The tax system

In general, is the U.S. federal tax system progressive or regressive?

(a)Regressive

(a)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?

(a) As a capital gain taxed at the long-term tax rate

(b)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.

According to a tax law established in 1969, taxpayers are...............   to pay the greater of the Alternative Minimum Tax (AMT) liabilityor the regular tax liability.

Which of the following cash outflows cannot be deducted from the operating income to derive the taxable income?

(a)Interest paid

(a)Dividends paid