Solution Manual for McGraw-Hill's Taxation of
Individuals 2024 Edition, 15th Edition
By Brian Spilker, Benjamin Ayers, All Chapters 1 - 14
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Part I: Introduction to Taxation
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Chapter 1: An Introduction to Tax
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Chapter 2: Tax Compliance, the IRS, and Tax Authorities
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Chapter 3: Tax Planning Strategies and Related Limitations
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Part II: Basic Individual Taxation
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Chapter 4: Individual Income Tax Overview, Dependents, and Filing Status
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Chapter 5: Gross Income and Exclusions
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Chapter 6: Individual Deductions
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Chapter 7: Investments
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Chapter 8: Individual Income Tax Computation and Tax Credits
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Part III: Business-Related Transactions
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Chapter 9: Business Income, Deductions, and Accounting Methods
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Chapter 10: Property Acquisition and Cost Recovery
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Chapter 11: Property Dispositions
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Part IV: Specialized Topics
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Chapter 12: Compensation
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Chapter 13: Retirement Savings and Deferred Compensation
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Chapter 14: Tax Consequences of Home Ownership
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,Chapter 1 CY
An Introduction to Tax
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Discussion Questions CY
(1) [LO 1] Jessica’s friend Zachary once stated that he couldn’t understand why
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someone would take a tax course. Why is this a rather naïve view?
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Taxes are a part of everyday life and have a financial effect on many of the major personal decisions t
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hat individuals face (e.g., investment decisions, evaluating alternative job offers, saving for educatio
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n expenses, gift or estate planning, etc.).
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(2) [LO 1] What are some aspects of business that require knowledge of taxation? What
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are some aspects of personal finance that require knowledge of taxation?
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Taxes play an important role in fundamental business decisions such as the following:
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What organizational form should a business use?
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Where should the business locate? CY CY CY CY
How should business acquisitions be structured?
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How should the business compensate employees?
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What is the appropriate mix of debt and equity for the business?
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Should the business rent or own its equipment and property?
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How should the business distribute profits to its owners?
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One must consider all transaction costs (including taxes) to evaluate the merits of a transaction.
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Common personal financial decisions that taxes influence include: choosing investments, retirement p
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lanning, choosing to rent or buy a home, evaluating alternative job offers, saving for education expe
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nses, and doing gift or estate planning.
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(3) [LO 1] Describe some ways in which taxes affect the political process in the Unit
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ed States. CY
U.S. presidential candidates often distinguish themselves from their opponents
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, based upon their tax rhetoric. Likewise, the major political parties generally have very diverse views o
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f the appropriate way to tax the public. Determining who is taxed, what is taxed, and how much is t
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axed are difficult questions. Voters must have a basic understanding of taxes to evaluate the merits of
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alternative tax proposals offered by opposing political candidates and their political parties.
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(4) [LO 2] Courtney recently received a speeding ticket on her way to the university. Her
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Yfine was $200. Is this considered a tax? Why or why not?
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The $200 speeding ticket is not considered a tax. Instead, it is considered a fine or penalty. Taxes
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differ from fines and penalties because taxes are not intended to punish or prevent illegal behavio
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r.
(5) [LO 2] Marlon and Latoya recently started building a house. They had to pay
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$300 to the county government for a building permit. Is the $300 payment a tax? Why
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or why not? CY CY
The building permit is not considered a tax because $300 payment is directly linked to a benefit that
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they received (i.e., the ability to build a house).
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(6) [LO 2] To help pay for the city’s new stadium, the city of Birmingham recently enac
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ted a 1 percent surcharge on hotel rooms. Is this a tax? Why or why not?
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The 1 percent surcharge is a tax. The 1 percent surcharge is an earmarked tax –
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i.e., collected for a specific purpose. The surcharge is considered a tax because the tax payments ma
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de by taxpayers do not directly relate to the specific benefit received by the taxpayers.
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(7) [LO 2] As noted in Example 1-
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2, tolls, parking meter fees, and annual licensing fees are not considered taxes. Can y
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ou identify other fees that are similar?
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There are several possible answers to this question. Some common examples include entrance fees to
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national parks, tag fees paid to local/state government for automobiles, boats, etc.
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(8) [LO 2] If the general objective of our tax system is to raise revenue, why does the inco
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me tax allow deductions for charitable contributions and retirement plan contributions?
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In addition to the general objective of raising revenue, Congress uses the federal tax system to encour
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age certain behavior and discourage other behavior. The charitable contribution deduction is intende
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d to encourage taxpayers to support the initiatives of charitable organizations, whereas deductions f
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or retirement contributions are intended to encourage retirement savings. Another objective of the t
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ax system is to redistribute wealth.
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