The State of California Plans to Amend Its Personal Income

question 2

Multiple Choice

The state of California plans to amend its personal income tax laws to allow parents to reduce their tax by the cost of infant car seats. Which of the following statements is true? 

• A) The amendment creates a tax preference for parents who purchase infant car seats.
• B) The amendment is intended to change social behavior.
• C) The amendment increases the neutrality of the tax law.
• D) Both the amendment creates a tax preference for parents who purchase infant car seats and is also intended to change social behavior are true.

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Definitions:

Maturity Value

The amount of money that an investment will grow to at the end of its investment period.

Compounded Monthly

Interest on an investment or loan calculated each month and added to the balance, so that subsequent interest calculations include interest on the previous interest.

Receivable Contract

An agreement where one party has the right to receive a payment or series of payments from another party.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.