Test Bank for Pearson's Federal Taxation 2025 Individuals, 38th Edition by Luke E. Richardson, Franklin
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Module
Taxation
Institution
Taxation
Test Bank for Pearson's Federal Taxation 2025 Individuals, 38e 38th Edition by Luke E. Richardson, Mitchell Franklin. Complete Chapters (Chap 1 to 18) are included with answers. Chapters are reversed in order so you can make sure all chapters are included before purchase.
An Introduction to Taxa...
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, Table of Contents are given below
Chap 01: An Introduction to Taxation
Chap 02: Determination of Tax
Chap 03: Gross Income: Inclusions
Chap 04: Gross Income: Exclusions
Chap 05: Property Transactions: Capital Gains and Losses
Chap 06: Deductions and Losses
Chap 07: Business Expenses and Deferred Compensation
Chap 08: Itemized Deductions
Chap 09: Losses and Bad Debts
Chap 10: Depreciation, Cost Recovery, Amortization, and Depletion
Chap 11: Accounting Periods and Methods
Chap 12: Property Transactions: Nontaxable Exchanges
Chap 13: Property Transactions: Section 1231 and Recapture
Chap 14: Special Tax Computation Methods, Tax Credits, and
Payment of Tax
Chap 15: Tax Research
Chap 16: Corporations
Chap 17: Partnerships and S Corporations
Chap 18: Taxes and Investment Planning
, All Chapters Included ✅
Pearson's Federal Taxation 2025: Individuals, 38e (Richardson)
Chapter I18: Taxes and Investment Planning
Chap 18 ➡ Chap 1 ✅
LO1: Investment Models
1) In the Current Model, investment earnings are taxed as they are earned.
Answer: TRUE
Explanation: In the Current Model, after-tax dollars are invested, and the earnings are taxed annually.
Page Ref.: I:18-2
Objective: 1
2) In the Deferred Model, both the initial investment dollars and the investment earnings are taxed at the
end of the investment period.
Answer: FALSE
Explanation: In the Deferred Model, after-tax dollars are invested, but earnings are not taxed until the
end of the investment period.
Page Ref.: I:18-2
Objective: 1
3) In the Exempt Model, the earnings are excluded from explicit taxation.
Answer: TRUE
Explanation: In the Exempt Model, the earnings are never taxed.
Page Ref.: I:18-2
Objective: 1
4) In the Pension Model, the initial investment is deductible or excludible from gross income, and
investment earnings are taxed currently.
Answer: FALSE
Explanation: The initial investment is deductible or excludible from gross income, and investment
earnings are taxed at the end of the investment period.
Page Ref.: I:18-2
Objective: 1
5) Savings accounts and money market funds are examples of investments taxed under the Current
Model.
Answer: TRUE
Explanation: Income is taxed annually under the Current Model.
Page Ref.: I:18-3 and I:18-4
Objective: 1
6) A single taxpayer earns a salary of $6,000. If he is taxed with a 10% flat rate, he has $5,400 of after-tax
dollars available to invest.
Answer: TRUE
Explanation: $6,000 (1.00 - .10) = $5,400.
Page Ref.: I:18-3; Example I:18-2
Objective: 1
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3
, 7) A taxpayer in the 24% marginal tax bracket invests $1,000 of after-tax dollars at 10% interest before
taxes. At the end of year one, the taxpayer will have accumulated after-tax dollars of $1,076.
Answer: TRUE
Explanation: $1,000 + $1,000(.1)(1 - .24) = $1,076.
Page Ref.: I:18-4; Example I:18-3
Objective: 1
8) Investments conforming to the Current Model provide no deferral advantages because earnings are
taxed currently.
Answer: TRUE
Explanation: Under the Current Model, investment earnings are taxed each year.
Page Ref.: I:18-4
Objective: 1
9) The nondeductible traditional IRA is a classic example of the Pension Model.
Answer: FALSE
Explanation: It is an example of the Deferred Model. After-tax dollars are invested, but earnings are not
taxed until the IRA distributions are received.
Page Ref.: I:18-5
Objective: 1
10) In the Deferred Model, only after-tax dollars are invested.
Answer: TRUE
Explanation: Investment of after-tax dollars is a key characteristic of the Deferred Model.
Page Ref.: I:18-5
Objective: 1
11) The Deferred Model investment outperforms the Current Model investment if interest rates and tax
rates are constant over time because the interest on the Deferred Model investment grows tax free until
withdrawal.
Answer: TRUE
Explanation: Under the Deferred Model, investment earnings can compound without taxation so they
will outperform the Current Model where only after-tax investment earnings compound.
Page Ref.: I:18-7
Objective: 1
12) An investment in a growth stock which does not pay dividends is an example of the Exempt Model.
Answer: FALSE
Explanation: An investment in a growth stock is an example of the Deferred Model.
Page Ref.: I:18-8
Objective: 1
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