,ACCESS Test Bank for South Western Federal Taxation 2023 IndividualIncom
n n n n n n n n n n
e Taxes 46th Edition Young
n n n n
CHAPTERn1
ANnINTRODUCTIONnTOnTAXATION
ANDnUNDERSTANDINGnTHEnFEDERALnTAXnLAWn
SOLUTIONSnTOnPROBLEMnMATERIALS
DISCUSSIONnQUESTIONS
1. (LOn1)nVariousnanswersnarenpossible,nincludingnusingnthenKeynTermsnatnthenendnofneachnchapter,nreferri
ngnnntonnnthennnGlossarynnn(AppendixnnnC),nnnlookingnnnupnnnthennnfootnotennnresourcesnnntonnnthenInternalnReven
uenCodeninnAppendixnD,nusingnchapternfeaturesn(e.g.,nGlobalnTaxnIssues,nEthicsn&nEquity,nTaxnPlanning,na
ndnFrameworkn1040),nexaminingnthentaxnformsnusedninnthenchapters,nandncompletingnadditionalnend-of-
chapternassignments.nAllnofnthesenresourcesnwillnhelpnstudentsnengagenmorendeeplynwithnthenmaterialsna
ndnhelpntheirnunderstanding.
2. (LOn1,n4)
a. Johnnmustnnowndocumentnrentalnreceiptsnandnseparatenhisnhomenexpensesnbetweennpersonalnandnr
entalnuse,nandnhenmaynbensubjectntonthentransientnoccupancyntax.
b. Theresanhasnbecomenself-employed.nNownshenwillnbensubjectntonself-
employmentntaxnandnmaynhaventonmakenquarterlyninstallmentnpaymentsnofnestimatednincomenan
dnself-
employmentntax.nTheresanwillnbenrequiredntonmakenpayrollntaxnpaymentsnifnshenhiresnindividual
sntonworkninnhernbusiness.
c. Paul’snemployernmightnhavensomenmovingnexpensesnthatnitncanndeductn(inngeneral,nPaulncannotn
deductnmovingnexpenses).nPaul’snpersonalntaxesnwillnchangenbecausenFloridandoesnnotnimposen
annincomentaxnbutnCaliforniandoes.
3. (LOn1,n4)nThenincomentaxnconsequencesnthatnresultnarenMarvin’snprincipalnconcern.nAnynrentnhenreceivesni
sntaxednasnincome,nbutnoperatingnexpensesnandndepreciationnwillngeneratendeductionsnthatnoffsetnsomeno
rnallnofnthenincomenornevennyieldnanloss.nMarvinnmustnalsonconsiderntheneffectnofnotherntaxes.nBecausenth
enpropertynisnbeingnconvertednfromnresidentialntoncommercialnuse,nhencannexpectnannincreaseninnthenadnval
oremnpropertyntaxesnleviednbynthenlocaln(andnperhapsnevennthenstate)ntaxingnauthorities.nBesidesnthenreal
nestatentaxes,npersonalnpropertyntaxesncouldnbenimposednonnthenfurnishings.
4. (LOn2)nTonfinancenournparticipationninnWorldnWarnII,nthenscopenofnthenincomentaxnwasnexpandednconsid
erably—
fromnanlimitedncoveragenofn6%ntonovern74%nofnthenpopulation.nHence,nthendescriptionnofnthenincomentaxna
snbeingnan“massntax”nbecamenappropriate.
5. (LOn2)nFornwagenearners,nthentaxnlawnrequiresnemployersntonwithholdnanspecifiedndollarnamountnfromnw
agesnpaidntonthenemployeentoncovernincomentaxesnandnpayrollntaxes.nPersonsnwithnnonwagenincomengen
erallynarenrequiredntonmakenquarterlynpaymentsntonthenIRSnfornestimatedntaxes.nBothnproceduresnensuren
thatntaxpayersnwillnbenfinanciallynablentonmeetntheirnannualntaxnliabilities.nThatnis,nthenamountsnwithheldn
arenmeantntonprepaynthenemployee’snincomentaxesnandnpayrollntaxesnrelatedntonthenwagesnearned.
6. (LOn3)nThentaxnlawnofnthisnstatenappearsntonviolatenthencertaintynandnsimplicitynprinciples.
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, ACCESS Test Bank for South Western Federal Taxation 2023 IndividualIncom
n n n n n n n n n n
e Taxes 46th Edition Young
n n n n
1-2 2023nIndividualnIncomenTaxes/SolutionsnManual
7. (LOn3)nAntaxnisnregressivenifnitnrepresentsnanlargernpercentagenofnthenincomenofnanlow-
incomentaxpayernrelativentonthenincomenofnanhigh-
incomentaxpayer.nExamplesnofnregressiventaxesnincludensalesnandnexcisentaxes.nAntaxnisnprogressivenifnitnr
epresentsnanlargernpercentagenofnthenincomenofnanhigh-incomentaxpayernrelativentonthenincomenofnanlow-
incomentaxpayer.nThenFederalnincomentaxnisnannexamplenofnanprogressiventax.
8. (LOn4)
a. Thenparsonagenprobablynwasnnotnlistednonnthenpropertyntaxnrollsnbecausenitnwasnownednbynantax-
nexemptnchurch.nApparently,nthentaxingnauthoritiesnarennotnawarenthatnownershipnhasnchanged.
b. Ethannshouldnnotifynthenauthoritiesnofnhisnpurchase.nThisnwillnforcenhimntonpaynbackntaxesnbutn
mayneliminatenfutureninterestnandnpenalties.
9. (LOn4)nAlthoughnthenBakernMotorsnbidnisnthenlowest,nfromnanlong-
termnfinancialnstandpoint,nitnisnthenbest.nThenproposednusenofnthenpropertynbynthenstatenandnthenchurchnpr
obablynwillnmakenitnexemptnfromnthenschoolndistrict’snadnvaloremntax.nThisnwouldnhardlynbenthencasenwi
thnancarndealership.nInnfact,ncommercialnpropertiesn(e.g.,ncarndealerships)noftennarensubjectntonhigherntaxn
rates.
10. (LOn4)
a. Innthisncase,nthen“taxnholiday”nprobablynconcernsnexemptionnfromnadnvaloremntaxes.n“Generous”nc
ouldninvolvenannextendednperiodnofntimen(e.g.,n10nyears)nandnincludenbothnrealtynandnpersonalty.
b. Thenschoolndistrictncouldnbenaffectedninntwonways.nFirst,nduentonthenerosionnofnthentaxnbase,nlessnr
evenuenwouldnbenforthcoming.nSecond,nnewnworkersnwouldnmeannnewnfamiliesnandnmorenchild
renntoneducate.
11. (LOn4)nAnpossiblenexplanationnisnthatnSophianmadencapitalnimprovementsn(e.g.,naddednanswimmingnpool)nt
onhernresidencenandnhernparentsnbecamenretireesn(e.g.,nreachednagen65).
12. (LOn4)nPresumingnthatnthendockagenfacilitiesnarencomparableninnMassachusetts,nthenMorgansnmaynbentry
ingntonavoidnadnvaloremntaxes.nTaxesnonnnonbusinessnpropertynvarynfromnonenstatentonanothernandnarenfreq
uentlynavoided.
13. (LOn4)nInngeneral,nFederalnexcisentaxesnapplyntonfewernitemsnthanninnthenpast.nLawmakersnhavenfocusedno
nnandnincreasedncertainnFederalnexcisentaxesn(e.g.,nthosenonntobacconproducts,ngasoline,nandnairntravel).
14. (LOn4)nJaylancouldnhavenbeennovercharged,nbutnitnisnlikelynthatnatnleastnpartnofnthenexcessnisnattributablent
onanhotelnoccupancyntaxnandnancarnrentalntax.nInnmajorncities,nthesentypesnofnexcisentaxesnhavenbecomenanp
opularnwaynofnfinancingncapitalnimprovementsnsuchnasnsportsnarenasnandnstadiums.nConsequently,nthena
mountnofnthentaxesncouldnbensignificant.
15. (LOn 4)n Ann excisen taxn isn limitedn ton an particularn transactionn (e.g.,n salen ofn gasoline),n whereasn an general
salesntaxncoversnanmultitudenofntransactionsn(e.g.,nsalenofnallnnonfoodngoods).
a. Thenfollowingnstatesndonnotnimposenangeneralnsalesntax:nAlaska,nDelaware,nMontana,nNewnHam
pshire,nandnOregon.
b. TherenisnnonFederalngeneralnsalesntax.
©n2023nCengage®.nMaynnotnbenscanned,ncopiednornduplicated,nornpostedntonanpubliclynaccessiblenwebsite,ninnwholenorninnpa
rt.
mynursytest.store
n n n n n n n n n n
e Taxes 46th Edition Young
n n n n
CHAPTERn1
ANnINTRODUCTIONnTOnTAXATION
ANDnUNDERSTANDINGnTHEnFEDERALnTAXnLAWn
SOLUTIONSnTOnPROBLEMnMATERIALS
DISCUSSIONnQUESTIONS
1. (LOn1)nVariousnanswersnarenpossible,nincludingnusingnthenKeynTermsnatnthenendnofneachnchapter,nreferri
ngnnntonnnthennnGlossarynnn(AppendixnnnC),nnnlookingnnnupnnnthennnfootnotennnresourcesnnntonnnthenInternalnReven
uenCodeninnAppendixnD,nusingnchapternfeaturesn(e.g.,nGlobalnTaxnIssues,nEthicsn&nEquity,nTaxnPlanning,na
ndnFrameworkn1040),nexaminingnthentaxnformsnusedninnthenchapters,nandncompletingnadditionalnend-of-
chapternassignments.nAllnofnthesenresourcesnwillnhelpnstudentsnengagenmorendeeplynwithnthenmaterialsna
ndnhelpntheirnunderstanding.
2. (LOn1,n4)
a. Johnnmustnnowndocumentnrentalnreceiptsnandnseparatenhisnhomenexpensesnbetweennpersonalnandnr
entalnuse,nandnhenmaynbensubjectntonthentransientnoccupancyntax.
b. Theresanhasnbecomenself-employed.nNownshenwillnbensubjectntonself-
employmentntaxnandnmaynhaventonmakenquarterlyninstallmentnpaymentsnofnestimatednincomenan
dnself-
employmentntax.nTheresanwillnbenrequiredntonmakenpayrollntaxnpaymentsnifnshenhiresnindividual
sntonworkninnhernbusiness.
c. Paul’snemployernmightnhavensomenmovingnexpensesnthatnitncanndeductn(inngeneral,nPaulncannotn
deductnmovingnexpenses).nPaul’snpersonalntaxesnwillnchangenbecausenFloridandoesnnotnimposen
annincomentaxnbutnCaliforniandoes.
3. (LOn1,n4)nThenincomentaxnconsequencesnthatnresultnarenMarvin’snprincipalnconcern.nAnynrentnhenreceivesni
sntaxednasnincome,nbutnoperatingnexpensesnandndepreciationnwillngeneratendeductionsnthatnoffsetnsomeno
rnallnofnthenincomenornevennyieldnanloss.nMarvinnmustnalsonconsiderntheneffectnofnotherntaxes.nBecausenth
enpropertynisnbeingnconvertednfromnresidentialntoncommercialnuse,nhencannexpectnannincreaseninnthenadnval
oremnpropertyntaxesnleviednbynthenlocaln(andnperhapsnevennthenstate)ntaxingnauthorities.nBesidesnthenreal
nestatentaxes,npersonalnpropertyntaxesncouldnbenimposednonnthenfurnishings.
4. (LOn2)nTonfinancenournparticipationninnWorldnWarnII,nthenscopenofnthenincomentaxnwasnexpandednconsid
erably—
fromnanlimitedncoveragenofn6%ntonovern74%nofnthenpopulation.nHence,nthendescriptionnofnthenincomentaxna
snbeingnan“massntax”nbecamenappropriate.
5. (LOn2)nFornwagenearners,nthentaxnlawnrequiresnemployersntonwithholdnanspecifiedndollarnamountnfromnw
agesnpaidntonthenemployeentoncovernincomentaxesnandnpayrollntaxes.nPersonsnwithnnonwagenincomengen
erallynarenrequiredntonmakenquarterlynpaymentsntonthenIRSnfornestimatedntaxes.nBothnproceduresnensuren
thatntaxpayersnwillnbenfinanciallynablentonmeetntheirnannualntaxnliabilities.nThatnis,nthenamountsnwithheldn
arenmeantntonprepaynthenemployee’snincomentaxesnandnpayrollntaxesnrelatedntonthenwagesnearned.
6. (LOn3)nThentaxnlawnofnthisnstatenappearsntonviolatenthencertaintynandnsimplicitynprinciples.
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mynursytest.store
, ACCESS Test Bank for South Western Federal Taxation 2023 IndividualIncom
n n n n n n n n n n
e Taxes 46th Edition Young
n n n n
1-2 2023nIndividualnIncomenTaxes/SolutionsnManual
7. (LOn3)nAntaxnisnregressivenifnitnrepresentsnanlargernpercentagenofnthenincomenofnanlow-
incomentaxpayernrelativentonthenincomenofnanhigh-
incomentaxpayer.nExamplesnofnregressiventaxesnincludensalesnandnexcisentaxes.nAntaxnisnprogressivenifnitnr
epresentsnanlargernpercentagenofnthenincomenofnanhigh-incomentaxpayernrelativentonthenincomenofnanlow-
incomentaxpayer.nThenFederalnincomentaxnisnannexamplenofnanprogressiventax.
8. (LOn4)
a. Thenparsonagenprobablynwasnnotnlistednonnthenpropertyntaxnrollsnbecausenitnwasnownednbynantax-
nexemptnchurch.nApparently,nthentaxingnauthoritiesnarennotnawarenthatnownershipnhasnchanged.
b. Ethannshouldnnotifynthenauthoritiesnofnhisnpurchase.nThisnwillnforcenhimntonpaynbackntaxesnbutn
mayneliminatenfutureninterestnandnpenalties.
9. (LOn4)nAlthoughnthenBakernMotorsnbidnisnthenlowest,nfromnanlong-
termnfinancialnstandpoint,nitnisnthenbest.nThenproposednusenofnthenpropertynbynthenstatenandnthenchurchnpr
obablynwillnmakenitnexemptnfromnthenschoolndistrict’snadnvaloremntax.nThisnwouldnhardlynbenthencasenwi
thnancarndealership.nInnfact,ncommercialnpropertiesn(e.g.,ncarndealerships)noftennarensubjectntonhigherntaxn
rates.
10. (LOn4)
a. Innthisncase,nthen“taxnholiday”nprobablynconcernsnexemptionnfromnadnvaloremntaxes.n“Generous”nc
ouldninvolvenannextendednperiodnofntimen(e.g.,n10nyears)nandnincludenbothnrealtynandnpersonalty.
b. Thenschoolndistrictncouldnbenaffectedninntwonways.nFirst,nduentonthenerosionnofnthentaxnbase,nlessnr
evenuenwouldnbenforthcoming.nSecond,nnewnworkersnwouldnmeannnewnfamiliesnandnmorenchild
renntoneducate.
11. (LOn4)nAnpossiblenexplanationnisnthatnSophianmadencapitalnimprovementsn(e.g.,naddednanswimmingnpool)nt
onhernresidencenandnhernparentsnbecamenretireesn(e.g.,nreachednagen65).
12. (LOn4)nPresumingnthatnthendockagenfacilitiesnarencomparableninnMassachusetts,nthenMorgansnmaynbentry
ingntonavoidnadnvaloremntaxes.nTaxesnonnnonbusinessnpropertynvarynfromnonenstatentonanothernandnarenfreq
uentlynavoided.
13. (LOn4)nInngeneral,nFederalnexcisentaxesnapplyntonfewernitemsnthanninnthenpast.nLawmakersnhavenfocusedno
nnandnincreasedncertainnFederalnexcisentaxesn(e.g.,nthosenonntobacconproducts,ngasoline,nandnairntravel).
14. (LOn4)nJaylancouldnhavenbeennovercharged,nbutnitnisnlikelynthatnatnleastnpartnofnthenexcessnisnattributablent
onanhotelnoccupancyntaxnandnancarnrentalntax.nInnmajorncities,nthesentypesnofnexcisentaxesnhavenbecomenanp
opularnwaynofnfinancingncapitalnimprovementsnsuchnasnsportsnarenasnandnstadiums.nConsequently,nthena
mountnofnthentaxesncouldnbensignificant.
15. (LOn 4)n Ann excisen taxn isn limitedn ton an particularn transactionn (e.g.,n salen ofn gasoline),n whereasn an general
salesntaxncoversnanmultitudenofntransactionsn(e.g.,nsalenofnallnnonfoodngoods).
a. Thenfollowingnstatesndonnotnimposenangeneralnsalesntax:nAlaska,nDelaware,nMontana,nNewnHam
pshire,nandnOregon.
b. TherenisnnonFederalngeneralnsalesntax.
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