Income Tax Fundamentals 2023 41st Edition TEST BANK
by Gerald E. Whittenburg, Steven Gill
prior to civil war, how did the gov generate revenue? - ANSWER:no income tax, used
customs receipts (imports)
income analysis - ANSWER:- how many events? (picking up jewel, then selling the
jewel -- 2 events)
- how many of those events were taxes paid?
Pollock v. The Farmers' Loan and Trust Co. - ANSWER:Declared the income tax under
the Wilson-Gorman Tariff to be unconstitutional.
- "direct tax on the individual" if there's a direct tax, the cons says the following:
have to figure out population each state, and then figure out how much money that
state needed to generate based on the population
-- therefore: no direct taxes on individuals, only on states
what overruled Pollock? - ANSWER:16th Amendment
16th Amendment - ANSWER:congress has the power to set and collect taxes from
whatever source they decide without apportionment from the states and without a
census count
response to WWI? - ANSWER:more taxes were generated
- the more you made, the more you paid in taxes (wars always demand more
revenue)
- step system was created
response to WWII - ANSWER:- instead of just the wealthy, everyone now pays
where does all tax law start? - ANSWER:ways and means committee
what is the tax committee called for the senate? - ANSWER:the senate finance
committee
joint committee? - ANSWER:joint committee on taxation
- supposed to compromise
- want something adopted by both the house and the senate
what does the irs do? - ANSWER:- promulgates regulation
- administers tax laws
- issues revenue ruling
tax payer has three courses for trial court - ANSWER:1) united states tax court (don't
have to pay the tax first, judge is trier of law and fact)
, 2) federal district court (in the taxpayer's district, taxpayer must pay the alleged tax
first)
3) united states court of federal claims (claims against the us, including claims for
refund of overpayment of taxes)
what section of the code gives the examples of income - ANSWER:61
Old Colony Trust Co. v. Commissioner (employer pays income tax) - ANSWER:gross
income is not limited to situations where only cash or money is received by the
taxpayer
- company pays your income tax? that's extra income bub
- form of the receipt is irrelevant
receiving a cow as payment? income? - ANSWER:yes, income
- form of the receipt is irrelevant as long as it is accepted by the payee
revenue ruling (gross income; barter transactions) - ANSWER:if you receive
something other than money as payment for a service (including rent), you have to
report the fair market value of that thing as gross income (including bartering)
- (report services received for services rendered)
define fair market value - ANSWER:price at which the property would change hands
between a willing buyer and a willing seller, neither being under any compulsion to
buy or sell and both having reasonable knowledge of relevant facts
what does the irs say about virtual money? - ANSWER:virtual currency is a digital
representation of value that functions as a medium of exchange [...], and is
customarily used and accepted as a medium of exchange in the country of issuance
-- but it does not have the legal ender status in any jurisdiction
how is virtual currency treated for federal tax purposes? - ANSWER:treated as
property -- general tax principles applicable to property transactions apply to
transactions using virtual currency
- therefore, must know the fair market value of the property and report that fmv on
your gross income tax statement
in an arm's length deal involving the purchase of property with cash, is the buyer
treated as having income? - ANSWER:no
- promotes convenience and an entrepreneurial society
- what they paid represents the value of the asset when they pay cash at arm's
length
- logic: listen, if it's an arms' length transaction and cash, we (the irs) is going to give
you the benefit of the bargain
buying property for 100k in year 1, and then selling it for 300k in year 3 -- income? -
ANSWER:yes
by Gerald E. Whittenburg, Steven Gill
prior to civil war, how did the gov generate revenue? - ANSWER:no income tax, used
customs receipts (imports)
income analysis - ANSWER:- how many events? (picking up jewel, then selling the
jewel -- 2 events)
- how many of those events were taxes paid?
Pollock v. The Farmers' Loan and Trust Co. - ANSWER:Declared the income tax under
the Wilson-Gorman Tariff to be unconstitutional.
- "direct tax on the individual" if there's a direct tax, the cons says the following:
have to figure out population each state, and then figure out how much money that
state needed to generate based on the population
-- therefore: no direct taxes on individuals, only on states
what overruled Pollock? - ANSWER:16th Amendment
16th Amendment - ANSWER:congress has the power to set and collect taxes from
whatever source they decide without apportionment from the states and without a
census count
response to WWI? - ANSWER:more taxes were generated
- the more you made, the more you paid in taxes (wars always demand more
revenue)
- step system was created
response to WWII - ANSWER:- instead of just the wealthy, everyone now pays
where does all tax law start? - ANSWER:ways and means committee
what is the tax committee called for the senate? - ANSWER:the senate finance
committee
joint committee? - ANSWER:joint committee on taxation
- supposed to compromise
- want something adopted by both the house and the senate
what does the irs do? - ANSWER:- promulgates regulation
- administers tax laws
- issues revenue ruling
tax payer has three courses for trial court - ANSWER:1) united states tax court (don't
have to pay the tax first, judge is trier of law and fact)
, 2) federal district court (in the taxpayer's district, taxpayer must pay the alleged tax
first)
3) united states court of federal claims (claims against the us, including claims for
refund of overpayment of taxes)
what section of the code gives the examples of income - ANSWER:61
Old Colony Trust Co. v. Commissioner (employer pays income tax) - ANSWER:gross
income is not limited to situations where only cash or money is received by the
taxpayer
- company pays your income tax? that's extra income bub
- form of the receipt is irrelevant
receiving a cow as payment? income? - ANSWER:yes, income
- form of the receipt is irrelevant as long as it is accepted by the payee
revenue ruling (gross income; barter transactions) - ANSWER:if you receive
something other than money as payment for a service (including rent), you have to
report the fair market value of that thing as gross income (including bartering)
- (report services received for services rendered)
define fair market value - ANSWER:price at which the property would change hands
between a willing buyer and a willing seller, neither being under any compulsion to
buy or sell and both having reasonable knowledge of relevant facts
what does the irs say about virtual money? - ANSWER:virtual currency is a digital
representation of value that functions as a medium of exchange [...], and is
customarily used and accepted as a medium of exchange in the country of issuance
-- but it does not have the legal ender status in any jurisdiction
how is virtual currency treated for federal tax purposes? - ANSWER:treated as
property -- general tax principles applicable to property transactions apply to
transactions using virtual currency
- therefore, must know the fair market value of the property and report that fmv on
your gross income tax statement
in an arm's length deal involving the purchase of property with cash, is the buyer
treated as having income? - ANSWER:no
- promotes convenience and an entrepreneurial society
- what they paid represents the value of the asset when they pay cash at arm's
length
- logic: listen, if it's an arms' length transaction and cash, we (the irs) is going to give
you the benefit of the bargain
buying property for 100k in year 1, and then selling it for 300k in year 3 -- income? -
ANSWER:yes
