Question

1 Which of the following statements is false?

A. The child and dependent care credit, the earned income credit, and the charitable contribution deduction are examples of tax provisions designed to meet social goals.

B. The tax law has become so complex because Congress has used the tax system to influence social policy as well as to deliver benefits for specific groups and industries.

C. Tax provisions have been used for such economic motives as reduction of unemployment, expansion of investment in productive (capital) assets, and control of inflation.

D. The sole purpose of the income tax is to raise revenue to operate the government.

E. An example of a provision that has both economic and social objectives is the provision allowing the gain on sale of a personal residence up to $250,000 ($500,000 if married) to be excluded from taxable income. From a social standpoint, this helps a family afford a new home, but it also helps achieve the economic goal of ensuring that the United States has a mobile workforce.

2 Which of the following statements is not correct?

A.
A progressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. The average tax rate is higher than the marginal tax rate.

B.
A marginal tax rate is the tax rate that applies to the last (or next) unit of the tax base.

C.
An effective tax rate is the ratio of total taxes paid as a percentage of the company's accounting income, instead of as a percentage of the taxable income.

D.
An average tax rate is the ratio of the total amount of taxes paid to the total tax base expressed as a percentage.

E.
A proportional tax is a tax imposed so that the tax rate is fixed, with no change as the taxable base amount increases or decreases.

3 Which of the following individuals is most likely to be audited?

A.
Kent Brockman is medically insane takes the standard deduction and his only source of income is social security, workers compensation and Supplemental Nutrition Assistance Program (SNAP).

B.
Morris "Moe" Szyslak has a $200,000 of unsubstantiated gambling losses used to offset $200,000 of gambling winnings. He also received a $1,000,000 salary as owner and operator of the Moe's Tavern.

C.
Barnard Arnold "Barney" Gumble, a recovering alcoholic, has AGI of $44,000 from wages as a Duff Brewery employee and uses the standard deduction.

D.
Margaret Evelyn "Maggie" Simpson inadvertently fails to report $120 of dividends from a Form 1099. Her taxable income is $64,000 and she has no other unusually large itemized deductions or business expenses.

E.
Maude Flanders is deceased and formerly ran an illegal cash bases business where she routinely claimed large

Answer 1

For question 1, the false statement is D.

For question 2, the incorrect statement is A.

Step-by-step explanation:

For question 1, The sole purpose of the income tax is not to raise revenue to operate the government. Tax provisions have also been used to achieve social and economic goals, as mentioned in the other options.

For question 2, A progressive tax is a tax imposed in such a manner that the tax rate increases as the amount subject to taxation increases. The average tax rate is lower than the marginal tax rate.