Chapter 1

Question 1

Tax is a ________________ to support the cost of government.

__________ of a tax refers to the ultimate economic burden represented by the tax.

Answer 1

payment

incident

Question 2

Which entities are required to pay tax?

Answer 2

C-corps, individuals, and trusts

Question 3

The right of a government to levy tax is referred to as…

Answer 3

jurisdiction

Question 4

T or F: Incidence may not fall on the person or organization who pays tax.

Answer 4

True

Question 5

Tax formula is….

Answer 5

tax = (rate) x (base)

Question 6

This tax rate applies to the entire tax base.

Answer 6

flat tax rate

Question 7

Income tax applies to portions or brackets of the tax base and is a prime example of what tax base?

Answer 7

graduated tax base

Question 7

Taxes such as sales, excise, estate or gift taxes are examples of which kind of frequency tax?

Answer 7

transaction

Question 7

What is an example of an activity based tax?

Answer 7

income tax

Question 8

Governments have two ways of increasing the amount of tax they collect

Answer 8

Expand the base

Increase the rate

Question 8

Where do we go to find tax laws?

Answer 8

Internal Revenue Code (IRC)

Question 9

How is a tax base defined?

Answer 9

An item, transaction or activity with respect to which a tax is levied. They are usually expressed in monetary terms.

Ex: RE taxes are levied on the ownership of land and buildings, so the dollar value of the land/building is the tax base.

Question 10

What is another term for tax that is collected by the government and is available for public use?

Answer 10

Revenue

Question 11

What does it mean if a tax is event or transaction based?

Answer 11

Tax is triggered only when the event or transaction takes place.

Question 12

A tax that is imposed on the cumulative result of an ongoing activity, it is a _________ based tax.

Answer 12

activity

Question 13

A city levies a five-cent-per-bag tax on disposable plastic and paper bags. All of the tax revenue goes to a river clean up fund. What kind tax does this best describe?

Answer 13

earmarked taxes

Question 14

Ad valorem taxes is another way of describing which popular taxes in local government?

Answer 14

real property and personal property taxes

Question 15

______ __________ taxes are levied annually and are based on the market value of the property.

Answer 15

Real property taxes

Question 16

List the three classifications of taxable personalty (personal property).

Answer 16

1) Household tangibles
2) Business tangibles
3) Intangibles

Question 17

Federal employment taxes are earmarked to provide funding for which two federal programs?

Answer 17

Social Security

Medicare

Question 18

Define a transfer tax and what it plays a key role in.

Answer 18

Tax levied when a gift or transfer of wealth occurs. This plays a key role in family tax planning (or estate planning).

Question 19

This tax is levied on firms engaged in the production of goods and is based on the incremental value it adds to the good.

Answer 19

value-added tax

Question 20

In its narrowest sense, federal tax law means the ________________________, the compilation of statutory rules enacted by Congress.

Answer 20

Internal Revenue Code of 1986

Question 21

This committee drafts new tax bill ideas to be considered by the House of Representatives.

Answer 21

House Ways and Means Committee

Question 22

After the House of Representatives votes to approve a bill, it moves to which committee?

Answer 22

Senate Finance Committee

Question 23

T or F: The Senate Finance Committee is permitted to make revisions, additions, or deletions to a bill before presenting it to the Senate for approval.

Answer 23

True

Question 24

T or F: An amended bill from the Senate is typically the same as the bill proposed by the House of Representatives.

Answer 24

False, it usually looks quite different.

Question 25

Which committee reviews both the House’s and Senate’s version of a proposed tax bill?

Answer 25

Conference committee

Question 26

A _________ _____ is drafted by the Conference Committee and both the House and Senate Vote on it.

Answer 26

compromise bill

Question 27

When does the President get to decide if a proposed tax bill should become law?

Answer 27

After the House and Senate vote on the Conference Committee’s final version.

Question 28

Treasury Regulations are the government’s official ________________ of the law, but are not laws in and of themselves.

Answer 28

explanation

Question 29

T or F: The Internal Revenue Service (IRS) provides rulings and procedures that represent the federal governments official interpretation of how to comply with taxes.

Answer 29

False, they only represent the IRS’s official position. The IRC and Supreme Court verdicts are the final word in any tax dispute.