Which of the following statement is correct? A) The benefit of a tax credit depends on the...
Question:
Which of the following statement is correct?
A) The benefit of a tax credit depends on the taxpayer's marginal tax rate.
B) Tax deductions are less valuable for high-income taxpayers than for low-income taxpayers.
C) Tax credits reduce tax liability on a dollar-for-dollar basis.
D) Tax deductions reduce tax liability on a dollar-for-dollar basis.
Income Tax Credits:
Income tax credits are amounts that taxpayers can deduct from their tax on taxable income to determine the amount payable to the revenue authorities. They can be either refundable or non-refundable.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answer
Let us discuss each alternative:
| A) The benefit of a tax credit depends on the taxpayer's marginal tax rate. | No, the benefit of a tax deduction de... |
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Income Tax: Tax Liability & Deductions
from
Chapter 3 / Lesson 5
14K
Learn what income tax liability is. Find out what taxable and adjusted gross income are, discover how to calculate tax liability, and examine common deductions.
Related to this Question
- Which statement is correct? A) Tax credits reduce tax liability on a dollar-for-dollar basis. B) Tax deductions reduce tax liability on a dollar-for-dollar basis. C) The benefit of a tax credit depends on the taxpayer's marginal tax rate. D) Tax deduction
- Which of the following statements regarding tax credits is true? A) Tax credits reduce taxable income dollar for dollar. B) Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate. C) Tax credits reduce taxes payable doll
- Which of the following statements is incorrect? a. The AMTI is calculated by modifying the regular tax Taxable Income. b.The AMT is a flat-rate alternative to the regular tax. c. Taxpayers may choose to pay either the regular tax or the AMT. d. Only b
- Which of the following statements is incorrect? a. If the tentative minimum tax exceeds the regular income tax liability, the AMT is $0. b. The exemption amount increases as AMTI increases. c. The AMT tax rate for an individual taxpayer can be as high
- Which of the following statements about marginal tax rates is true? a. A taxpayer's marginal rate can change with every transaction. b. As the marginal rate increases, the tax savings of an income-ge
- Which of the following statements concerning the exemption phaseout is true? a. The phaseout applies only to taxpayers with a 39.6% marginal income tax rate. b. The phaseout can reduce a taxpayer's exemption amount to zero. c. The phaseout doesn't appl
- Which of the following statements is incorrect with respect to determining E & P? a. All tax-exempt income should be added back to taxable income. b. Dividends received deductions should be added back to taxable income. c. Charitable contributions in e
- Which of the following statements is correct? a) Under the tax laws as they existed in 2014, a dollar received by an individual taxpayer as interest income is taxed at the same rate as a dollar rece
- Which of the following taxpayers benefit most in terms of dollars saved as a result of tax planning to reduce taxes? (a) An individual taxpayer who has a marginal tax rate of 28 percent (b) An individual taxpayer who has an average tax rate of 28 percent
- Which of the following is not true regarding income tax credits? (a) Tax credits have the ability to protect a larger amount of income from taxation on individuals with lower taxable income than those with higher taxable income. (b) Individual tax credits
- Which of the following taxpayers will benefit most in terms of dollars saved as a result of tax planning to reduce taxes? a. An individual taxpayer who has a marginal tax rate of 28 percent. b. An i
- Which of the following statements is true? A. The transfer tax rate schedule is regressive in nature. B. The same transfer tax rate schedule is used to calculate both the estate tax and the gift tax. C. The exemption equivalent automatically offsets tr
- Explain the difference between tax credit and tax deduction. Which would help a 28 percent tax bracket taxpayer most, a $2000 deduction or a $400 credit? A 15 percent tax bracket taxpayer.
- Which one of the following statements concerning the deduction for interest on qualified education loans is not correct? (a) The deduction is available even if the taxpayer does not itemize deductions. (b) The deduction only applies to the first sixty mon
- The taxpayer is a Ph.D. student in accounting at City University. The student is paid $1,500 per month for teaching two classes. Which statement is correct? A. The $13,500 is not excludible from taxable income even if the money is used to pay for tuition
- Which of the following statements is incorrect? A- The income tax rates applied to trusts and estates are highly compressed compared to income tax rates for individuals. B- Form 1041 is the income t
- Which of the following statements about the alternative minimum tax is true? A. All of the answers are true. B. Regular taxable income is the starting point for determining AMT. C. Taxpayers must add back the standard deduction amount regardless of whe
- Which one is not correct in the context of tax accounting? a. Corporate income tax is an expense, not a distribution of the profits to the government. b. Deferred tax assets might be resulted from loss carryback. c. Non-taxable expense causes permanent
- Which one is not correct in the context of tax accounting? (a) Deferred tax liability might have resulted when tax expense on the income statement is less than tax payment based on tax code (b) Non-taxable expense causes permanent differences between pret
- Which of the following statements concerning taxation is accurate? A. Only the owners must pay taxes on corporate income. B. Corporations pay federal income taxes but not state income taxes. C. Corporations pay federal and state income taxes. D. Partn
- What is the difference between deductions for adjusted gross income (AGI) and deductions from AGI? Which type of deduction provides the greatest benefit to the taxpayer? Explain why this distinction is critical to individual income taxation. Provide an ex
- Which of the following is NOT true regarding income tax credits? a. The credits have the ability to protect a larger amount of income from taxation on individuals with lower taxable income than those with higher taxable income. b. Individual tax credits a
- Which of the following is referred to as net pay? a. Gross pay minus federal and state income taxes. b. Gross pay minus all deductions. c. Take-home pay plus all deductions. d. All deductions plus all with holdings.
- Which of the following is defined as a tax rate that decreases when the tax base increases? a. Average tax b. Proportional tax c. Marginal tax d. Progressive tax e. Regressive tax
- Which of the following is not a true statement regarding comprehensive income tax allocation? A) Tax allocation is made necessary by the timing differences between when an item reaches the income statement and when it appears on the tax return. B) The dif
- Which of the following statements about conversion of income is correct? a. Converting ordinary income into capital gain is a beneficial tax planning strategy. b. Converting capital gain income into ordinary income is a beneficial tax planning strategy.
- What is adjusted gross income (AGI)? a) The taxable income after deductions b) The taxable income before deductions c) The taxpayer's after-tax income d) The amount that is subject to tax.
- Which of the following is a true statement? a) The deduction of cash contributions to public charities is limited to 30 percent of AGI. b) The deduction of capital gain property to private nonoperating foundations is limited to 50 percent of AGI.
- Which of the following will cause the reported effective tax rate to differ from the federal statutory tax rate? I. Foreign tax rates that are lower than federal statutory tax rate. II. Tax-exempt income. III. Different depreciation methods for tax and
- Which of the following statements regarding the home office deduction is/are true? A. While a taxpayer may have multiple locations where business is conducted, to claim the home office deduction, the taxpayer must be able to show that his home is the prin
- Which one of the following statements concerning the deduction for interest on qualified education loans is not correct? a. The deduction is available even if the taxpayer does not itemize deductions. b. The deduction only applies to the first sixty month
- Which of the following statements is not correct? a. The accountant obtains information about wages subject to payroll taxes from the payroll register. b. Most commercial banks are authorized to accept the employee's tax deposits for federal income taxe
- Which of the following options correctly completes the sentence? The social security lump-sum election means the taxpayer elects to treat the lump-sum social security benefit as if the benefits: a) F
- Which of the following statements is incorrect? a. The taxation of trusts and estates is governed by Subchapter J of the Internal Revenue Code. b. Form 1041 illustrates the conduit theory of income taxation since all taxable income received by a trust or
- For the deduction of self-employment taxes, which of the following statements is correct? a- they are taken as an itemized deduction on schedule A. b- they are not deductible. c- they are 80% deductible as for AGI deduction. d- they are 50% deductible
- Which statement best describes the concept of the double taxation of corporation income? a. Subject to two levels of taxation: regular tax and the alternative minimum tax. b. Corporate income is taxed twice at the corporate level: first when earned and th
- Which option correctly completes this sentence? The social security lump-sum election means the taxpayer elects the lump sum social security benefit as if the benefits: a) For prior years had been re
- Benefit taxation a) means no benefit, no tax. b) means pricing all benefits to arrive at a fair tax for all taxpayers. c) means benefits are valued or priced in line with the ability to pay the tax. d) cannot be applied to state and local taxes.
- Which of the following statements is correct? a) Historically, the tax code has encouraged companies to pay dividends rather than retain earnings. b) If a company uses the residual dividend model t
- Which of the following statements is correct with regard to business tax calculation? a. When determining a corporation's taxable income, all of the expense items are 100% deductible. b. Net operating losses can be carried back to the past three years a
- Which of the following is an example of a progressive tax system? A) Social security tax B) A sales tax C) A proportional tax D) U.S. Federal Income Tax
- Which of the below allowances would have the least amount of taxes withheld for federal income tax purposes? - S-0 - S-3 - S-2 - S-1
- Which of the following are true? A. Deductions are subtracted from gross income to arrive at AGI. B. Exemptions are subtracted from gross income to arrive at AGI. C. Deductions are subtracted from AGI to arrive at taxable income. D. Exemptions are sub
- Which of the following statements is an inaccurate statement regarding the tax implications of the use of the IRC �2503(c) trust a. gifts to IRC �2503(c) trusts qualify for the annual exclusion. b. p
- Which of the following statements concerning state death taxes is (are) correct? I. The federal state death tax deduction is allowed only if a federal estate tax Form 706 return must be filed. II. State estate and inheritance taxes are generally imposed
- Which of the following taxes are likely to be regressive taxes? a. Income taxes based on ability to pay. b. Sales taxes and use taxes. c. Additional sales and use taxes imposed on luxury vehicles. d. None of the above.
- Which of the following credits is not a credit that reduces the tax calculated on taxable income? a. Dependency credit. b. Child tax credit. c. Earned income credit. d. Credit for estimated tax payments.
- Which of the following is a true statement? A) A taxpayer can deduct medical expenses incurred for members of his family who are dependents. B) A taxpayer can deduct medical expenses incurred for a qualified relative even if the relative does not meet t
- Which of the following statements regarding the home office deduction is correct? a. There is no annual dollar limit on the home office deduction. b. The home office deduction is composed of both direct expenses and a portion of indirect expenses. c. I
- Which of the following taxpayers would not be subject to the penalty for underpayment of estimated tax in 2017? a. A taxpayer who does not have the cash to make the payments. b. A taxpayer whose estimated payments are 115 percent her tax liability for th
- Which of the following statements regarding the home office expense deduction is correct? (i) The amount of home office expense allowed under the simplified method of computing home office expenses i
- Which of the following statements is false? a. A taxpayer can be charged a penalty for the late payment of taxes if an extension to file was granted. b. The interest charged on the late payment of taxes is deductible on the federal tax return. c. The pena
- Which statement best describes the concept of the "double taxation" of corporation income? a. Corporate income is subject to two levels of taxation: the regular tax and the alternative minimum tax. b. Corporate income is taxed twice at the corporate level
- In regards to extraordinary items, which of the following statements is not correct? A. An extraordinary gain is reported the same as a loss minus net of the income tax effect. B. Taking of a company assets by a foreign government are generally considered
- What is the difference between a deduction from income and a credit against a tax liability?
- Which statement is incorrect? a. The current annual exclusion from gift tax is $14,000 per donee, per year, indexed for inflation after 1998. b. If the Estate tax exemption is not used at the death of H, H's wife can use the credit. c. In 2015, the est
- Which of the following is paid by the employer only? A. OASDI tax B. Employee income tax C. Medicare tax D. Federal unemployment tax
- Which of the following statements is CORRECT? a. When calculating the cost of a preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation. b. All else equal, an increase in a company's
- What is true when income for tax purposes is higher than accounting income? (a) Actual income taxes payable will be the same as accounting income tax expense (b) Actual income taxes payable will be higher than accounting income tax expense (c) Actual inco
- Which of the following would be used to compute the federal income taxes to be withheld from an employee's earnings? a. FICA tax rate b. Wage and tax statement c. FUTA tax rate d. Wage bracket and withholding table
- What type of deductions is directly deducted from the Gross Income? a. Deductions for AGI. b. Tax-exempt income. c. Tax credit. d. Itemized deductions
- Which of the following statements concerning federal gift and estate taxes is (are) correct? I. The donor's gross estate includes the amount of any gift taxes paid by the donor on gifts made within 3 years of death. II. Gifts made within 3 years of death
- Which of the below allowances would have the least amount of taxes withheld for federal income tax purposes? a. S-1 b. S-0 c. S-3 d. S-2
- Which of the following statements concerning federal gift and estate taxes is (are) correct? I. The donor s gross estate includes the amount of any gift taxes paid by the donor on gifts made within 3 years of death. II. Gifts made within 3 years of deat
- Which of the following produces an incorrect observation? A. The tax shield for NOPAT calculations is subtracted from the total tax expense to determine the tax on operating results. B. A higher NOPAT, will typically result in a higher the return on inv
- With a taxable income of $332,000, what it the effective tax rate? What is marginal tax rate?
- Which of the following is true of the alternative minimum tax? a. The alternative minimum tax is designed to ensure that high-income taxpayers do not pay excessive amounts of income tax. b. For 2015, the alternative minimum tax rates are 20 percent and
- Which of the following is a true statement? A. Moving expenses are deductible for AGI. B. Moving expenses are deductible from AGI. C. Individuals qualify for the moving expense deduction if their employer does not pay for the moving expenses. D. Indiv
- Under the cash method of tax accounting, tax deductions are generally taken when: a) the liability arises b) the taxpayer elects to take the deduction c) payment is made d) None of the above
- Which statement below does not represent the taxation of stock option plans? a. Employers do not receive a tax deduction for ISO's. b. Non-qualified stock option plans provide tax benefits to employers. c. Incentive Stock Options (ISO) provide tax benefit
- Which of the following statements regarding Social Security tax is false? a. Social Security tax was first levied on employees in 1937. b. All earnings of an employee that exceed the taxable wage base
- Which of the following taxes does not represent a payroll deduction a company may incur? a. Federal income taxes b. FICA taxes c. State unemployment taxes d. State income taxes
- Which of the following statements does not apply to intrastatement tax allocation? A) It is also referred to as intraperiod tax allocation. B) It includes showing prior period adjustments net of tax effect. C) It includes showing extraordinary items, chan
- Which statement is incorrect? a. S Corporations are treated as corporations under state law. b. S Corporations resemble partnerships under the Federal income tax law. c. The alternative minimum tax
- Which of the following taxes are likely to be regressive taxes? a) Sales taxes and use taxes. b) Income taxes based on ability to pay. c) Additional sales and use taxes imposed on luxury vehicles. d) None of the above.
- Which of the following statements is not correct regarding qualifying nonbusiness energy property? A) The property is expected to remain in use for at least five years. B) The property must meet minimum energy standards. C) The taxpayer's basis in the
- Which of the following statements regarding the child tax credit is false? A. The child for whom the credit is claimed must be under the age of 15 at the end of the year. B. The credit is subject to phase-out based on the taxpayer's AGI. C. The full cred
- Which of the following statements is true about FICA Social Security and Medicare? A. Employers match the employee's deduction for FICA Medicare but pay a higher percentage for FICA Social Security. B. Only employees have this deduction. C. Only employers
- Which of the following is a result of a permanent difference? a. DTA (deferred tax asset). b. DTL (deferred tax liability). c. Effective tax rate equal to the statutory tax rate. d. None of the above.
- Which statement best describes the concept of the "double taxation" of corporation income? a. Corporate income is taxed twice at the corporate level: first when earned and then a second time if appreciated property is distributed to a shareholder. b. Corp
- Which of the following represents an "above the line" deductions? A. Business Deductions. B. Education Credits. C. Charitable Contributions. D. Home Mortgage Interest.
- Which of the following is correct? a) Social Security tax is employer-paid only. b) Income taxes withheld from employees' paychecks are liabilities of the employer. c) Vacation benefits should be recognized as expenses when employees take a vacation.
- Which of the following statements regarding FICA taxes is true? A. Low income employees are not required to pay FICA taxes. B. An employee who has two different employers during the year may be enti
- Which of the following statements about the FICA tax is not true? (a) The FICA tax is composed of two parts, Social Security and Medicare. (b) Self-employed individuals may elect to pay either FICA taxes or self-employment taxes. (c) FICA taxes are paid b
- Which of the following statements is false? A. A CPA who used his dining room table as a place to meet tax clients to prepare tax returns during the tax year may take a home office deduction. B. The home office deduction is always limited to the income
- Which of the following statements is incorrect? a. Qualified pension plans may be contributory or noncontributory. b. An employer can require employees to make contributions as long as the plan is non-discriminatory. c. A profit-sharing plan does not qual
- Which of the following statements is correct? A. Uncertain tax positions that are more likely than not to be sustained meet the recognition threshold established by the FASB. B. An allowance is established for a deferred tax asset only when it is probab
- Which of the following statements regarding the child tax credit is false? \\ A) The child for whom the credit is claimed must be under the age of 15 at the end of the year B) The credit is subject to phase-out based on the taxpayer's AGI C) The full c
- Which of the following is a true statement regarding the taxation of interest and dividends on a fiduciary income tax return? a. Only interest and dividends not treated ad distributed to the beneficiaries should be reported on page 1. b. Interest and di
- Which, if any, of the following correctly describes the earned income credit? a. Would be available regardless of the amount of the taxpayer's adjusted gross income. b. Not available to a surviving sp
- With regard to tax burdens, which of the following statements is most accurate? a. Gas taxes are an example of a tax that adheres to the benefits received principal. b. Tolls are an example of a tax that adheres to the ability to pay principal. c. Incom
- Which of the following shows the correct relationship among standard deduction amounts for the respective filing statuses? A) Single greater than Head of Household greater than Married Filing Jointly B) Married Filing Jointly greater than Married Filing
- Which of the following taxes would be deducted in determining an employee's net pay? a. FUTA taxes b. SUTA taxes c. FICA taxes d. all are correct
- What are the taxes paid in 2014? Assume the firm pays equal to 35% of taxable income.
- Which is not a source of federal revenue? a. Employment taxes. b. Estate and gift taxes. c. Sales tax. d. Income taxes and individuals.
- Which of the following statements correctly reflects the rules governing interest on an individual's Federal tax deficiency and a claim for refund? a. The IRS has full discretion in determining the rate that will apply. b. The simple interest method for c
- "Marginal income tax rates" a) are nearly always lower than effective income tax rates. b) refers to the tax rate or bracket on the first dollar earned. c) refers to the tax rate or bracket on the last dollar earned and in a progressive income tax system,
- Please specify which answer is correct and explain why. Please include all calculations and be as thorough as possible. 1. Jaime is a cash basis taxpayer. In 2012, she paid state income taxes of $6,00
- Which of the following statements concerning Social Security benefits is (are) correct? Choice 1: If an individual receives retirement benefits based on his spouse's earnings record, his benefits will cease upon his divorce from her, unless he is 62 years
- Which of the following is NOT a tax that most people pay? A) Local taxes on property B) Federal taxes on possessions C) Federal taxes on earnings D) State taxes on purchases
Explore our homework questions and answers library
Browse
by subject