Suppose one of your clients is four years away from retirement and has only $2,500 in pretax income to devote to either a roth or traditional ira. the traditional ira permits investors to contribute the full $2,500 since contributions to these accounts are tax-deductible, but they must pay taxes on all future distributions. in contrast, contributions to a roth ira are not tax-deductible. for example, if a person’s tax rate is 25 percent, an investor is able to contribute only $1,875 after taxes; however, the earnings of a roth ira grow tax-free. your company has decided to waive the one-time set-up fee of $50 to open a roth ira; however, investors opening a traditional ira must pay the $50 set-up fee. assuming that your client anticipates that her tax rate will remain at 19 percent in retirement and will earn a stable 7 percent return on her investments, will she prefer a traditional or roth ira?

If the government is required to balance the budget and the economy falls into a recession, which of the actions is a feasible policy response? cut taxes to encourage consumer spending invest in infrastructure increase government spending to stimulate the economy cut spending equal to the reduction in tax revenue what is a likely consequence of this policy? unemployment falls due to the economic stimulus. the negative consequences of the recession are magnified. consumer spending increases due to their ability to keep more of their after-tax income. there is hyperinflation due to an increase in aggregate demand.

If a seller prepaid the taxes of $4,400 and the closing is set for may 19, using the 12 month/30 day method what will the buyer owe the seller as prorated taxes?

9. tax types: taxes are classified based on whether they are applied directly to income, called direct taxes, or to some other measurable performance characteristic of the firm, called indirect taxes. identify each of the following as a “direct tax,” an “indirect tax,” or something else: a. corporate income tax paid by a japanese subsidiary on its operating income b. royalties paid to saudi arabia for oil extracted and shipped to world markets c. interest received by a u. s. parent on bank deposits held in london d. interest received by a u. s. parent on a loan to a subsidiary in mexico e. principal repayment received by u. s. parent from belgium on a loan to a wholly owned subsidiary in belgium f. excise tax paid on cigarettes manufactured and sold within the united states g. property taxes paid on the corporate headquarters building in seattle h. a direct contribution to the international committee of the red cross for refugee relief i. deferred income tax, shown as a deduction on the u. s. parent’s consolidated income tax j. withholding taxes withheld by germany on dividends paid to a united kingdom parent corporation