Question

8. The tax system Understanding taxes In general, is the U.S. federal tax system progressive or regressive? O Regressive O Progressive You bought 1,000 shares of Tund Corp. stock for $68.12 per share and sold it for $90.03 per share after a few years How will your gain or loss be treated when you file your taxes? O As a capital gain taxed at the long-term tax rate O As a capital gain taxed at the current ordinary-income tax rate Depreciation expenses directly affect a company's taxable income. An increase in depreciation expense will lead to a taxable income. It will operating cash flow. tax deducted from a company's earnings, thus leading to a According to a tax law established in 1969, taxpayers must pay the or regular tax of the Alternative Minimum Tax (AMT) Suppose a firm in the 40% federal-plus-state tax bracket needs to p the pretax income it should have to pay this dividend? ay S 1 in dividends to its share iders, what is $1.00 $1.67 5 8 9

Answer 1

In general US Federal tax system is progressive since higher income households pays more tax on higher income than lower income households, corporate tax system is flat after TCJA.

Any capital gain that is earned during the period higher than 12 months is comes under long term capital gain and taxed at long term rate that is max 20%.

An increase in depreciation expense will lead to a lower taxable income. It will decrease tax deducted from a company's earnings, thus leading to a higher operating cash flow.

Taxpayer must pay the Higher of AMT or regular tax.

Pretax income should be $1.67 (1/60%)