WGU C237 Taxation I Review Exam 231 Questions
with Verified Answers
Administration would be difficult since the tax was apportioned in proportion to
state populations - CORRECT ANSWER After the reinstatement of the individual
federal income tax in 1894, why was the tax challenged in the courts?
Revenue Rulings, Court Decisions, Internal Revenue Code, Congressional
Committee Reports, Income Tax Regulations, Revenue Procedures, and letter
rulings - CORRECT ANSWER What are two primary sources of tax law in the United
States?
Internal Revenue Code, or IRS Publications - CORRECT ANSWER What is a primary
source of tax law in the United States?
Tax rules and regulations are changed frequently - CORRECT ANSWER What is a
desirable characteristic when evaluating a tax system?
the notion that similarly situated taxpayers should be treated equally - CORRECT
ANSWER What is horizontal Equity?
Implies that taxpayers who are not similarly situated should be treated differently.
- CORRECT ANSWER What is Vertical Equity
Each taxpayer pays a different amount based on their income level. - CORRECT
ANSWER What is an example of equity when evaluating a tax system?
,The amount to which the tax rate applied to determine the tax due. (taxable
income) - CORRECT ANSWER What is Tax Base?
Interest Income - CORRECT ANSWER What increases the tax base of an individual?
where the rate of tax increases as the tax base increases - CORRECT ANSWER
Progressive Rate
where the rate of tax is the same for all tax payers - CORRECT ANSWER
Proportional Tax or Flat Tax
Proportional Tax - CORRECT ANSWER Tax used for Real estate taxes, state and local
sales tax, custom duties, and excise taxes.
Rate decreases with an increase in the tax base - CORRECT ANSWER Regressive
Tax
Regressive Tax - CORRECT ANSWER Tax used for FICA
applied to an incremental amount of taxable income that is added to the tax base.
- CORRECT ANSWER Marginal Tax Rate
Dividing the Total tax liability by the amount of taxable income - CORRECT
ANSWER Average Tax Rate
,Total tax liability divided by total economic income - CORRECT ANSWER Effective
Tax Rate
all types of economic income that a taxpayer has for the year - CORRECT ANSWER
Total Economic income
- CORRECT ANSWER Understand how to compute Marginal Tax Rate
Excise Tax - CORRECT ANSWER Which tax is considered proportional?
Sole Proprietorship, Partnerships, S corps, LLC, LLP, trusts - CORRECT ANSWER
Flow Through Entities
S Corps, and Partnerships - CORRECT ANSWER Which two entities are typically
considered flow-through entities in the U.S. Tax System?
Individuals, and C Corps - CORRECT ANSWER Tax paying Entities
C Corporations - CORRECT ANSWER Which entities are subject to double taxation
in the United States?
Prevents either the taxpayer or the IRS from changing a filed tax return after the
time period has expired. - CORRECT ANSWER Statute of Limitations
, Three years from the later of the date the tax return was actually filed or its due
date - CORRECT ANSWER What is the general rule for the statute of limitations
6 years - CORRECT ANSWER What is the statute of limitations when the taxpayer
omits items of gross income that in total exceed 25% of the gross income reported
on the return.
If a fraudulent return is file or if no return is filed - CORRECT ANSWER Why would
the statute of limitations remain open indefinitely?
Includes preparing tax returns for the individuals and entities and representing
clients before the IRS - CORRECT ANSWER Tax Compliance and Procedure
Involves establishing the facts, identifying the issues, developing a solution, and
communicating with the client - CORRECT ANSWER Tax Research
Involves helping clients manage and insure their personal assets, investments, and
retirement accounts - CORRECT ANSWER Financial Planning
Focuses on minimizing taxes paid and maximizing after-tax cash flows - CORRECT
ANSWER Tax Planning and Consulting
Both taxable and nontaxable income, close the revenue however does not inclue a
return of capital - CORRECT ANSWER Income
with Verified Answers
Administration would be difficult since the tax was apportioned in proportion to
state populations - CORRECT ANSWER After the reinstatement of the individual
federal income tax in 1894, why was the tax challenged in the courts?
Revenue Rulings, Court Decisions, Internal Revenue Code, Congressional
Committee Reports, Income Tax Regulations, Revenue Procedures, and letter
rulings - CORRECT ANSWER What are two primary sources of tax law in the United
States?
Internal Revenue Code, or IRS Publications - CORRECT ANSWER What is a primary
source of tax law in the United States?
Tax rules and regulations are changed frequently - CORRECT ANSWER What is a
desirable characteristic when evaluating a tax system?
the notion that similarly situated taxpayers should be treated equally - CORRECT
ANSWER What is horizontal Equity?
Implies that taxpayers who are not similarly situated should be treated differently.
- CORRECT ANSWER What is Vertical Equity
Each taxpayer pays a different amount based on their income level. - CORRECT
ANSWER What is an example of equity when evaluating a tax system?
,The amount to which the tax rate applied to determine the tax due. (taxable
income) - CORRECT ANSWER What is Tax Base?
Interest Income - CORRECT ANSWER What increases the tax base of an individual?
where the rate of tax increases as the tax base increases - CORRECT ANSWER
Progressive Rate
where the rate of tax is the same for all tax payers - CORRECT ANSWER
Proportional Tax or Flat Tax
Proportional Tax - CORRECT ANSWER Tax used for Real estate taxes, state and local
sales tax, custom duties, and excise taxes.
Rate decreases with an increase in the tax base - CORRECT ANSWER Regressive
Tax
Regressive Tax - CORRECT ANSWER Tax used for FICA
applied to an incremental amount of taxable income that is added to the tax base.
- CORRECT ANSWER Marginal Tax Rate
Dividing the Total tax liability by the amount of taxable income - CORRECT
ANSWER Average Tax Rate
,Total tax liability divided by total economic income - CORRECT ANSWER Effective
Tax Rate
all types of economic income that a taxpayer has for the year - CORRECT ANSWER
Total Economic income
- CORRECT ANSWER Understand how to compute Marginal Tax Rate
Excise Tax - CORRECT ANSWER Which tax is considered proportional?
Sole Proprietorship, Partnerships, S corps, LLC, LLP, trusts - CORRECT ANSWER
Flow Through Entities
S Corps, and Partnerships - CORRECT ANSWER Which two entities are typically
considered flow-through entities in the U.S. Tax System?
Individuals, and C Corps - CORRECT ANSWER Tax paying Entities
C Corporations - CORRECT ANSWER Which entities are subject to double taxation
in the United States?
Prevents either the taxpayer or the IRS from changing a filed tax return after the
time period has expired. - CORRECT ANSWER Statute of Limitations
, Three years from the later of the date the tax return was actually filed or its due
date - CORRECT ANSWER What is the general rule for the statute of limitations
6 years - CORRECT ANSWER What is the statute of limitations when the taxpayer
omits items of gross income that in total exceed 25% of the gross income reported
on the return.
If a fraudulent return is file or if no return is filed - CORRECT ANSWER Why would
the statute of limitations remain open indefinitely?
Includes preparing tax returns for the individuals and entities and representing
clients before the IRS - CORRECT ANSWER Tax Compliance and Procedure
Involves establishing the facts, identifying the issues, developing a solution, and
communicating with the client - CORRECT ANSWER Tax Research
Involves helping clients manage and insure their personal assets, investments, and
retirement accounts - CORRECT ANSWER Financial Planning
Focuses on minimizing taxes paid and maximizing after-tax cash flows - CORRECT
ANSWER Tax Planning and Consulting
Both taxable and nontaxable income, close the revenue however does not inclue a
return of capital - CORRECT ANSWER Income
