TEST BANK Principles of Taxation for Business and Investment Planning, 2023 26th Edition by Jones, Shelley, Sandra and Kubick
CHAPTER 1
1) Ms. Penser resides in the city of Lanock, Tennessee. She owns 100% of the stock of PSW Incorporated, which is incorporated under Tennessee law and conducts business in six different local jurisdictions in Tennessee. A.How many taxpayers are identified in the above statement of facts? B.Identify the governments with jurisdiction to tax each of these taxpayers.
2) Forrest Township levies a tax on the assessed value of real property located within the town limits. The tax equals 1.4% of the value up to $300,000 plus 2% of any value in excess of $300,000. Mildred Payne owns real estate with a $983,500 assessed value. Compute her property tax.
3) Richton Company operates its business solely in Jurisdiction H, which levies a 6% sales and use tax. This year, Richton paid $1,438,000 to purchase tangible property from a dealer located in Jurisdiction W. This purchase was subject to W's 3.5% sales tax. The property was shipped to Richton's office in Jurisdiction H for use in its business. Compute Richton's sales or use tax with respect to this transaction.
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4) Grant Wilson is an employee of Market Enterprises, a corporation operating in State A. Identify the different types of potential taxes to be paid by both Grant and Market Enterprises with respect to this employment relationship.
5)
Which of the following is not characteristic of a tax? A) A tax is compulsory. B) A tax is intended to punish unacceptable behavior. C) A tax is levied by a government. D) All of these choices are characteristics of a tax.
6) The state of Virginia charges motorists 50 cents for every trip across a toll bridge over the James River. This charge is an example of a(n): A) User's fee B) Transaction-based tax C) Activity-based tax D) Excise tax
7) The city of Mayfield charges individuals convicted of DWI (driving while intoxicated) $500 for the first conviction and $2,000 for any subsequent conviction. These charges are an example of a(n): A) User's fee B) Transaction-based tax C) Activity-based tax D) Government penalty
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8) The property tax on a rental house owned by Mr. Janey increased by $1,200 this year. Mr. Janey increased the monthly rent charged to his tenant, Ms. Lacey, by $45. Who bears the incidence of the property tax increase? A) Mr. Janey B) Ms. Lacey C) Both Mr. Janey and Ms. Lacey D) Neither Mr. Janey nor Ms. Lacey
9) Acme Incorporated's federal income tax increased by $100,000 this year. As a result, Acme reduced the annual dividend paid on its common stock by $100,000. Who bears the incidence of the corporate tax increase? A) Acme Incorporated B) Acme's customers C) Acme's employees D) Acme's shareholders
10) Acme Incorporated's property taxes increased by $65,000 this year. As a result, Acme increased the sale prices of its products to generate $65,000 more revenue. Who bears the incidence of the corporate tax increase? A) Acme Incorporated B) Acme's customers. C) Acme's employees. D) Acme's shareholders.
11) Acme Incorporated's property taxes increased by $19,000 this year. As a result, Acme eliminated $19,000 from its budget for the employee Christmas party. Who bears the incidence of the corporate tax increase?
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A) Acme Incorporated B) Acme's customers. C) Acme's employees. D) Acme's shareholders.
12)
Mr. Bilboa is a citizen of Portugal. Which of the following statements is true? A) The U.S. government has no jurisdiction to tax Mr. Bilboa because he is not a U.S.
citizen. B) The U.S. government has jurisdiction to tax Mr. Bilboa if he is a permanent resident of the United States. C) The U.S. government has jurisdiction to tax Mr. Bilboa if he earns income from a business he operates in Florida. D) Both the U.S. government has jurisdiction to tax Mr. Bilboa if he is a permanent resident of the United States and the U.S. government has jurisdiction to tax Mr. Bilboa if he earns income from a business he operates in Florida are true.
13) Mrs. King is a U.S. citizen who permanently resides in South Africa. Which of the following statements is true? A) The U.S. government has jurisdiction to tax Mrs. King. B) The U.S. government has no jurisdiction to tax Mrs. King because she does not live in the United States. C) The U.S. government has no jurisdiction to tax Mrs. King because she does not earn any income from a source within the United States. D) Mrs. King can elect whether to pay tax to the United States or to South Africa.
14) Mrs. Renfru is a Brazilian citizen who permanently resides in Houston, Texas. Which of the following statements is true?
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A) The U.S. government has no jurisdiction to tax Mrs. Renfru because she is not a U.S. citizen. B) The U.S. government has jurisdiction to tax Mrs. Renfru only on income that she earns from a source within the United States. C) The U.S. government has jurisdiction to tax Mrs. Renfru. D) Mrs. Renfru can elect whether to pay tax to the United States or to Brazil.
15)
Which of the following statements regarding tax systems is false?
A) A single percentage that applies to the entire tax base is described as a flat rate. B) When designing a tax, governments try to identify tax bases that taxpayers can easily avoid or conceal. C) A tax base is an item, occurrence, transaction, or activity with respect to which a tax is levied. D) With regard to tax systems, the term revenue refers to the total tax collected by the government.
16)
Which of the following is an example of a transaction-based tax? A) A tax on net business income B) An excise tax C) An estate tax on the transfer of assets at death D) Both an excise tax and an estate tax on the transfer of assets at death.
17)
Which of the following is an example of an activity-based tax? A) A tax on business' net income B) An excise tax C) A gift tax on the transfer of assets by gift D) Both a tax on business' net income and a gift tax on the transfer of assets by gift
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18)
Which of the following is an earmarked tax?
A) A tax imposed on the purchase of specific items such as liquor or cigarettes B) A tax that generates revenues that the government can spend only to build more National Parks C) A tax imposed only on individuals who earn more than $1 million annually D) A tax that generates revenues that the government can spend for any purpose
19)
Which of the following characterizes a good tax base? A) The base can be easily expressed in monetary terms. B) Taxpayers cannot easily avoid or conceal the base. C) Taxpayers cannot easily move the base from one jurisdiction to another. D) All of these choices characterize a good tax base.
20) The city of Springvale imposes a net income tax on businesses operating within its jurisdiction. The tax equals 1% of income up to $100,000 and 1.5% of income in excess of $100,000. The Springvale Bar and Grill generated $782,000 net income this year. Compute its city income tax. A) $10,230 B) $11,230 C) $11,730 D) None of these choices are correct
21) Government Q imposes a net income tax on businesses operating within its jurisdiction. The tax equals 3% of income up to $500,000 and 5% of income in excess of $500,000. Company K generated $782,000 net income this year. Compute the income tax that Company K owes to Q.
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