TESTBANK
Fundamentals of Taxation for Individuals:
A Practical Approach
2024th Edition
Author (s): Gregory A. Carnes, Suzanne Youngberg
,TEST BANK FOR
Fundamentals Of Taxation For Individuals A Practical Approach, 2024 Edition Gregory A.
Carnes, Suzanne Youngberg
Chapter 1-18
Chapter 1 The Professional Practice Of Taxation
1) Which Of The Following Is False About Tax Planning?
A) The Appropriate Goal For Tax Planning Is To Maximize After-Tax Income.
B) The Appropriate Goal For Tax Planning Is To Minimize A Taxpayer's Tax Liability For The Year.
C) Once A Taxpayer Understands The Tax Consequences Of A Particular Transaction, They Can
Move On To The Tax Planning Stage.
D) Tax Evasion Is Not A Tax Planning
Strategy. Answer: B
Explanation: Minimizing A Taxpayer's Liability Is Not The Appropriate Goal For Tax Planning
Because If That Were The Goal, Then The Ultimate Success Would Be To Reduce A Taxpayer's
Tax Liability To Zero–Actually An Easy Goal To Meet. If A Taxpayer Has No Income For The
Year, Then There Would Be No Tax Liability, And You Will Have Minimized Their Taxes. But
Your Client Will Also Be A Very Poor And Hungry Person, So This Cannot Be The Proper
Goal.
DIFFICULTY: 1
Learning Objective: LO 1.1
AACSB / AICPA: Knowledge / Accounting Competencies
Bloom's: Knowledge
Section Reference: Sec. 1.1
Time On Task: 5 Min
2) Jessica Has Received Several Job Offers From Various Accounting Firms Located In 4
Different States. She Has Performed An Analysis To Determine Her Income, Her Non-Income
Tax Costs (E.G. Cost Of Living, Etc.) And Income Tax. Jessica Is Trying To Make A Decision
On Which Offer To Accept, And She Has Asked For Your Advice. Based On The Appropriate
Goal Of Tax Planning, Which Of The Following States Would You Advise Jessica To Choose?
Gross Wages Non-Income Tax Costs Income Tax
California 120,000 52,000 24,000
New York 100,000 37,000 20,000
Virginia 70,000 10,800 10,500
Texas 50,000 6,000 5,000
A) Texas
B) California
C) Virginia
D) New York
Answer: C
Explanation: The Appropriate Goal For Tax Planning Is To Maximize After-Tax Income. After-
Tax Income Is Net Income After Reducing Revenue For All Expenses, Including Federal Income
2
,Taxes. See Table Below For Calculation Of After-Tax Income For Each State. With That In
Mind, You Should Advise Jessica To Choose Virginia Because Doing So Maximizes Her After-
Tax Income. The State With The Lowest Income Tax (I.E., Texas) Is Not The Right Answer
Because Minimizing A Taxpayer's Liability Is Not The Appropriate Goal For Tax Planning
Because If That Were The Goal, Then The Ultimate Success Would Be To Reduce A Taxpayer's
Tax Liability To Zero–An Easy Goal To Meet. If A Taxpayer Has No Income For The Year,
Then There Would Be No Tax Liability, And You Will Have Minimized Their Taxes. But Your
Client Will Also Be A Very Poor And Hungry Person, So This Cannot Be The Proper Goal.
Gross Non-Income After-Tax
Wages Tax Costs Income Tax Income
(A) (B) (C) (D) = (A) - (B) - (C)
California 20,000 52,000 24,000 44,000
New York 100,000 37,000 20,000 43,000
Virginia 70,000 10,800 10,500 48,700
Texas 50,000 6,000 5,000 39,000
DIFFICULTY: 2
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 8 Min
3) Which Of The Following Is Not Correct Regarding Tax And Non-Tax Costs?
A) Both Tax And Non-Tax Costs Must Be Considered When Making Financial And
Investment Decisions.
B) Tax Costs Include Any Type Of Tax Paid To A Local, State, Federal, Or Foreign Government.
C) Non-Tax Costs Are All Costs Other Than Tax Costs.
D) Effective Tax Planning Requires Prioritizing Tax
Costs. Answer: D
Explanation: Effective Tax Planning Requires Consideration Of Both Tax And Non-Tax
Costs. DIFFICULTY: 1
Learning Objective: LO 1.1
AACSB / AICPA: Knowledge / Accounting Competencies
Bloom's: Knowledge
Section Reference: Sec. 1.1
Time On Task: 5 Min
4) Samson's Wages Are $100,000. He Lives In Maryland And His Expenses Include $25,000 Rent,
$12,000 Other Living Expenses, $27,000 Income Tax, $6,200 Payroll Tax And $5,500 Property
Tax. What Are Samson's Tax Costs?
A) $27,000
B) $33,200
C) $61,300
D) $38,700
Answer: D
Explanation: $38,700 = $27,000 + $6,200 + $5,500. Tax Costs Include Any Type Of Tax Paid
3
, To A Local, State, Federal, Or Foreign Government.
DIFFICULTY: 1
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 5 Min
5) Samson's Wages Are $100,000. He Lives In Maryland And His Expenses Include $25,000
Mortgage Interest, $12,000 Other Living Expenses, $27,000 Income Tax, $6,200 Payroll Tax
And
$5,500 Property Tax. What Is Samson's Non-Tax Costs?
A) $37,000
B) $12,000
C) $61,300
D) $38,700
Answer: A
Explanation: $37,000 = $25,000 + $12,000. Non-Tax Costs Are All Costs Other Than Tax
Costs. Tax Costs Include Any Type Of Tax Paid To A Local, State, Federal, Or Foreign
Government.
DIFFICULTY: 1
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 5 Min
6) Samson's Wages Are $100,000. He Lives In Maryland And His Non-Tax Costs Include
$25,000 Rent And $12,000 Other Living Expenses. His Tax Costs Include $27,000 Income Tax,
$6,200 Payroll Tax And $5,500 Property Tax. What Is Samson's After-Tax Income?
A) $73,000
B) $24,300
C) $61,300
D) $29,000
Answer: B
Explanation: $24,300 = $100,000 - $25,000 - $12,000 - $27,000 - $6,200 - $5,500. After-Tax
Income Is Net Income After Reducing Revenue For All Expenses, Including Federal Income
Taxes. DIFFICULTY: 2
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 8 Min
7) Which Of The Following Statements Is False?
A) Individuals File Their Individual Income Taxes On Form 1040.
B) Income Lines On The Form 1040 Are Line 1 - 9
C) Deduction Lines On Form 1040 Are Line 10, 12 - 13
D) Demographic Information Is Included On The Second Page Of The Form
4
Fundamentals of Taxation for Individuals:
A Practical Approach
2024th Edition
Author (s): Gregory A. Carnes, Suzanne Youngberg
,TEST BANK FOR
Fundamentals Of Taxation For Individuals A Practical Approach, 2024 Edition Gregory A.
Carnes, Suzanne Youngberg
Chapter 1-18
Chapter 1 The Professional Practice Of Taxation
1) Which Of The Following Is False About Tax Planning?
A) The Appropriate Goal For Tax Planning Is To Maximize After-Tax Income.
B) The Appropriate Goal For Tax Planning Is To Minimize A Taxpayer's Tax Liability For The Year.
C) Once A Taxpayer Understands The Tax Consequences Of A Particular Transaction, They Can
Move On To The Tax Planning Stage.
D) Tax Evasion Is Not A Tax Planning
Strategy. Answer: B
Explanation: Minimizing A Taxpayer's Liability Is Not The Appropriate Goal For Tax Planning
Because If That Were The Goal, Then The Ultimate Success Would Be To Reduce A Taxpayer's
Tax Liability To Zero–Actually An Easy Goal To Meet. If A Taxpayer Has No Income For The
Year, Then There Would Be No Tax Liability, And You Will Have Minimized Their Taxes. But
Your Client Will Also Be A Very Poor And Hungry Person, So This Cannot Be The Proper
Goal.
DIFFICULTY: 1
Learning Objective: LO 1.1
AACSB / AICPA: Knowledge / Accounting Competencies
Bloom's: Knowledge
Section Reference: Sec. 1.1
Time On Task: 5 Min
2) Jessica Has Received Several Job Offers From Various Accounting Firms Located In 4
Different States. She Has Performed An Analysis To Determine Her Income, Her Non-Income
Tax Costs (E.G. Cost Of Living, Etc.) And Income Tax. Jessica Is Trying To Make A Decision
On Which Offer To Accept, And She Has Asked For Your Advice. Based On The Appropriate
Goal Of Tax Planning, Which Of The Following States Would You Advise Jessica To Choose?
Gross Wages Non-Income Tax Costs Income Tax
California 120,000 52,000 24,000
New York 100,000 37,000 20,000
Virginia 70,000 10,800 10,500
Texas 50,000 6,000 5,000
A) Texas
B) California
C) Virginia
D) New York
Answer: C
Explanation: The Appropriate Goal For Tax Planning Is To Maximize After-Tax Income. After-
Tax Income Is Net Income After Reducing Revenue For All Expenses, Including Federal Income
2
,Taxes. See Table Below For Calculation Of After-Tax Income For Each State. With That In
Mind, You Should Advise Jessica To Choose Virginia Because Doing So Maximizes Her After-
Tax Income. The State With The Lowest Income Tax (I.E., Texas) Is Not The Right Answer
Because Minimizing A Taxpayer's Liability Is Not The Appropriate Goal For Tax Planning
Because If That Were The Goal, Then The Ultimate Success Would Be To Reduce A Taxpayer's
Tax Liability To Zero–An Easy Goal To Meet. If A Taxpayer Has No Income For The Year,
Then There Would Be No Tax Liability, And You Will Have Minimized Their Taxes. But Your
Client Will Also Be A Very Poor And Hungry Person, So This Cannot Be The Proper Goal.
Gross Non-Income After-Tax
Wages Tax Costs Income Tax Income
(A) (B) (C) (D) = (A) - (B) - (C)
California 20,000 52,000 24,000 44,000
New York 100,000 37,000 20,000 43,000
Virginia 70,000 10,800 10,500 48,700
Texas 50,000 6,000 5,000 39,000
DIFFICULTY: 2
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 8 Min
3) Which Of The Following Is Not Correct Regarding Tax And Non-Tax Costs?
A) Both Tax And Non-Tax Costs Must Be Considered When Making Financial And
Investment Decisions.
B) Tax Costs Include Any Type Of Tax Paid To A Local, State, Federal, Or Foreign Government.
C) Non-Tax Costs Are All Costs Other Than Tax Costs.
D) Effective Tax Planning Requires Prioritizing Tax
Costs. Answer: D
Explanation: Effective Tax Planning Requires Consideration Of Both Tax And Non-Tax
Costs. DIFFICULTY: 1
Learning Objective: LO 1.1
AACSB / AICPA: Knowledge / Accounting Competencies
Bloom's: Knowledge
Section Reference: Sec. 1.1
Time On Task: 5 Min
4) Samson's Wages Are $100,000. He Lives In Maryland And His Expenses Include $25,000 Rent,
$12,000 Other Living Expenses, $27,000 Income Tax, $6,200 Payroll Tax And $5,500 Property
Tax. What Are Samson's Tax Costs?
A) $27,000
B) $33,200
C) $61,300
D) $38,700
Answer: D
Explanation: $38,700 = $27,000 + $6,200 + $5,500. Tax Costs Include Any Type Of Tax Paid
3
, To A Local, State, Federal, Or Foreign Government.
DIFFICULTY: 1
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 5 Min
5) Samson's Wages Are $100,000. He Lives In Maryland And His Expenses Include $25,000
Mortgage Interest, $12,000 Other Living Expenses, $27,000 Income Tax, $6,200 Payroll Tax
And
$5,500 Property Tax. What Is Samson's Non-Tax Costs?
A) $37,000
B) $12,000
C) $61,300
D) $38,700
Answer: A
Explanation: $37,000 = $25,000 + $12,000. Non-Tax Costs Are All Costs Other Than Tax
Costs. Tax Costs Include Any Type Of Tax Paid To A Local, State, Federal, Or Foreign
Government.
DIFFICULTY: 1
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 5 Min
6) Samson's Wages Are $100,000. He Lives In Maryland And His Non-Tax Costs Include
$25,000 Rent And $12,000 Other Living Expenses. His Tax Costs Include $27,000 Income Tax,
$6,200 Payroll Tax And $5,500 Property Tax. What Is Samson's After-Tax Income?
A) $73,000
B) $24,300
C) $61,300
D) $29,000
Answer: B
Explanation: $24,300 = $100,000 - $25,000 - $12,000 - $27,000 - $6,200 - $5,500. After-Tax
Income Is Net Income After Reducing Revenue For All Expenses, Including Federal Income
Taxes. DIFFICULTY: 2
Learning Objective: LO 1.1
AACSB / AICPA: Analytic / Accounting Competencies
Bloom's: Application
Section Reference: Sec. 1.1
Time On Task: 8 Min
7) Which Of The Following Statements Is False?
A) Individuals File Their Individual Income Taxes On Form 1040.
B) Income Lines On The Form 1040 Are Line 1 - 9
C) Deduction Lines On Form 1040 Are Line 10, 12 - 13
D) Demographic Information Is Included On The Second Page Of The Form
4
