Answer the following statements true (T) or false (F)
1. If a taxpayer's total tax liability is $4,000, taxable income is $20,000, and total economic income is $40,000, then the effective tax rate is 20 percent.
2. All states impose a state income tax which is generally based on an individual's federal adjusted gross income (AGI) with minor adjustments.
3. The unified transfer tax system, comprised of the gift and estate taxes, is based upon the total property transfers an individual makes during lifetime and at death.
4. Gifts between spouses are generally exempt from transfer taxes.
5. The primary liability for payment of the gift tax is imposed upon the donee.
1. FALSE
The effective rate would be $4,000/$40,000 = 10 percent.
2. FALSE
While many states impose a state income tax, not all states do. In those states that do impose tax, the taxes vary greatly in both form and rates.
3. TRUE
Gift and estate taxes, which comprise a unified transfer tax system, are based on cumulative
4. TRUE
The tax law allows for unlimited transfers between spouses.
5. FALSE
The gift tax is imposed on the donor.
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