Chapter 1, Problem 1MCQ

To determine

Introduction:Income tax law enables individuals to pay taxes to the government for the social and economic benefits of the public and it allows the government to collect and spend revenues in creating value for the society at large. Income tax law applies not only to individuals but also to corporations, firms, trusts, etc.

To choose:The recent tax changes that are not scheduled to expire after 2025.

Answer to Problem 1MCQ

Option ‘d. Reduction of corporate tax rates to 21 percent’ is correct.

Explanation of Solution

Explanation for correct answer: After the introduction of ‘The Tax Cuts and Jobs Act’ or TCJA act in December 2017.The TCJA did overhauls to the provisions and scheduled some provisions to expire by 2025, such as suspension of exemptions given to individuals, lowering the individual tax rates, restriction on personal casualty losses, etc.but excluding the provision regardingthe reduction of corporate tax rates. Thus, theoption ‘d. Reduction of corporate tax rates to 21 percent’ is correct.

Explanation for incorrect answers: The Tax Cuts and Jobs Act or TCJA act brings changes to the law and scheduled some provisions to expire by 2025. List of major expiring provisions are listed below:

• Reduction of individual tax rates
• Increased standard deduction
• Suspension of personal exemptions
• Qualified business income deduction
• Suspension of itemized deduction phase-out
• Temporary cap on state and local taxes
• Suspension of miscellaneous itemized deductions subjectto 2 percent floor
• Suspension of moving expense deduction
• Reduced limits on mortgage interest deduction
• Restrictions on personal casualty losses
• Increased AMT exemption and phase-out
• Changes to the kiddie tax
• Increased child tax credit
• 100 percent bonus depreciation

Thus, the options ‘a. Suspension of personal exemptions’, ‘b. General lowering of individual tax rates’ and ‘c. Restrictions on the deduction of casualty and theft losses’ are set to expire by 2025.