Mingming and Xavier,unrelated Single Taxpayers,have Each Incurred a $1,000 Expenditure

question 47

Multiple Choice

Mingming and Xavier,unrelated single taxpayers,have each incurred a $1,000 expenditure.Before considering this expenditure,Mingming has taxable income of $500,000 and Xavier has taxable income of $32,000.Assume the expenditure qualifies as either a tax deduction or a 25% credit.Which of the following statements is correct?

• A)Mingming will prefer the credit,but Xavier will prefer the deduction.
• B)Mingming will prefer the deduction,but Xavier will prefer the credit.
• C)Both taxpayers will prefer the credit.
• D)Both taxpayers will prefer the deduction.

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Definitions:

Voting Common Stock

Equity shares that give shareholders the right to vote on corporate policies and board of director elections.

Goodwill

An intangible asset that arises when a business is purchased for more than the fair value of its separate net assets, representing aspects like brand reputation, customer loyalty, and other non-physical assets.

Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company's financial condition at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Long-Term Investments

Assets held by a company for a period exceeding one year, intended to bring a return on the investment over time.