Explore BrainMass
Share

Tax Questions

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

A. In 2003, Senate Democrats proposed that all workers receive a one-time tax rebate check of $300 for each adult in a family, and $300 for each of the first two children. The goal of the program was to stimulate the consumer spending. On the basis of the life-cycle model of consumption behavior, would you expect this proposal to be successful? If the life-cycle model is correct and the US Government wishes to stimulate consumption, what advice would you give it?

b. An editorial in the Wall Street Journal (April 19, 2001) argued that "high marginal tax rates discourage incentives ... to invest in one's own human capital with additional training or education." Discuss the circumstances under which this statement is likely to be correct, focusing on the nature of the costs of the human capital investment.

c. The tax act passed in 2001 increased the contribution limit on IRA's from $2,000 to $5,000 by 2008. What impact, if any, would you expect this provision to have on personal savings?

© BrainMass Inc. brainmass.com October 25, 2018, 12:29 am ad1c9bdddf
https://brainmass.com/business/annuity/229640

Solution Preview

a. In 2003, Senate Democrats proposed that all workers receive a one-time tax rebate check of $300 for each adult in a family, and $300 for each of the first two children. The goal of the program was to stimulate the consumer spending. On the basis of the life-cycle model of consumption behavior, would you expect this proposal to be successful? If the life-cycle model is correct and the US Government wishes to stimulate consumption, what advice would you give it?

On the basis of the life-cycle model, I do not expect the government program to stimulate consumer spending. The reason is that according to the life-cycle theory this unexpected increase in income will lead to the lifetime annuity value to be consumed and the rest saved.
The life-cycle model predicts that people will consume an annuity of their expected lifetime income at all points in time. So, if the government wants to stimulate consumption it should not give ...

Solution Summary

This explanation provides you a comprehensive argument relating to Tax Questions

$2.19
See Also This Related BrainMass Solution

Tax Questions... Multiple Choice

1. For federal tax purposes, royalty income not derived in the ordinary course of a business is classified as:
Active income
Portfolio income
Passive income
None of the above

2. Which of the following is not an example of a nontaxable like-kind exchange?
An ice cream making machine for inventory of Rocky Road ice cream.
Land for an office building.
A printer for a computer.
The trade of an apartment building for a store building.

3. Al and Amy file a joint return for the 2007 tax year. Their adjusted gross income is $80,000. They had net investment income of $7,000. In 2007, they had the following interest expenses:

Personal credit card interest $4,000;
Home mortgage interest $8,000; and
Investment interest (on loans used to buy stocks) $10,000.

What is the interest deduction for Al and Amy for the 2007 tax year?
$8,000
$15,000
$12,000
$18,000

4. Charitable contribution deductions for cash donations made by individuals to public charities are limited to:
50% of AGI
40% of AGI
30% of AGI
20% of AGI

5. The following taxes were paid by Tim: Real estate taxes on his home: $2,000; State income taxes: $900; and State gasoline tax (personal use of automobile): $150.

In itemizing his deductions, what is the amount that Tim may claim as a deduction for taxes?
$2,000
$2,900
$3,050
$0

6. Josh sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $60,000 cash and a painting with a fair market value of $20,000 from the buyer. The buyer also assumed Josh's $25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale?
$50,000
$105,000
$75,000
$60,000

7. Ben's property, which has an adjusted basis of $85,000, is condemned by the state government. The authorities replace his property with other qualified property which cost them $120,000. What is Ben's recognized gain?
$0
$35,000
$85,000
$120,000

8. Sean, a calendar year taxpayer, purchased stock on June 18, 2006, for $8,000. The stock became worthless on June 4, 2007. What is Sean's loss in 2007?
$8,000 short-term capital loss
No loss
$8,000 long-term capital loss
$8,000 itemized deduction for investments

View Full Posting Details