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exam 3 - taxes

Terms in this set (20)

T or F - 5. In 2010 you purchased a share of stock for $250 and you sold it this year for $300. Legally, you don't need to pay any taxes on this transaction.
False
Three years ago, you purchased 125 share of Microsoft (MSFT) stock for $131, which you could sell today at the current market price of $105. What would be your capital gain on the sale, ignoring commissions?

A. $26.00
B. $3,250
C. 0
D. -3,250
$0
Contributing $7,500 into a tax-deferred retirement plan in a 28% tax bracket will save...

A. $7,500.
B. $5,400.
C. $2,800.
D. $2,100.
E. It depends on the exemptions and deductions claimed.
$2,100

7,500 x.28
The amount of income taxes that you actually pay is based upon your

A. taxable income.
B. gross income.
C. earned income.
D. taxable income minus exemptions and deductions.
a. taxable income
T or F - If you are self-employed, you have to pay both the employer and employee portions of FICA, for a total rate of 15.3 percent.
TRUE
FICA stands for

A. Federal Insurance Contribution Act
B. Federal Income Contribution Act
C. Financial Investment Compounding Act
D. Federal Interest Compounding Act
Federal Insurance Contribution Act
Ben works at Plains Capital Bank as a credit analyst. His annual salary is $75,000 and gets a bonus of $5,000. He has $4,000 deducted from his 401(k), $2,400 health insurance and $9,000 for taxes. On a personal income statement for a new home loan, what should Ben put for his income?

A. $75,000
B. $66,000.
C. $80,000
D. $71,000
$80,000

75,000 + 5,000
salary + bonus = income
Income can be earned or unearned. Which of the following is an example of unearned income?

A. Money from a part-time second job.
B. Tips from customers.
C. Interest from bank accounts.
D. Paid vacation days from work.
interest from bank accounts
Income that comes from wages or a business is called

A. investment income.
B. earned income.
C. adjusted income.
D. portfolio income.
earned income
Who must file a federal income tax return?

A. Everyone with an earned income during the year
B. All heads of household
C. All American citizens
D. Individuals whose income meets federal guidelines
individuals whose income meets federal guidelines
T or F - If you are self-employed, you have to pay both the employer and employee portions of FICA, for a total rate of 20 percent.
FALSE
Contributing $7,500 into a tax-deferred retirement plan in a 24% tax bracket will save _______ in taxes.

A. $1,700.
B. $7,500
C. $1,500.
D. $1,800
E. It depends on the exemptions and deductions claimed.
$1,800

7,500 x .24 = 1,800
Federal Income taxes are based on which of the following:

A. Gross Income
B. Adjusted Income
C. Earned Income
D. Investment Income
adjusted income
T or F - For most tax payers, their average tax rate is higher than their marginal tax rate.
FALSE
Camie is a single person with no dependents. She normally receives over $1,800 every year for an income tax refund. She is having difficulty paying her monthly bills every month. What tax advice would you give her?

A. She should decrease her withholding on her W-4 form at work.
B. She should pay her estimated taxes every quarter.
C. She needs to find some more tax deductions.
D. She needs to file as Head of Household status
A. She should decrease her withholding on her W-4 form at work.
Deductions calculated using the federal tax form "Schedule A" which are totaled and then subtracted from taxable income are called:

A. itemized deductions.
B. standard deductions.
C. personal expenditures.
D. personal exemptions.
A. itemized deductions.
Which of the following is an income tax filing status?

A. Divorced filing spouse
B. Married filing jointly and surviving spouses
C. Head of divorced household
D. All of the above are income tax filing statuses.
B. Married filing jointly and surviving spouses
FICA taxes are based on which of the following:

A. Gross Income
B. Adjusted Income
C. Taxable Income
D. Investment Income
Gross income
You have decided to set aside 15% of your salary for retirement. You work at a firm where your employer matches your contribution to the 401(k) plan, dollar by dollar, up to 5% of your salary. Which of these statements are correct?

A. What the employer contributes should not play any role in your decision to participate
B. It is always a good idea to contribute less than what the employer contributes.
C. Any contribution of your employer is lost if you change jobs.
D. If you contribute up to 5% of your salary, the employer match is equivalent to a 100% return on your contribution.
If you contribute up to 5% of your salary, the employer match is equivalent to a 100% return on your contribution.
Three years ago, you purchased 10 shares of GameStart stock for $56, which you could sell today at the current market price of $398. What would be your capital gain on the sale, ignoring commissions?

A. $3,980
B. $1,620.
C. $3,420
D. $3,520
C. $3,420

(10 x 398) - (10 x 56) = 3,420
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