,ACCESS Test Bank for South Western Federal Taxation 2023 IndividualIncom
1 1 1 1 1 1 1 1 1 1
e Taxes 46th Edition Young
1 1 1 1
CHAPTER11
AN1INTRODUCTION1TO1TAXATION
AND1UNDERSTANDING1THE1FEDERAL1TAX1LAW1
SOLUTIONS1TO1PROBLEM1MATERIALS
DISCUSSION1QUESTIONS
1. (LO11)1Various1answers1are1possible,1including1using1the1Key1Terms1at1the1end1of1each1chapter,1referri
ng111to111the111Glossary111(Appendix111C),111looking111up111the111footnote111resources111to111the1Internal1Reven
ue1Code1in1Appendix1D,1using1chapter1features1(e.g.,1Global1Tax1Issues,1Ethics1&1Equity,1Tax1Planning,1a
nd1Framework11040),1examining1the1tax1forms1used1in1the1chapters,1and1completing1additional1end-of-
chapter1assignments.1All1of1these1resources1will1help1students1engage1more1deeply1with1the1materials1a
nd1help1their1understanding.
2. (LO11,14)
a. John1must1now1document1rental1receipts1and1separate1his1home1expenses1between1personal1and1r
ental1use,1and1he1may1be1subject1to1the1transient1occupancy1tax.
b. Theresa1has1become1self-employed.1Now1she1will1be1subject1to1self-
employment1tax1and1may1have1to1make1quarterly1installment1payments1of1estimated1income1an
d1self-
employment1tax.1Theresa1will1be1required1to1make1payroll1tax1payments1if1she1hires1individual
s1to1work1in1her1business.
c. Paul’s1employer1might1have1some1moving1expenses1that1it1can1deduct1(in1general,1Paul1cannot1
deduct1moving1expenses).1Paul’s1personal1taxes1will1change1because1Florida1does1not1impose1
an1income1tax1but1California1does.
3. (LO11,14)1The1income1tax1consequences1that1result1are1Marvin’s1principal1concern.1Any1rent1he1receives1i
s1taxed1as1income,1but1operating1expenses1and1depreciation1will1generate1deductions1that1offset1some1o
r1all1of1the1income1or1even1yield1a1loss.1Marvin1must1also1consider1the1effect1of1other1taxes.1Because1th
e1property1is1being1converted1from1residential1to1commercial1use,1he1can1expect1an1increase1in1the1ad1val
orem1property1taxes1levied1by1the1local1(and1perhaps1even1the1state)1taxing1authorities.1Besides1the1real
1estate1taxes,1personal1property1taxes1could1be1imposed1on1the1furnishings.
4. (LO12)1To1finance1our1participation1in1World1War1II,1the1scope1of1the1income1tax1was1expanded1consid
erably—
from1a1limited1coverage1of16%1to1over174%1of1the1population.1Hence,1the1description1of1the1income1tax1a
s1being1a1“mass1tax”1became1appropriate.
5. (LO12)1For1wage1earners,1the1tax1law1requires1employers1to1withhold1a1specified1dollar1amount1from1w
ages1paid1to1the1employee1to1cover1income1taxes1and1payroll1taxes.1Persons1with1nonwage1income1gen
erally1are1required1to1make1quarterly1payments1to1the1IRS1for1estimated1taxes.1Both1procedures1ensure1
that1taxpayers1will1be1financially1able1to1meet1their1annual1tax1liabilities.1That1is,1the1amounts1withheld1
are1meant1to1prepay1the1employee’s1income1taxes1and1payroll1taxes1related1to1the1wages1earned.
6. (LO13)1The1tax1law1of1this1state1appears1to1violate1the1certainty1and1simplicity1principles.
©120231Cengage®.1May1not1be1scanned,1copied1or1duplicated,1or1posted1to1a1publicly1accessible1website,1in1whole1or1in1pa
rt.
mynursytest.store
, 1-1
©120231Cengage®.1May1not1be1scanned,1copied1or1duplicated,1or1posted1to1a1publicly1accessible1website,1in1whole1or1in1p
art.
mynursytest.store
, ACCESS Test Bank for South Western Federal Taxation 2023 IndividualIncom
1 1 1 1 1 1 1 1 1 1
e Taxes 46th Edition Young
1 1 1 1
1-2 20231Individual1Income1Taxes/Solutions1Manual
7. (LO13)1A1tax1is1regressive1if1it1represents1a1larger1percentage1of1the1income1of1a1low-
income1taxpayer1relative1to1the1income1of1a1high-
income1taxpayer.1Examples1of1regressive1taxes1include1sales1and1excise1taxes.1A1tax1is1progressive1if1it1r
epresents1a1larger1percentage1of1the1income1of1a1high-income1taxpayer1relative1to1the1income1of1a1low-
income1taxpayer.1The1Federal1income1tax1is1an1example1of1a1progressive1tax.
8. (LO14)
a. The1parsonage1probably1was1not1listed1on1the1property1tax1rolls1because1it1was1owned1by1a1tax-
1exempt1church.1Apparently,1the1taxing1authorities1are1not1aware1that1ownership1has1changed.
b. Ethan1should1notify1the1authorities1of1his1purchase.1This1will1force1him1to1pay1back1taxes1but1
may1eliminate1future1interest1and1penalties.
9. (LO14)1Although1the1Baker1Motors1bid1is1the1lowest,1from1a1long-
term1financial1standpoint,1it1is1the1best.1The1proposed1use1of1the1property1by1the1state1and1the1church1pr
obably1will1make1it1exempt1from1the1school1district’s1ad1valorem1tax.1This1would1hardly1be1the1case1wi
th1a1car1dealership.1In1fact,1commercial1properties1(e.g.,1car1dealerships)1often1are1subject1to1higher1tax1
rates.
10. (LO14)
a. In1this1case,1the1“tax1holiday”1probably1concerns1exemption1from1ad1valorem1taxes.1“Generous”1c
ould1involve1an1extended1period1of1time1(e.g.,1101years)1and1include1both1realty1and1personalty.
b. The1school1district1could1be1affected1in1two1ways.1First,1due1to1the1erosion1of1the1tax1base,1less1r
evenue1would1be1forthcoming.1Second,1new1workers1would1mean1new1families1and1more1child
ren1to1educate.
11. (LO14)1A1possible1explanation1is1that1Sophia1made1capital1improvements1(e.g.,1added1a1swimming1pool)1t
o1her1residence1and1her1parents1became1retirees1(e.g.,1reached1age165).
12. (LO14)1Presuming1that1the1dockage1facilities1are1comparable1in1Massachusetts,1the1Morgans1may1be1try
ing1to1avoid1ad1valorem1taxes.1Taxes1on1nonbusiness1property1vary1from1one1state1to1another1and1are1freq
uently1avoided.
13. (LO14)1In1general,1Federal1excise1taxes1apply1to1fewer1items1than1in1the1past.1Lawmakers1have1focused1o
n1and1increased1certain1Federal1excise1taxes1(e.g.,1those1on1tobacco1products,1gasoline,1and1air1travel).
14. (LO14)1Jayla1could1have1been1overcharged,1but1it1is1likely1that1at1least1part1of1the1excess1is1attributable1t
o1a1hotel1occupancy1tax1and1a1car1rental1tax.1In1major1cities,1these1types1of1excise1taxes1have1become1a1p
opular1way1of1financing1capital1improvements1such1as1sports1arenas1and1stadiums.1Consequently,1the1a
mount1of1the1taxes1could1be1significant.
15. (LO1 4)1 An1 excise1 tax1 is1 limited1 to1 a1 particular1 transaction1 (e.g.,1 sale1 of1 gasoline),1 whereas1 a1 general
sales1tax1covers1a1multitude1of1transactions1(e.g.,1sale1of1all1nonfood1goods).
a. The1following1states1do1not1impose1a1general1sales1tax:1Alaska,1Delaware,1Montana,1New1Ham
pshire,1and1Oregon.
b. There1is1no1Federal1general1sales1tax.
©120231Cengage®.1May1not1be1scanned,1copied1or1duplicated,1or1posted1to1a1publicly1accessible1website,1in1whole1or1in1pa
rt.
mynursytest.store
