Question

Need help with Tax problems.

Understanding taxes In general, is the U.S. federal tax system progressive or regressive? O Progressive Regressive 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 tax deducted from a company's earnings, thus leading to a operating cash flow.

Answer 1

(i)

Under progressive tax system, tax rate continues to increase with the increase in the tax base.

In general, U.S. federal tax system is progressive in nature since tax rate goes on increasing with the increase in the taxable income.

(ii)

Any gain arising from the sale of securities like shares held for the long run, will be treated as a capital gain. It will be taxed at long term tax rate.

Long term Capital gain is not taxed at the current ordinary income tax rate.

(iii)

Depreciation expenses directly affect a company's taxable income. An increase in depreciation expense will lead to a decrease in taxable income. It will be tax deducted from a company's earnings, thus leading to a rise in operating cash flow.

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