If Lex's Income Increases from $30,000 to $40,000 and His

question 296

Multiple Choice

If Lex's income increases from $30,000 to $40,000 and his tax liability increases from $6,000 to $10,000, which of the following is true?

• A) His marginal tax rate is 20 percent in this range.
• B) His average tax rate is 40 percent at his new income level of $40,000.
• C) He faces a regressive tax in this income range.
• D) He faces a progressive tax in this income range.

---

Definitions:

Partnership Distributions

The sharing out of profits, assets, or earnings among the partners of a partnership based on the agreed-upon terms.

Sole Proprietorship

A business structure where a single individual owns and operates the business, bearing all the business's financial responsibilities and obligations.

Legal Entity

An organization or structure that has legal rights and obligations, including the capability to enter into contracts, sue, and be sued.

Association

An organized group of people who share a common purpose, interest, or activity.