Taxes As Transaction Costs

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Questions Bank

Taxes and Taxing Jurisdictions
Policy Standards for a Good Tax
Taxes as Transaction Costs
Maxims of Income Tax Planning
Tax Research
Taxable Income from Business Operations
Property Acquisitions and Cost Recovery Deductions
Property Dispositions
Nontaxable Exchanges
Sole Proprietorships
The Corporate Taxpayer
The Choice of Business Entity
Jurisdictional Issues in Business Taxation
The Individual Tax Formula
Compensation and Retirement Planning
Investment and Personal Financial Planning
Tax Consequences of Personal Activities
The Tax Compliance Process

All Questions

Question 1

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True/False

Net cash flow from a transaction equals the difference between cash received and cash disbursed in the transaction.

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Question 2

Free

True/False

The present value of a dollar available in a future period increases as the discount rate increases.

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True

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Question 3

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True/False

A dollar available today is always worth more than a dollar not available until a future period.

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Question 4

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True/False

A cash flow consisting of a constant dollar amount to be received for a specific number of future periods is called an annuity.

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Question 5

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True/False

An increase in the risk associated with a future stream of cash should result in an increase in the discount rate used in the present value calculation.

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Question 6

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The tax cost of a transaction represents a cash inflow.

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Question 7

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The tax savings from a transaction represents a cash inflow.

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Question 8

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Every business transaction results in a current tax cost or tax savings.

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Question 9

True/False

The tax cost of a transaction depends on the taxpayer's average tax rate for the year.

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Question 10

True/False

The tax cost of an income-generating transaction increases as the taxpayer's marginal tax rate increases.

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Question 11

True/False

The tax savings from a deduction decreases as the taxpayer's marginal tax rate increases.

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Question 12

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A deduction is worth twice as much to a taxpayer with a 30% marginal rate than to a taxpayer with a 15% rate.

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Question 13

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The before-tax cash flow and after-tax cash flow from a nontaxable transaction are equal.

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Question 14

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A taxpayer's marginal tax rate and discount rate are independent variables in the NPV calculation.

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Question 15

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When the tax law applies differentially to transaction alternatives, decisions should focus on before-tax earnings.

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Question 16

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Tax law uncertainty is the risk that the Internal Revenue Service will challenge a taxpayer's tax treatment on audit.

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Question 17

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Marginal rate uncertainty includes the risk that Congress will change tax rates, increasing the tax costs of future income.

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Question 18

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A business strategy that reduces the tax cost of a transaction always increases the NPV of the transaction.

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Question 19

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Mr Jessel sold 4,200 shares of stock in a publicly held corporation through his stock broker. This transaction occurred in a private market.

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Question 20

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Mr and Mrs Bing purchased a business from Ms. Clark in an arm's length transaction. This transaction occurred in a private market.

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