Federal Taxation Exam 1 exam newest 2026/2027 complete questions and correct verified answers

1. who cares about taxation: individuals, businesses, and politicians 2. why do individuals care about taxation: because of tax planing, retirement savings, and home ownership 3. why do businesses care about taxation: because of organizational form, business locations, appropriate mix of debt and equity, distribution of profits, and structure of transactions. 4. why do politicians care about taxation: because of tax rhetoric and voters knowledge 5. flow-through taxation: taxes flow to individual 401k if a business has a shared partnership 6. primary objectives and goals of taxation: generate revenue, tax revenue sustains organizations, communities, states, etc, influence behavior 7. how can taxation influence behavior: citizens behavior can be influenced by the tax code example (expenses)- charitable contribution leads to a tax deduction for some but for others they donate because they like the charity. 8. evaluation of tax system consists of: suflciency, equity, certainty, convenience, and economy 9. sufficiency and its evaluation of the tax system: what amount of tax revenue needs to be generated 10. equity and its evaluation of the tax system: is the tax burden distributed equitably across taxpayers 11. certainty and its evaluation of the tax system: do taxpayers understand when to pay, where to pay, and how to determine how much they should be paid 12. convenience and its evaluation of the tax system: is the tax system designed to collect taxes without undo hardship to the taxpayer 13. economy and its evaluation of the tax system: is the tax system operation with minimal compliance and administrative cost 14. what is the definition of tax: a payment required by a government that is unrelated specific benefit or service received from the government 15. what are some components of a tax: payment is required payment imposed by a government agency (federal, state, local) payment not tied directly to benefit received by the taxpayer 16. how do we calculate tax: must know the following: tax base- defines what is actually taxed, expressed in monetary terms, taxable income vs. economic income. tax rate- level of tax imposed on the tax base, expressed as a percentage. 1 / 9 Federal Taxation Exam 1 exam newest 2026/2027 complete questions and correct verified answers tax=tax base * tax rate *more complex than it looks. 17. how do we measure tax rates: by marginal tax rates, average tax rates, and ettective tax rates 18. what is a marginal tax rate: tax rate that applies to the next additional increment of a taxpayer's taxable income 19. what is a average tax rate: the taxpayer's average rate of taxation on each dollar of taxable income 20. what is a effective tax rate: ettective tax rate= tax liability/total income the taxpayer's average rate of taxation on each dollar of total income both taxable and non-taxable income 21. example of tax rate: Bill and Mercedes have $160,000 of taxable income and an additional $10,000 of nontaxable income. Using the 2025 married filing jointly tax rates, the tax due is what?: find on the tax bracket the range Bill and Mercedes are in- $96,950-$206,700 and $11,157 plus 22% of the excess over $96,950. you should then - $11,157 + 22% ($160,000-$96,950) $11,157 + 22% * $63,050 $11,157 + $13,871 = $25,028 22. example of tax rate: Bill and Mercedes have $160,000 of taxable income and an additional $10,000 of nontaxable income. Using the 2025 married filing jointly tax rates, what is their average tax rate?: you would - $25,028/$160,000= 15.6% tax liab. / tax income= average tax rate 23. example of tax rate: Bill and Mercedes have $160,000 of taxable income and an additional $10,000 of nontaxable income. Using the 2025 married filing jointly tax rates, what is their effective tax rate?: you would - $25,028/ 170,000= 14.7% tax liab. / tax income + non-income= ettective rate 24. what are the tax rate structures: proportional tax rate progressive tax rate regressive tax rate 25. proportional tax rate: imposes a constant tax rate throughout the tax base. rate - same, tax change - grows example: federal corporate tax rate, state tax in Iowa, sales tax rate. 26. progressive tax rate: imposes an increasing tax rate as the tax base 27. regressive tax rate: imposes a decreasing tax rate as the tax base example: medicare tax rate 2 / 9 Federal Taxation Exam 1 exam newest 2026/2027 complete questions and correct verified answers 29. what would a line graph look like to describe a progressive tax r x rate struc- ate structure- 31. what are types of federal taxes: income taxes employment taxes unemployment taxes excise taxes te structure: 32. what are income taxes on the federal level: represents approximately 51% of all tax revenues collected in the United States Levied on individuals, corporations, estates, and trusts 33. what are employment taxes: includes the OASDI (social security tax) and the MHI (medicare tax). OASDI: pays monthly retirement, survivor, and disability benefits for qualifying individuals MHI: pays for medical insurance for individuals who are elderly or disabled 34. what are unemployment taxes: levied to fund temporary unemployment benefits for individuals terminated their jobs without cause 35. what are excise taxes on the federal level: levied on the quantity of a product sold 36. what are types of state and local taxes: income taxes sales and use tax property taxes excise taxes 37. what are income taxes on the state and local level: most state taxable income calculations conform to the federal taxable income calculations ditterent tax rates applied at state and local level compared to federal level progress 3 / 9 Federal Taxation Exam 1 exam newest 2026/2027 complete questions and correct verified answers 38. what are sales and use tax: tax base for a sales tax is the retail sales price of goods and services tax base for a use tax is the retail price of goods owned, possessed, or consumed within a state that were not purchased within the same state. 39. what are property taxes: ad valorem based tax. tax base for property is the FMV of the property real property tax consists of taxes on lan and structures permanently attached to blank personal property tax consists of taxes on all other types of property, both tangible and intangible 40. what are excise taxes on the state and local level: states typically impose excise tax on items subject to a federal excise tax 41. what is direct taxation: tax paid directly to the government cannot be shifted to any other person or group 42. what is indirect taxation: tax that can be shifted to a person or group by the person or business that owes it 43. what is a part of taxpayer filing requirements: corporations, estates, trusts, and individuals 44. corporations taxpayer filing requirements: all must file regardless of taxable income 45. estates and trusts taxpayer filing requirements: required to file if gross income exceeds $600 46. individuals taxpayer filing requirements: filing is determined by taxpayer's filing status, age, and gross income gross income filing thresholds are calculated as the sum of the standard deduction and any additional deductions 47. c corporations and how tax return due dates and extensions are applied: tax return is due the 15th day of the fourth month following the end of tax year 48. partnership and s corporation and how tax return due dates and extensions are applied: tax return is due the 15th day of the third month following the end of tax year 49. individuals and how tax return due dates and extensions are applied: tax return is due the 15th day of the fourth month following the end of tax year due dates that fall on a Saturday, Sunday or holiday are extended to the next business day 50. what is true about all c corporations, partnerships, and individuals when it comes to tax return due dates: all are allowed to apply for an automatic 6 month extension. they all must notify the IRS by their deadline the extension is not for payment but for the paperwork and forms that are normally due 51. tax return due dates and extensions scenario 1: Cyclone Incorporated has a tax year that ends on June 30th. When will its tax