Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1)
1)
What is the tax rate for corporations?
A)
12%
B)
35%
C)
22%
D)
21%
Answer:
D
Explanation:
2)
2)
In general, what percentage of meals is tax deductible?
A)
All (100%)
B)
25%
C)
50%
D)
None (0%)
Answer:
C
Explanation:
3)
3)
What is the marginal tax rate for a married couple with a taxable income of $60,000?
A)
24%
B)
10%
C)
22%
D)
12%
Answer:
D
Explanation:
4)
4)
When will bonus depreciation begin to be phased out?
A)
2030
B)
2025
C)
2023
D)
Never
Answer:
C
Explanation:
1
5)
5)
Which of the following entities do not pass their tax liability through to their shareholders?
A)
S corporations
B)
Sole proprietors
C)
C corporations
D)
Limited liability companies
Answer:
C
Explanation:
6)
6)
Which of the following are not deductible expenses for tax purposes?
A)
Postage
B)
Entertainment
C)
Promotional items
D)
Construction labor
Answer:
B
Explanation:
7)
7)
For individual taxpayers, estimated tax payments are due which on which of the following dates?
A)
June 15
B)
September 15
C)
April 15
D)
All of the above
Answer:
D
Explanation:
8)
8)
How often are the income tax rates adjusted?
A)
Every five years
B)
Annually
C)
Monthly
D)
Never
Answer:
B
Explanation:
2
9)
9)
What equation is used to calculate the taxes for a single person who had $175,000 of taxable
income during 2018?
A)
$45,689.50 + 35% of the amount over $200,000
B)
$14,089.50 + 24% of the amount over $82,500
C)
$32,089.50 + 32% of the amount over $157,500
D)
$4,453.50 + 22% of the amount over $38,700
Answer:
C
Explanation:
10)
10)
How much of their qualified income from S corporations may individuals deduct under Section
199A?
A)
25%
B)
50%
C)
10%
D)
20%
Answer:
D
Explanation:
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
11)
What is the purpose of the alternate minimum tax?
Answer:
To ensure that individuals pay a minimum amount of tax, the tax code includes provisions that require
some individuals to calculate their Alternate Minimum Tax liability and pay the higher of the
Alternate Minimum Tax or their regular income tax.
12)
How do tax credits differ from deductible expenses?
Answer:
Unlike deducting expenses that reduce a business’s taxable incomewhich in turn reduces a business’s
tax liabilitytax credits are used to directly reduce a business’s tax liability.
13)
How are taxable losses handled?
Answer:
In general, both corporations and individuals are required to carry their losses back, and if the losses
are not used, they may then carry their losses forward.
14)
What is a capital gain?
Answer:
Capital gains and losses are gains and losses on the sale or exchange of capital assets.
15)
What are the effects of depreciation on taxable income?
Answer:
Depreciation does not reduce the amount we may deduct from the taxable income; it only defers the
tax savings to future years.
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16)
When is it most financially advantageous to take tax deductions?
Answer:
In general, it is financially advantageous to take tax deductionsthereby reducing taxable income and
tax liabilityas soon as possible and postpone the payment of taxes as long as possible.
17)
When is section 199A scheduled to be eliminated?
Answer:
Section 199A is scheduled to be eliminated at the end of 2025.
18)
How is taxable income projected from an income statement?
Answer:
When projecting the taxable income from an income statement, the nontax deductible expenses must
be adjusted out of the income statement. The taxable income is calculated by taking the before–tax
profits and adding back in any nondeductible expenses, such as the nondeductible portion of meals
and entertainment. Also, if the depreciation method or recovery periods are different for financial
purposes than are allowed for tax purposes, further adjustments for these differences must be made.
19)
How is taxable income determined?
Answer:
Taxable Income = Income – Tax Deductions
20)
What assets must be depreciated?
Answer:
Typically, assets with a life of one year or more that are purchased for use in business must be
depreciated. Exceptions to this are the bonus depreciation under the Tax Cuts and Job Act and the
Section 179 deduction.
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Answer Key
Testname: C13
1)
D
2)
C
3)
D
4)
C
5)
C
6)
B
7)
D
8)
B
9)
C
10)
D
11)
To ensure that individuals pay a minimum amount of tax, the tax code includes provisions that require some
individuals to calculate their Alternate Minimum Tax liability and pay the higher of the Alternate Minimum Tax or
their regular income tax.
12)
Unlike deducting expenses that reduce a business’s taxable incomewhich in turn reduces a business’s tax liability
tax credits are used to directly reduce a business’s tax liability.
13)
In general, both corporations and individuals are required to carry their losses back, and if the losses are not used,
they may then carry their losses forward.
14)
Capital gains and losses are gains and losses on the sale or exchange of capital assets.
15)
Depreciation does not reduce the amount we may deduct from the taxable income; it only defers the tax savings to
future years.
16)
In general, it is financially advantageous to take tax deductionsthereby reducing taxable income and tax liabilityas
soon as possible and postpone the payment of taxes as long as possible.
17)
Section 199A is scheduled to be eliminated at the end of 2025.
18)
When projecting the taxable income from an income statement, the nontax deductible expenses must be adjusted out
of the income statement. The taxable income is calculated by taking the before–tax profits and adding back in any
nondeductible expenses, such as the nondeductible portion of meals and entertainment. Also, if the depreciation
method or recovery periods are different for financial purposes than are allowed for tax purposes, further
adjustments for these differences must be made.
19)
Taxable Income = Income – Tax Deductions
20)
Typically, assets with a life of one year or more that are purchased for use in business must be depreciated.
Exceptions to this are the bonus depreciation under the Tax Cuts and Job Act and the Section 179 deduction.
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