Drake and Davina Are Married and File a Joint Return

question 56

Multiple Choice

Drake and Davina are married and file a joint return for 2016 with taxable income of $100,000 and tax preferences and adjustments of $51,000 for AMT purposes.Their regular tax liability is $16,533.What is the amount of their total tax liability?

• A)$17,472
• B)$39,260
• C)$34,005
• D)$16,533

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Definitions:

Legal Limits

These are boundaries established by laws or regulations that define what is permissible within a legal framework.

Collective Action Problem

A situation where individuals in a group have incentives to not cooperate, despite a cooperative outcome being in their collective best interest, often leading to suboptimal results.

Free-Rider Problem

A situation in which individuals consume more than their fair share of a public resource, or shoulder less than a fair share of the costs of its production, without contributing to its provision.

Coase Theorem

Under certain conditions, when externalities are present, private parties can arrive at the efficient solution without government involvement.