Questions and Answers
What is an example of a proportional tax?
State general sales tax
Who is a use tax imposed by?
Most states but not the government
How to determine the annual exclusion for gifts?
(Number of donees)(14,000 annual exclusion)(number of donees)
When transferring property why prefer the gift approach?
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Characteristics of FICA include?
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Characteristics of FUCA include?
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The U.S. imposes export duties.
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Which tax would simplify income tax?
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Taxes on consumption include?
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Facts about VAT include?
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When are special agent auditors assigned?
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What validated the tax on individuals?
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What were the first levied income tax rates?
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Which generates more revenue, income tax or tax on corporations?
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Examples of progressive taxes include?
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Examples of proportional taxes include?
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Will conversion from residential to rental change the tax?
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Is a fixture an ad valorem on personalty or realty?
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What is all property other than realty?
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What are Adam Smith's canons of taxation?
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Does the excise tax on gasoline vary from state to state?
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Every state that has a sales tax also has a _____?
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On transfers by death, what does the federal government rely on, and what do states rely on?
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What is a tax on a heir's right to receive property from a decedent?
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What was the major reason for the enactment of the Federal estate tax?
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What are the three types of income taxes?
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What are the three types of transaction taxes?
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What are death taxes?
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What reduces or eliminates the estate tax liability for certain estates?
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What is the annual exclusion per donee?
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Examples of the excise taxes include?
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What is the purpose of the use tax?
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What is a tax on natural resources extracted?
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When is a death tax classified as an estate tax?
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What is the determination of the amount of taxable gift?
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Are individual and corporate federal income tax proportional or progressive?
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Formula for federal income tax on individuals?
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Provide an example of FICA.
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What are unemployment taxes?
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Study Notes
Proportional Taxes
- Proportional taxes maintain a constant rate relative to the tax base, with examples including state general sales tax and FICA.
Use Tax
- Imposed by most states to ensure sales tax is collected on out-of-state purchases, preventing tax avoidance.
Gift Tax Exemption
- Determined by the formula: (Number of donees) x (14,000 annual exclusion) x (number of donees), providing significant tax relief on gifts.
FICA Characteristics
- Imposed on both employers and employees.
- Includes retirement income and is federally administered.
- Spouses working together are not exempt.
FUTA Characteristics
- Focused solely on employers.
- Covers unemployment taxes at both state and federal levels.
International Trade Taxes
- The U.S. does not impose export duties, promoting international sales.
Simplification of Income Tax
- A flat tax system could streamline income tax processes.
Consumption Taxes
- Include VAT (Value Added Tax) and general sales tax, impacting consumer spending.
VAT Characteristics
- Regressive in nature and widely adopted by various countries.
Special Agent Auditors
- Assigned when there are indications of fraud to ensure compliance.
Individual Taxation Validation
- The 16th Amendment validated the taxation of individuals in the U.S.
Historical Income Tax Rates
- Initial rates were 2% for low brackets and up to 6% for high brackets.
Revenue Generation Comparison
- Income tax generates more revenue than corporate taxes.
Progressive Taxes Examples
- Include estate taxes and gift taxes, based on an individual's ability to pay.
Conversion of Property Taxation
- Changing property from residential to rental alters tax implications significantly.
Property Classification
- Fixtures are categorized under realty, while all other property is referred to as personalty.
Adam Smith's Taxation Principles
- Emphasizes equality, convenience, certainty, and economy in tax systems.
Excise Tax Consistency
- Gasoline excise tax remains consistent across states, ensuring uniformity.
Sales and Use Taxes
- Every state with a sales tax implements a corresponding use tax.
Death-related Taxes
- The federal government relies on estate tax, while states may depend on inheritance taxes.
Inheritance Tax Definition
- A tax on an heir's right to receive property from a decedent.
Federal Estate Tax Motivation
- Enacted to prevent the concentration of wealth within families across generations.
Types of Income Taxes
- Comprise federal, state, and city income taxes.
Transaction Taxes Varieties
- Include excise, sales, and severance taxes.
Death Taxes Overview
- Comprises both estate and inheritance taxes.
Unified Transfer Tax Credit
- Designed to reduce or eliminate estate tax liability for certain estates.
Annual Exclusion for Gifts
- Currently set at $14,000 per donee.
Examples of Excise Taxes
- Include taxes on gasoline, tobacco, liquor, telephone services, and air travel.
Purpose of Use Tax
- Exists to maintain sales tax integrity by taxing items bought out-of-state without a sales tax.
Severance Tax Definition
- Tax levied on the extraction of natural resources.
Classification of Death Taxes
- Estate tax applies to the right to transfer property, while inheritance tax applies to the rights of receiving it.
Taxable Gift Calculation
- Determined by Fair Market Value (FMV) minus annual exclusion and marital deduction.
Income Tax Structure
- Both individual and corporate federal income taxes are progressive, adjusting based on income levels.
Federal Income Tax Formula for Individuals
- Involves multiple steps, from gross income calculation to deductions and credits for final tax due.
FICA Example
- Social Security tax serves as a primary example of the FICA tax system.
Unemployment Taxes
- Federal Unemployment Tax Act (FUTA) governs unemployment tax regulations.
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Description
Test your knowledge on proportional taxes with these flashcards. Each card provides key terms and definitions related to tax concepts, including state general sales tax and gift exclusions. Perfect for students in finance or accounting courses.
