:EPTS:1DIF:Easy
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2.ANS:GPTS:1DIF:Easy
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3.ANS:IPTS:1DIF:Easy
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4.ANS:FPTS:1DIF:Easy
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5.ANS:HPTS:1DIF:Easy
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6.ANS:DPTS:1DIF:Easy
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7.ANS:APTS:1DIF:Easy
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8.ANS:BPTS:1DIF:Easy
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9.ANS:CPTS:1DIF:Easy
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10.ANS:JPTS:1DIF:Easy
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Match each term with the correct statement below.
a.
Ad valorem tax
b.
Deduction
c.
Excise tax
d.
Exclusion
e.
Expense
f.
Gain
g.
Loss
h.
Ordinary income
i.
Pay-as-you-go concept
j.
Personal property
k.
Real property
l.
Self-assessment
m.
Standard deduction
n.
Statute of limitations
o.
Tax base
p.
Tax credit

11.Any asset that is not real estate.

12.Based on a quantity of a product sold.

13.Based on the value of the property being taxed.

14.The value or amount that is subject to taxation.

15.The excess of an asset’s tax basis over its selling price.

16.Land and any structures permanently attached to the land.

17.The excess of the selling price of an asset over its tax basis.

18.Used by persons who do not itemize deductions on their return.

19.Subtractions from gross income specifically allowed by the tax law.

20.Current period expenditure incurred in order to earn income.

21.The payment of tax throughout the year as income is earned.

22.The common, customary, recurring type of income earned by taxpayers.

23.A taxpayer is responsible for determining his/her tax liability and timely paying the tax due.

24.Direct reduction in the income tax liability often created by Congress to further a public purpose.

25.The period of time during which a taxpayer and/or the IRS can correct a taxpayer’s taxable income.

26.Increases in wealth and recoveries of capital that Congress has decided should not be subject to income tax.

11.ANS:JPTS:1DIF:Easy
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12.ANS:CPTS:1DIF:Easy
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13.ANS:APTS:1DIF:Easy
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14.ANS:OPTS:1DIF:Easy
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15.ANS:GPTS:1DIF:Easy
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16.ANS:KPTS:1DIF:Easy
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17.ANS:FPTS:1DIF:Easy
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18.ANS:MPTS:1DIF:Easy
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