,ACCESS Test Bank for South Western Federal Taxation 2023 Individual Income
j j j j j j j j j j
Taxes 46th Edition Young
j j j j
CHAPTERj1
ANjINTRODUCTIONjTOjTAXATION
ANDjUNDERSTANDINGjTHEjFEDERALjTAXjLAWjSOLUTIONSj
TOjPROBLEMjMATERIALS
DISCUSSIONjQUESTIONS
1. (LOj1)jVariousjanswersjarejpossible,jincludingjusingjthejKey jTermsjatjthejend jof jeach jchapter,jreferringj t
o j thej Glossary j (Appendix j C),j lookingj up j thej footnotej resourcesj to j thejInternaljRevenuejCodeji
n jAppendix jD,jusingjchapterjf eaturesj(e.g.,jGlobaljTax jIssues,jEthicsj&jEquity,jTax jPlanning,jand jFramewo
rk j1040),jexaminingjthejtax jformsjused jin jthejchapters,jand jcompletingjadditionaljend-of-
chapterjassignments.jAlljof jthesejresourcesjwilljhelp jstudentsjengagejmorejdeeply jwith jthejmaterialsjand jh
elp jtheirjunderstanding.
2. (LOj1,j4)
a. John jmustjnowjd ocumentjrentaljreceiptsjand jseparatejh isjhomejexpensesjbetween jpersonaljandjrent
aljuse,jand jhejmay jbejsubjectjto jthejtransientjoccupancy jtax.
b. Theresajhasjbecomejself-employed.jNowjshejwilljbejsubjectjto jself-
employmentjtax jand jmay jhavejto jmakejquarterlyjinstallmentjpaymentsjof jestimated jincomejand js
elf-
employmentjtax.jTheresajwilljbejrequired jto jmakejpayrolljtax jpaymentsjif jshejhiresjindividualsjto j
work jin jherjbusiness.
c. Paul’sjemployerjmightjhavejsomejmovingjexpensesjthatjitjcanjdeductj(in jgeneral,jPauljcannotjded
uctjmovingjexpenses).jPaul’sjpersonaljtaxesjwilljchangejbecausejFloridajdoesjnotjimposejan jinco
mejtax jbutjCalifornia jdoes.
3. (LOj1,j4)jThejincomejtax jconsequencesjthatjresultjarejMarvin’sjprincipaljconcern.jAny jrentjh ejreceivesjisjtax
ed jasjincome,jbutjoperatingjexpensesjand jdepreciation jwilljgeneratejdeductionsjthatjoffsetjsomejorjalljof jth
ejincomejorjeven jyield jajloss.jMarvin jmustjalso jconsiderjthejeffectjof jotherjtaxes.jBecausejthejproperty jisjb
eingjconvertedjfromjresidentialjtojcommercialjuse,jhejcanjexpectjan jincrease jin jthejad jvalorem jproperty jtax
esjlevied jby jthejlocalj(andjperhapsjevenjthejstate)jtaxingjauthorities.jBesidesjthejrealjestatejtaxes,jpersonalj
property jtaxesjcould jbejimposed jon jthejfurnishings.
4. (LOj2)jTo jfinancejourjparticipation jin jWorld jWarjII,jthejscopejof jthejincome jtax jwasjexpandedjconsiderabl
y—
fromjajlimitedjcoveragejofj6%jtojoverj74% jof jthejpopulation.jHence,jthejdescriptionjofjthejincomejtax jasjbei
ngjaj“massjtax”jbecamejappropriate.
5. (LOj2)jForjwagejearners,jthejtax jlawjrequiresjemployersjto jwithhold jajspecifiedjdollarjamountjfromjwagesj
paid jtojthejemployee jto jcoverjincomejtaxesjand jpayrolljtaxes.jPersonsjwithjnonwagejincomejgenerally jarej
required jto jmakejquarterlyjpaymentsjto jthejIRSjforjestimated jtaxes.jBothjproceduresjensurejthatjtaxpayersj
willjbejfinancially jablejto jmeetjtheirjannualjtaxjliabilities.jThatjis,jthejamountsjwithheld jarejmeantjto jprepa
y jthejemployee’sjincome jtaxesjand jpayrolljtaxesjrelated jto jthejwagesjearned.
6. (LOj3)jThejtax jlawjof jthisjstatejappearsjto jviolatejthejcertainty jand jsimplicityjprinciples.
©j2023 jCengage®.jMay jnotjbejscanned,jcopied jor jduplicated, jor jposted jto jajpublicly jaccessiblejwebsite, jin jwholejor jin jpart.
mynursytest.store
, 1-1
©j2023 jCengage®.jMay jnotjbejscanned,jcopied jor jduplicated, jor jposted jto jajpublicly jaccessiblejwebsite,jin jwholejor jin jpart.
mynursytest.store
, ACCESS Test Bank for South Western Federal Taxation 2023 Individual Income
j j j j j j j j j j
Taxes 46th Edition Young
j j j j
1-2 2023 jIndividualjIncome jTaxes/SolutionsjManual
7. (LOj3)jAjtax jisjregressivejif jitjrepresentsjajlargerjpercentagejofjthejincomejofjajlow-
incomejtaxpayerjrelativejto jthejincome jof jajhigh-
incomejtaxpayer.jExamplesjof jregressivejtaxesjinclude jsalesjand jexcisejtaxes.jAjtaxjisjprogressive jif jitjrepre
sentsjajlargerjpercentage jof jthejincomejofjajhigh-incomejtaxpayerjrelativejto jthejincome jof jajlow-
incomejtaxpayer.jThejFederaljincome jtax jisjan jexamplejof jajprogressive jtax.
8. (LOj4)
a. Thejparsonagejprobably jwasjnotjlistedjonjthejproperty jtaxjrollsjbecause jitjwasjowned jby jajtax-
jexemptjchurch. jApparently, jthe jtaxingjauthorities jare jnotjaware jthatjownership jhasjchanged.
b. Ethan jshould jnotify jthejauthoritiesjof jhisjpurchase.jThisjwilljforcejhimjto jpay jbackjtaxesjbutjmay je
liminatejfuture jinterestjand jpenalties.
9. (LOj4)jAlthough jthejBakerjMotorsjbid jisjthejlowest,jfromjajlong-
termjfinancialjstandpoint,jitjisjthejbest.jThejproposedjusejof jthejproperty jby jthejstatejandjthejchurch jprobab
ly jwilljmakejitjexemptjfromjthejschooljdistrict’sjad jvalorem jtax.jThisjwould jhardly jbejthejcasejwith jajcarjde
alership.jIn jfact,jcommercialjpropertiesj(e.g.,jcarjdealerships)joften jarejsubjectjto jhigherjtax jrates.
10. (LOj4)
a. In jthisjcase,jthej“tax jholiday”jp robably jconcernsjexemption jf romjad jv alorem jtaxes.j“Generous” jcou
ld jinvolve jan jextended jperiod jof jtimej(e.g.,j10 jyears)jand jinclude jboth jrealty jand jpersonalty.
b. Thejschooljdistrictjcould jbejaffectedjinjtwo jways.jFirst,jduejtojthejerosion jof jthejtax jbase,jlessjreven
uejwould jbejforthcoming.jSecond,jnewjworkersjwould jmean jnewjfamiliesjand jmorejchildren jto jed
ucate.
11. (LOj4)jAjp ossible jexplanation jisjthatjSophia jmadejcapitaljimprovementsj(e.g.,jadded jajswimmingjpool)jtojhe
rjresidence jand jherjparentsjbecamejretireesj(e.g.,jreached jagej65).
12. (LOj4)jPresumingjthatjthejdockagejfacilitiesjarejcomparable jin jMassachusetts,jthejMorgansjmay jbejtryingj
to javoid jadjvalorem jtaxes.jTaxesjonjnonbusinessjproperty jv ary jfromjonejstatejtojanotherjandjarejfrequently ja
voided.
13. (LOj4)jIn jgeneral,jFederaljexcisejtaxesjapply jto jfewerjitemsjthanjinjthejpast.jLawmakersjhavejfocused jon jan
d jincreased jcertain jFederaljexcisejtaxesj(e.g.,jthosejon jtobacco jproducts,jgasoline,jand jairjtravel).
14. (LOj4)jJaylajcouldjhavejbeen jovercharged,jbutjitjisjlikely jthatjatjleastjpartjof jthejexcessjisjattributable jtojajho
teljoccupancy jtaxjand jajcarjrentaljtax.jIn jmajorjcities,jthesejtypesjof jexcisejtaxesjhavejbecomejajpopularjwayj
of jfinancingjcapitaljimprovementsjsuch jasjsportsjarenasjand jstadiums.jConsequently,jthejamountjof jthejtax
esjcould jbejsignificant.
15. (LOj 4)j An j excisej taxj isj limited j to j aj particularj transaction j (e.g.,j salej of j gasoline),j whereasj aj general
salesjtaxjcoversjajmultitude jof jtransactionsj(e.g.,jsalejof jalljnonfood jgoods).
a. Thejfollowingjstatesjdo jnotjimposejajgeneraljsalesjtax:jAlaska,jDelaware,jMontana,jNewjHampsh
ire,jand jOregon.
b. There jisjno jFederaljgeneraljsalesjtax.
©j2023 jCengage®.jMay jnotjbejscanned,jcopied jor jduplicated, jor jposted jto jajpublicly jaccessiblejwebsite, jin jwholejor jin jpart.
mynursytest.store
j j j j j j j j j j
Taxes 46th Edition Young
j j j j
CHAPTERj1
ANjINTRODUCTIONjTOjTAXATION
ANDjUNDERSTANDINGjTHEjFEDERALjTAXjLAWjSOLUTIONSj
TOjPROBLEMjMATERIALS
DISCUSSIONjQUESTIONS
1. (LOj1)jVariousjanswersjarejpossible,jincludingjusingjthejKey jTermsjatjthejend jof jeach jchapter,jreferringj t
o j thej Glossary j (Appendix j C),j lookingj up j thej footnotej resourcesj to j thejInternaljRevenuejCodeji
n jAppendix jD,jusingjchapterjf eaturesj(e.g.,jGlobaljTax jIssues,jEthicsj&jEquity,jTax jPlanning,jand jFramewo
rk j1040),jexaminingjthejtax jformsjused jin jthejchapters,jand jcompletingjadditionaljend-of-
chapterjassignments.jAlljof jthesejresourcesjwilljhelp jstudentsjengagejmorejdeeply jwith jthejmaterialsjand jh
elp jtheirjunderstanding.
2. (LOj1,j4)
a. John jmustjnowjd ocumentjrentaljreceiptsjand jseparatejh isjhomejexpensesjbetween jpersonaljandjrent
aljuse,jand jhejmay jbejsubjectjto jthejtransientjoccupancy jtax.
b. Theresajhasjbecomejself-employed.jNowjshejwilljbejsubjectjto jself-
employmentjtax jand jmay jhavejto jmakejquarterlyjinstallmentjpaymentsjof jestimated jincomejand js
elf-
employmentjtax.jTheresajwilljbejrequired jto jmakejpayrolljtax jpaymentsjif jshejhiresjindividualsjto j
work jin jherjbusiness.
c. Paul’sjemployerjmightjhavejsomejmovingjexpensesjthatjitjcanjdeductj(in jgeneral,jPauljcannotjded
uctjmovingjexpenses).jPaul’sjpersonaljtaxesjwilljchangejbecausejFloridajdoesjnotjimposejan jinco
mejtax jbutjCalifornia jdoes.
3. (LOj1,j4)jThejincomejtax jconsequencesjthatjresultjarejMarvin’sjprincipaljconcern.jAny jrentjh ejreceivesjisjtax
ed jasjincome,jbutjoperatingjexpensesjand jdepreciation jwilljgeneratejdeductionsjthatjoffsetjsomejorjalljof jth
ejincomejorjeven jyield jajloss.jMarvin jmustjalso jconsiderjthejeffectjof jotherjtaxes.jBecausejthejproperty jisjb
eingjconvertedjfromjresidentialjtojcommercialjuse,jhejcanjexpectjan jincrease jin jthejad jvalorem jproperty jtax
esjlevied jby jthejlocalj(andjperhapsjevenjthejstate)jtaxingjauthorities.jBesidesjthejrealjestatejtaxes,jpersonalj
property jtaxesjcould jbejimposed jon jthejfurnishings.
4. (LOj2)jTo jfinancejourjparticipation jin jWorld jWarjII,jthejscopejof jthejincome jtax jwasjexpandedjconsiderabl
y—
fromjajlimitedjcoveragejofj6%jtojoverj74% jof jthejpopulation.jHence,jthejdescriptionjofjthejincomejtax jasjbei
ngjaj“massjtax”jbecamejappropriate.
5. (LOj2)jForjwagejearners,jthejtax jlawjrequiresjemployersjto jwithhold jajspecifiedjdollarjamountjfromjwagesj
paid jtojthejemployee jto jcoverjincomejtaxesjand jpayrolljtaxes.jPersonsjwithjnonwagejincomejgenerally jarej
required jto jmakejquarterlyjpaymentsjto jthejIRSjforjestimated jtaxes.jBothjproceduresjensurejthatjtaxpayersj
willjbejfinancially jablejto jmeetjtheirjannualjtaxjliabilities.jThatjis,jthejamountsjwithheld jarejmeantjto jprepa
y jthejemployee’sjincome jtaxesjand jpayrolljtaxesjrelated jto jthejwagesjearned.
6. (LOj3)jThejtax jlawjof jthisjstatejappearsjto jviolatejthejcertainty jand jsimplicityjprinciples.
©j2023 jCengage®.jMay jnotjbejscanned,jcopied jor jduplicated, jor jposted jto jajpublicly jaccessiblejwebsite, jin jwholejor jin jpart.
mynursytest.store
, 1-1
©j2023 jCengage®.jMay jnotjbejscanned,jcopied jor jduplicated, jor jposted jto jajpublicly jaccessiblejwebsite,jin jwholejor jin jpart.
mynursytest.store
, ACCESS Test Bank for South Western Federal Taxation 2023 Individual Income
j j j j j j j j j j
Taxes 46th Edition Young
j j j j
1-2 2023 jIndividualjIncome jTaxes/SolutionsjManual
7. (LOj3)jAjtax jisjregressivejif jitjrepresentsjajlargerjpercentagejofjthejincomejofjajlow-
incomejtaxpayerjrelativejto jthejincome jof jajhigh-
incomejtaxpayer.jExamplesjof jregressivejtaxesjinclude jsalesjand jexcisejtaxes.jAjtaxjisjprogressive jif jitjrepre
sentsjajlargerjpercentage jof jthejincomejofjajhigh-incomejtaxpayerjrelativejto jthejincome jof jajlow-
incomejtaxpayer.jThejFederaljincome jtax jisjan jexamplejof jajprogressive jtax.
8. (LOj4)
a. Thejparsonagejprobably jwasjnotjlistedjonjthejproperty jtaxjrollsjbecause jitjwasjowned jby jajtax-
jexemptjchurch. jApparently, jthe jtaxingjauthorities jare jnotjaware jthatjownership jhasjchanged.
b. Ethan jshould jnotify jthejauthoritiesjof jhisjpurchase.jThisjwilljforcejhimjto jpay jbackjtaxesjbutjmay je
liminatejfuture jinterestjand jpenalties.
9. (LOj4)jAlthough jthejBakerjMotorsjbid jisjthejlowest,jfromjajlong-
termjfinancialjstandpoint,jitjisjthejbest.jThejproposedjusejof jthejproperty jby jthejstatejandjthejchurch jprobab
ly jwilljmakejitjexemptjfromjthejschooljdistrict’sjad jvalorem jtax.jThisjwould jhardly jbejthejcasejwith jajcarjde
alership.jIn jfact,jcommercialjpropertiesj(e.g.,jcarjdealerships)joften jarejsubjectjto jhigherjtax jrates.
10. (LOj4)
a. In jthisjcase,jthej“tax jholiday”jp robably jconcernsjexemption jf romjad jv alorem jtaxes.j“Generous” jcou
ld jinvolve jan jextended jperiod jof jtimej(e.g.,j10 jyears)jand jinclude jboth jrealty jand jpersonalty.
b. Thejschooljdistrictjcould jbejaffectedjinjtwo jways.jFirst,jduejtojthejerosion jof jthejtax jbase,jlessjreven
uejwould jbejforthcoming.jSecond,jnewjworkersjwould jmean jnewjfamiliesjand jmorejchildren jto jed
ucate.
11. (LOj4)jAjp ossible jexplanation jisjthatjSophia jmadejcapitaljimprovementsj(e.g.,jadded jajswimmingjpool)jtojhe
rjresidence jand jherjparentsjbecamejretireesj(e.g.,jreached jagej65).
12. (LOj4)jPresumingjthatjthejdockagejfacilitiesjarejcomparable jin jMassachusetts,jthejMorgansjmay jbejtryingj
to javoid jadjvalorem jtaxes.jTaxesjonjnonbusinessjproperty jv ary jfromjonejstatejtojanotherjandjarejfrequently ja
voided.
13. (LOj4)jIn jgeneral,jFederaljexcisejtaxesjapply jto jfewerjitemsjthanjinjthejpast.jLawmakersjhavejfocused jon jan
d jincreased jcertain jFederaljexcisejtaxesj(e.g.,jthosejon jtobacco jproducts,jgasoline,jand jairjtravel).
14. (LOj4)jJaylajcouldjhavejbeen jovercharged,jbutjitjisjlikely jthatjatjleastjpartjof jthejexcessjisjattributable jtojajho
teljoccupancy jtaxjand jajcarjrentaljtax.jIn jmajorjcities,jthesejtypesjof jexcisejtaxesjhavejbecomejajpopularjwayj
of jfinancingjcapitaljimprovementsjsuch jasjsportsjarenasjand jstadiums.jConsequently,jthejamountjof jthejtax
esjcould jbejsignificant.
15. (LOj 4)j An j excisej taxj isj limited j to j aj particularj transaction j (e.g.,j salej of j gasoline),j whereasj aj general
salesjtaxjcoversjajmultitude jof jtransactionsj(e.g.,jsalejof jalljnonfood jgoods).
a. Thejfollowingjstatesjdo jnotjimposejajgeneraljsalesjtax:jAlaska,jDelaware,jMontana,jNewjHampsh
ire,jand jOregon.
b. There jisjno jFederaljgeneraljsalesjtax.
©j2023 jCengage®.jMay jnotjbejscanned,jcopied jor jduplicated, jor jposted jto jajpublicly jaccessiblejwebsite, jin jwholejor jin jpart.
mynursytest.store
