ACCESS Test Bank for South Western Federal Taxation 2023 Corporations
Partnerships Estates and Trusts 46th Edition Raabe
Instructor’s Guide: Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations, Partnerships,
Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the Federal Tax Law
Instructor’s Guide
Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations,
Partnerships, Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the
Federal Tax Law
Table of Contents
Chapter Objectives ............................................................................................................................. 2
Chapter Outline .................................................................................................................................. 2
Discussion Questions ....................................................................................................................... 16
Video Information............................................................................................................................. 18
Related Cengage Video Content .............................................................................................................. 18
© 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
mynursytest.store
,ACCESS Test Bank for South Western Federal Taxation 2023 Corporations
Partnerships Estates and Trusts 46th Edition Raabe
Instructor’s Guide: Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations, Partnerships,
Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the Federal Tax Law
Chapter Objectives
The following objectives are addressed in this chapter:
1.1 Discuss the importance of revenue needs as an objective of Federal tax law.
1.2 Demonstrate the influence of economic, social, equity, and political considerations
on the development of the tax law.
1.3 Explain how the IRS, as the protector of the revenue, has affected tax law.
1.4 Recognize the role of the courts in interpreting and shaping tax law.
1.5 Identify tax law sources—statutory, administrative, and judicial.
1.6 List and assess tax law sources.
1.7 Demonstrate the ability to conduct tax research.
1.8 Assess the validity and weight of tax law sources.
1.9 Describe various tax planning procedures.
1.10 Explain the role of taxation on the CPA examination.
[return to top]
Chapter Outline
In the outline below, each element includes references (in parentheses) to related content. “CO
CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint
deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center);
and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”).
Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this
chapter. Review learning objectives for Chapter 1. (PPT Slides 2–3).
I. The Whys of the Tax Law
i.
While the primary objective of Federal tax law is raising revenue, this is
not the sole objective of tax laws.
1. Important in explaining various provisions found in the law are
economic, social, equity, and political considerations.
2. The Treasury Department, the IRS, and the courts also have
significant impacts on the evolution of Federal tax law.
a. Revenue Needs (1.1, PPT Slide 6)
i. Raising revenue to fund the cost of government operations is the key
factor in structuring a tax system.
ii. Over the past century, the national debt has been increasing
significantly, reaching more than $28.8 trillion, or about $86,000 per
citizen, in November 2021.
© 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
mynursytest.store
,ACCESS Test Bank for South Western Federal Taxation 2023 Corporations
Partnerships Estates and Trusts 46th Edition Raabe
Instructor’s Guide: Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations, Partnerships,
Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the Federal Tax Law
iii. When enacting tax legislation, Congress is often guided by the concept
of revenue neutrality.
1. Changes in the tax law should neither increase nor decrease the net
revenues received by the government.
2. There are likely to be both “winners” (taxpayers who see a reduction
in taxes paid) and “losers” (taxpayers who see an increase in taxes
paid).
b. Economic Considerations (1.2, PPT Slides 7–16)
i. Tax law is often used to accomplish economic objectives.
ii. Control of the Economy. Congress has used the tax depreciation system
as one means of controlling the economy.
1. Shorter asset lives and accelerated methods should encourage
additional investments in depreciable business property.
2. Longer asset lives and the use of straight-line depreciation should
discourage capital outlays.
3. Congress also uses incentives like immediate expensing (§ 179) and
bonus depreciation to stimulate the economy when needed.
4. When tax rates are lowered, taxpayers retain money that can be
used for other purposes.
5. If Congress is using the concept of revenue neutrality, rate
reductions may be offset by a reduction or elimination of
deductions or credits. As a result, lower rates do not always mean
lower taxes.
iii. Encouragement of Certain Activities.
1. Research and development expenditures can be deducted in the
year incurred or, alternatively, capitalized and amortized over a
period of 60 months or more. These expenditures also may
generate a tax credit.
2. Inventions (including technological innovations) also are encouraged
under tax law. Patents can qualify as capital assets, and under
certain conditions, their disposition automatically carries long-term
capital gain treatment.
3. Ecology is encouraged by allowing pollution control facilities to be
amortized over 60 months (rather than over the 39-year period
required for most business buildings).
4. Saving, which leads to capital formation, is stimulated by incentives
to increase private retirement plans. The encouragement of private-
sector pension plans can be justified under social considerations as
well.
iv. Encouragement of Certain Industries.
1. Tax laws favor farming by allowing expensing of soil and water
conservation and fertilizers. Also, farmers can defer the gain
recognition on crop insurance proceeds.
© 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
mynursytest.store
, ACCESS Test Bank for South Western Federal Taxation 2023 Corporations
Partnerships Estates and Trusts 46th Edition Raabe
Instructor’s Guide: Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations, Partnerships,
Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the Federal Tax Law
2. The tax law favors the development of natural resources (like oil and
gas and mineral deposits) by permitting the use of percentage
depletion and a write-off (rather than a capitalization) of certain
exploration costs.
3. The railroad and banking industries also receive special tax
treatment.
v. Encouragement of Small Business. Several provisions illustrate a desire
to benefit small business. These include the following.
1. Special treatment of small business corporation stock leading to
ordinary (rather than capital) loss treatment (§ 1244 stock).
2. S corporation elections allow the avoidance of corporate income tax
and the pass-through of profits (or losses) to the shareholders.
c. Social Considerations
i. Many of the tax provisions passed by Congress can be explained by
social desirability.
1. These provisions encourage individuals to work, give to charities,
and obtain an education.
2. Employers are encouraged to provide accident, health, and group
term life insurance as well as retirement plans for employees.
d. Equity Considerations
i. Equity is a relative concept, and people often disagree as to what is
equitable. For tax purposes, equity is equal application of what the tax
law recognizes. One measure of equity is whether a tax is progressive
(e.g., the Federal income tax on individuals) or regressive (e.g., gasoline
excise tax). The determination is made by calculating the percentage of
a taxpayer’s income that is used to pay a tax.
ii. Alleviating the Effect of Multiple Taxation. Several provisions are
intended to alleviate the effect of multiple taxation.
1. Federal tax law allows a taxpayer to claim a deduction for some
state and local income taxes. The deduction, however, does not
eliminate the effect of multiple taxation.
2. Because double taxation results when the same income is subject to
both foreign and U.S. income taxes, the tax law permits the taxpayer
to choose either a credit or a deduction for the foreign taxes paid.
3. Triple taxation relief for corporations is provided by a deduction for
dividends received from certain domestic corporations. In the case
of individual shareholders, they receive a reduced rate of tax (from
0% for lower tax bracket shareholders to 20% for certain high-
income shareholders).
4. For the Federal estate tax, several provisions reflect attempts to
mitigate the effect of multiple taxation.
(a) A limited credit against the estate tax for foreign death taxes
imposed is allowed.
© 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
mynursytest.store
Partnerships Estates and Trusts 46th Edition Raabe
Instructor’s Guide: Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations, Partnerships,
Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the Federal Tax Law
Instructor’s Guide
Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations,
Partnerships, Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the
Federal Tax Law
Table of Contents
Chapter Objectives ............................................................................................................................. 2
Chapter Outline .................................................................................................................................. 2
Discussion Questions ....................................................................................................................... 16
Video Information............................................................................................................................. 18
Related Cengage Video Content .............................................................................................................. 18
© 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
mynursytest.store
,ACCESS Test Bank for South Western Federal Taxation 2023 Corporations
Partnerships Estates and Trusts 46th Edition Raabe
Instructor’s Guide: Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations, Partnerships,
Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the Federal Tax Law
Chapter Objectives
The following objectives are addressed in this chapter:
1.1 Discuss the importance of revenue needs as an objective of Federal tax law.
1.2 Demonstrate the influence of economic, social, equity, and political considerations
on the development of the tax law.
1.3 Explain how the IRS, as the protector of the revenue, has affected tax law.
1.4 Recognize the role of the courts in interpreting and shaping tax law.
1.5 Identify tax law sources—statutory, administrative, and judicial.
1.6 List and assess tax law sources.
1.7 Demonstrate the ability to conduct tax research.
1.8 Assess the validity and weight of tax law sources.
1.9 Describe various tax planning procedures.
1.10 Explain the role of taxation on the CPA examination.
[return to top]
Chapter Outline
In the outline below, each element includes references (in parentheses) to related content. “CO
CH.##” refers to the chapter objective; “PPT Slide #” refers to the slide number in the PowerPoint
deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center);
and, as applicable for each discipline, accreditation or certification standards (“BL 1.3.3”).
Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this
chapter. Review learning objectives for Chapter 1. (PPT Slides 2–3).
I. The Whys of the Tax Law
i.
While the primary objective of Federal tax law is raising revenue, this is
not the sole objective of tax laws.
1. Important in explaining various provisions found in the law are
economic, social, equity, and political considerations.
2. The Treasury Department, the IRS, and the courts also have
significant impacts on the evolution of Federal tax law.
a. Revenue Needs (1.1, PPT Slide 6)
i. Raising revenue to fund the cost of government operations is the key
factor in structuring a tax system.
ii. Over the past century, the national debt has been increasing
significantly, reaching more than $28.8 trillion, or about $86,000 per
citizen, in November 2021.
© 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
mynursytest.store
,ACCESS Test Bank for South Western Federal Taxation 2023 Corporations
Partnerships Estates and Trusts 46th Edition Raabe
Instructor’s Guide: Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations, Partnerships,
Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the Federal Tax Law
iii. When enacting tax legislation, Congress is often guided by the concept
of revenue neutrality.
1. Changes in the tax law should neither increase nor decrease the net
revenues received by the government.
2. There are likely to be both “winners” (taxpayers who see a reduction
in taxes paid) and “losers” (taxpayers who see an increase in taxes
paid).
b. Economic Considerations (1.2, PPT Slides 7–16)
i. Tax law is often used to accomplish economic objectives.
ii. Control of the Economy. Congress has used the tax depreciation system
as one means of controlling the economy.
1. Shorter asset lives and accelerated methods should encourage
additional investments in depreciable business property.
2. Longer asset lives and the use of straight-line depreciation should
discourage capital outlays.
3. Congress also uses incentives like immediate expensing (§ 179) and
bonus depreciation to stimulate the economy when needed.
4. When tax rates are lowered, taxpayers retain money that can be
used for other purposes.
5. If Congress is using the concept of revenue neutrality, rate
reductions may be offset by a reduction or elimination of
deductions or credits. As a result, lower rates do not always mean
lower taxes.
iii. Encouragement of Certain Activities.
1. Research and development expenditures can be deducted in the
year incurred or, alternatively, capitalized and amortized over a
period of 60 months or more. These expenditures also may
generate a tax credit.
2. Inventions (including technological innovations) also are encouraged
under tax law. Patents can qualify as capital assets, and under
certain conditions, their disposition automatically carries long-term
capital gain treatment.
3. Ecology is encouraged by allowing pollution control facilities to be
amortized over 60 months (rather than over the 39-year period
required for most business buildings).
4. Saving, which leads to capital formation, is stimulated by incentives
to increase private retirement plans. The encouragement of private-
sector pension plans can be justified under social considerations as
well.
iv. Encouragement of Certain Industries.
1. Tax laws favor farming by allowing expensing of soil and water
conservation and fertilizers. Also, farmers can defer the gain
recognition on crop insurance proceeds.
© 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
mynursytest.store
, ACCESS Test Bank for South Western Federal Taxation 2023 Corporations
Partnerships Estates and Trusts 46th Edition Raabe
Instructor’s Guide: Raabe/Young/Nellen/Cripe/Lassar/Persellin/Cuccia, SWFT 2023 Volume 2: Corporations, Partnerships,
Estates & Trusts, 9780357719961; Chapter 1: Understanding and Working with the Federal Tax Law
2. The tax law favors the development of natural resources (like oil and
gas and mineral deposits) by permitting the use of percentage
depletion and a write-off (rather than a capitalization) of certain
exploration costs.
3. The railroad and banking industries also receive special tax
treatment.
v. Encouragement of Small Business. Several provisions illustrate a desire
to benefit small business. These include the following.
1. Special treatment of small business corporation stock leading to
ordinary (rather than capital) loss treatment (§ 1244 stock).
2. S corporation elections allow the avoidance of corporate income tax
and the pass-through of profits (or losses) to the shareholders.
c. Social Considerations
i. Many of the tax provisions passed by Congress can be explained by
social desirability.
1. These provisions encourage individuals to work, give to charities,
and obtain an education.
2. Employers are encouraged to provide accident, health, and group
term life insurance as well as retirement plans for employees.
d. Equity Considerations
i. Equity is a relative concept, and people often disagree as to what is
equitable. For tax purposes, equity is equal application of what the tax
law recognizes. One measure of equity is whether a tax is progressive
(e.g., the Federal income tax on individuals) or regressive (e.g., gasoline
excise tax). The determination is made by calculating the percentage of
a taxpayer’s income that is used to pay a tax.
ii. Alleviating the Effect of Multiple Taxation. Several provisions are
intended to alleviate the effect of multiple taxation.
1. Federal tax law allows a taxpayer to claim a deduction for some
state and local income taxes. The deduction, however, does not
eliminate the effect of multiple taxation.
2. Because double taxation results when the same income is subject to
both foreign and U.S. income taxes, the tax law permits the taxpayer
to choose either a credit or a deduction for the foreign taxes paid.
3. Triple taxation relief for corporations is provided by a deduction for
dividends received from certain domestic corporations. In the case
of individual shareholders, they receive a reduced rate of tax (from
0% for lower tax bracket shareholders to 20% for certain high-
income shareholders).
4. For the Federal estate tax, several provisions reflect attempts to
mitigate the effect of multiple taxation.
(a) A limited credit against the estate tax for foreign death taxes
imposed is allowed.
© 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
mynursytest.store
