Chapter 1 Introduction To Taxation

Front 1

What are the two tax components?

Back 1

Tax rate and tax base

Front 2

What are the three tax rate types?

Back 2

Progressive, regressive, proportional.

Front 3

What is a progressive tax rate?

Back 3

A tax rate that increases as tax base increases.

Front 4

What type of taxes are progressive?

Back 4

Federal income tax, Federal estate and gift taxes.

Front 5

What is a proportional tax rate?

Back 5

A constant tax rate regardless of tax base.

Front 6

What is a regressive tax rate?

Back 6

A tax rate that decreases as a tax base increases.

Front 7

What are the four types of tax bases?

Back 7

1. Transactions (sales or purchases of goods, services, and transfer of wealth)
2. Property or wealth (ownership of types of property)
3. Privileges and rights.
4. Income.

Front 8

What is subject to Federal excise tax?

Back 8

Trucks, trailers, tires, liquor, tobacco, firearms, sporting equipment, air travel.

Front 9

When are Federal excise taxes due on what form?

Back 9

Quarterly Form 720 Federal Excise Tax Return.

Front 10

What are two types of local excise taxes?

Back 10

Hotel occupancy charge and rental car charge.

Front 11

What tax is formed in some states to avoid the avoidance of shipping goods to avoid state tax.

Back 11

Use tax.

Front 12

What are the three transaction taxes?

Back 12

Sales and excise, employment, and taxes on transfer of wealth such as gift and estate.

Front 13

What are the two types of employment taxes?

Back 13

FICA(Federal Insurance Contributions Act)
FUTA (Federal Unemployment Tax Act)

Front 14

What are the two components of FICA?

Back 14

Social Security and Medicare

Front 15

What is the FICA tax rate?

Back 15

.062 for SSA and .0145 for Medicare. Total:.0765

Front 16

What is the ceiling for the tax base for Social Security Tax?

Back 16

$97,500

Front 17

What type of a tax is employment tax?

Back 17

A regressive tax.

Front 18

When are employment taxes due on what return?

Back 18

Due a month after each quarter on the 31st as the 941 Employers Quarterly Federal Tax Return.

Front 19

When is FICA tax not due from the employee?

Back 19

When the kid is under 18 and works for his parents.

Front 20

What type of FICA do self-employed people pay?

Back 20

SE Self-employment tax.

Front 21

Up to what tax base and at what rate does FUTA apply?

Back 21

At .062 up to $7000.

Front 22

Up to how much of the FUTA tax rate can be applied to state unemployment tax?

Back 22

Up to .054.

Front 23

What type of return must be filed for FUTA ar what time?

Back 23

Employer's Annual Federal Employment Tax Return Form 940. Due on or before 1/31 of following year.

Front 24

Who alone is responsible for paying FUTA?

Back 24

The employer.

Front 25

How do you determine estate tax?

Back 25

Include in gross estate property decendent owned, life insurance proceeds paid to the estate or deceased-insured beneficiary. Valued at FV.

Front 26

What are some deductions to be used in arriving at taxable estate income?

Back 26

1. Funeral and Administrative Expenses.
2. Taxes.
3. Debts of decedent.
4. Transfers to charity.
5. Sometimes unlimited marital deduction for amounts paid to widow or widower.

Front 27

What are the progressive estate tax rates?

Back 27

18-45 %

Front 28

What is the most significant credit to be used in arriving at tentative tax liability on estates?

Back 28

Unified Transfer Tax Credit of $780,800.

Front 29

What type of tax is a gift tax?

Back 29

An excise tax levied on transfers made during an owner's life.

Front 30

What is the gift tax base?

Back 30

Sum of all taxable gifts made during an owner's lifetime.

Front 31

How do you compute gift tax?

Back 31

Multiply the tax base by gift tax rate and subtract all gift taxes paid in previous years.

Front 32

In what case is a unified transfer tax credit applied to an estate?

Back 32

When the dying person makes a lifetime gift.

Front 33

What happens if the unified transfer tax credit is used to offset gift tax on a lifetime gift?

Back 33

There will be a lesser or no credit amount to offset estate tax.

Front 34

What is the common tax base for property tax?

Back 34

Wealth

Front 35

What type of tax is value-based property tax?

Back 35

Ad Valorem tax.

Front 36

What are property taxes on reality used by?

Back 36

States and local political subdivisions.

Front 37

What is realty?

Back 37

Real estate and any capital improvements classified as permanent fixtures.

Front 38

What is a tax on personality?

Back 38

All assets that are not realty

Front 39

What type of personal items are subject to property tax?

Back 39

Stocks, bonds, and various securities. Newer cars and personalty devoted to business use such as inventories, trucks, machinery, and equipment.

Front 40

What does payroll tax consist of?

Back 40

FICA and FUTA

Front 41

What type of tax is a tax on privileges and rights?

Back 41

An excise tax.

Front 42

What type of excise tax is custom duties or tariffs?

Back 42

Tax on transportation of goods between borders.

Front 43

What is a franchise tax?

Back 43

Tax on privilege of doing business in a state or local division such as state corp tax.

Front 44

What is an occupational tax?

Back 44

A license.

Front 45

What is a severance tax?

Back 45

Tax on extracting natural resources.

Front 46

What is tax avoidance?

Back 46

Minimizing taxes legally

Front 47

What is marginal tax rate?

Back 47

Rate on additional dollar of taxable income.

Front 48

Average tax rate

Back 48

Ratio of taxes paid to tax base.

Front 49

Effective tax rate

Back 49

Ratio of taxes paid to financial net income before tax
-or-
Sum of currently payable and deferred tax expense divided by net income before tax.