SOLUTION MANUAL FOR
. .
Principles of Taxation for Business and Investment Planning 2024
. . . . . . . .
Edition 27th Edition by Sally M. Jones
. . . . . .
FULL TEST BANK!!! . .
,Chapter.1.Taxes.and.Taxing.Jurisdictions
Questions.and.Problems.for.Discussion
1. Tax.payments.differ.from.government.fines.and.penalties.because.they.aren‘t.intended.to.deter.or.p
unish.unacceptable.behavior..Tax.payments.differ.from.fees.or.user.charges.because.they.don‘t.e
ntitle.the.payer.to.a.specific.government.good.or.service,.such.as.a.postage.stamp.or.a.driver‘s.lice
nse..Tax.payments.also.differ.from.fees.or.user.charges.because.they.are.compulsory.
2. This.payment.has.characteristics.of.a.tax,.a.penalty,.and.a.user.fee..The.compulsory.payment.is.not.s
pecifically.punitive.but.does.apply.selectively.to.those.companies.most.likely.responsible.for.the.pollu
ted.condition.of.Green.River..However,.these.same.companies.may.be.the.entities.that.benefit.most.
from.the.environmental.clean-up.
3. This.payment.more.closely.resembles.a.fee.for.a.government.service.than.a.transaction-
based.tax.because.the.transaction.occurs.between.a.private.party.and.the.jurisdiction.itself,.rather.th
an.between.private.parties.engaging.in.a.market.transaction..The.payment.also.entitles.the.payer.to.a
.specific.benefit.(the.right.to. marry.under.law).
4. To.the.extent.that.the.decline.in.exterior.maintenance.reduces.the.value.of.Mr..Powell‘s.apartment.co
mplex,.he.bears.the.incidence.of.the.increased.property.tax..To.the.extent.that.the.decline.reduces.th
e.value.of.adjoining.properties.or.makes.the.neighborhood.less.attractive,.the.owners.of.the.adjoinin
g.properties.and.the.neighborhood.residents.share.the.incidence.of.the.tax.increase.
5. People.who.don‘t.directly.use.public.schools.(such.as.Mr..and.Mrs..Ahern.or.people.who.don‘t.have.c
hildren).indirectly.benefit.from.a.public.education.system.for.the.general.population..Arguably,.public
.education.contributes.to.a.skilled.workforce.and.improves.the.cultural.and.social.environment.in.whic
h.Mr..and.Mrs..Ahern.live..Based.on.this.argument,.Mr..and.Mrs..Ahern.should.not.be.exempt.from.th
e.local.property.tax.
6. The.consumers.who.pay.the.same.price.for.a.smaller.bar.of.soap.of.lesser.quality.bear.the.incid
ence.of.the.new.gross.receipts.tax.
7. Real.property.can‘t.be.hidden.or.moved,.and.its.ownership.(legal.title).is.a.matter.of.public.reco
rd..In.contrast,.personal.property.is.mobile.and.may.be.easily.concealed..Moreover,.jurisdicti
ons.may.not.have.an.effective.means.to.discover.or.trace.ownership.of.personal.property.
8. Arguably,.private.golf.courses.beautify.the.locality.and.are.environmentally.more.desirable.than.oth
er.commercial.activities..They.also.may.require.more.acreage.than.other.businesses.and,.therefor
e,.would.be.at.a.competitive.disadvantage.without.a.preferential.real.property.tax.rate.
9. Many.jurisdictions.that.levy.property.taxes.provide.an.exemption.for.public.institutions,.such.as.stat
e.universities.or.private.colleges..If.University.K.is.entitled.to.such.an.exemption,.every.commercia
l.building.or.residence.acquired.by.the.University.reduces.the.local.jurisdiction‘s.property.tax.base.
10. Excise.taxes.are.imposed.on.a.much.narrower.range.of.consumer.goods.and.services.than.sale
s.taxes..Consequently,.people.can.more.readily.avoid.purchasing.the.specific.good.or.service.
subject.to.excise.tax.
,11. The.tax.increase.may.have.reduced.the.aggregate.demand.for.consumer.goods.and,.consequently,
.municipal.residents.are.buying.fewer.goods..A.second.possibility.is.that.municipal.residents.are.trav
eling.to.other.jurisdictions.with.lower.tax.rates.or.making.more.purchases.through.mail.order.catalog
s.or.on-line.
12. From.a.political.perspective,.liquor.and.cigarettes.sales.make.an.excellent.tax.base.because.consu
mption.of.the.two.products.is.purely.discretionary,.and.any.decline.in.consumption.because.of.the.ta
x.is.socially.desirable..From.an.economic.perspective,.these.sales.are.a.good.tax.base.because.the.
demand.for.liquor.and.cigarettes.is.relatively.price.inelastic..In.other.words,.people.who.drink.and.sm
oke.on.a.regular.basis.buy.these.products.regardless.of.a.heavy.excise.tax.
13. The.federal.income. tax.has.the.broader.base..The.federal.payroll.tax.is.imposed.on.wages,.salar
ies,.and.other.forms.of.compensation.earned.by.employees..The.federal.income.tax.is.imposed.
on.all.types.of.compensation.as.well.as.net.business.profit,.investment.income,.and.any.other.inc
ome.item.from.whatever.source.derived.
14. A.property.tax.is.a.periodic.(usually.annual).tax.levied.on.the.ownership.of.property.and.based.on.the
.value.of.the.property.on.a.particular.assessment.date..A.transfer.tax.is.a.transaction-
.based.tax.levied.on.the.transfer.of.property.from.one.party .to.another..A.transfer.tax.is.based.on.the.v
alue.of.the.property.at.date.of.transfer.
15. If.the.federal.government.could.―piggy.back‖.a.national.sales.tax.on.existing.state.sales.tax.collecti
on.systems,.the.federal.government.could.avoid.creating.a.new.federal.agency.for.collecting.the.ta
x..In.contrast,.the.federal.government.would.have.to.create.a.new.collection.system.for.a.national.V
AT..However,.a.national.VAT.would.be.less.likely.to.cause.jurisdictional.conflict.between.the.federa
l.government.and.the.states.because.states.don‘t.depend.on.VATs.as.a.source.of.revenue.
16. The.Internal.Revenue.Code.is.federal.statutory.law,.enacted.by.Congress.and.signed.by.the.Presid
ent..Technically,.Treasury.regulations.only.interpret.and.explain.the.statute.and.aren‘t.laws.in.their.o
wn.right..Thus,.regulations.are.less.authoritative.than.the.Code.itself..However,.because.Congress.
authorized.the.Treasury.to.write.regulations,.they.are.the.government‘s.official.interpretation.of.stat
utory.law..Practically,.the.regulations.carry.considerable.authoritative.weight.
Application.Problems
1. a.. The.statement.of.facts.identifies.three.taxpayers:.Mr..Josh.Kenney,.JK.Services,.and.JK.Rea
lty.
b. The.government.of.the.locality.in.which.Mr..Kenney.resides,.the.state.government.of.Vermont,.
and.the.U.S..government.have.jurisdiction.to.tax.Mr..Kenney..The.local.governments.of.the.fou
r.counties.in.which.JK.Services.conducts.business,.the.state.government.of.Vermont,.and.the.
U.S..government.have.jurisdiction.to.tax.JK.Services..The.city.of.Boston,.the.state.government.
of.Massachusetts,.and.the.U.S..government.have.jurisdiction.to.tax.JK.Realty.
2. a.. . The.United.States.has.jurisdiction.to.tax.Mrs..May.because.she.is.a.permanent.resident.
b. The.United.States.has.jurisdiction.to.tax.Mrs..May.only.on.the.U.S..source.rental.income.gen
erated.by.the.Manhattan.real.estate.
c. The.United.States.does.not.have.jurisdiction.to.tax.Mrs..May.
d. The.United.States.has.jurisdiction.to.tax.Mrs..May.because.she.is.a.U.S..citizen.
, 3. a.. . The.United.States.has.jurisdiction.to.tax.Mr..Tompkin.because.he.is.a.U.S.citizen.
b. The.United.States.has.jurisdiction.to.tax.Mr..Tompkin.only.on.the.U.S..source.rental.income.gen
erated.by.the.Buffalo.real.estate.
c. The.United.States.has.jurisdiction.to.tax.Mr..Tompkin.because.he.is.a.permanent.resident.
d. The.United.States.has.jurisdiction.to.tax.Mr..Tompkin.on.his.share.of.the.U.S..source.busi
ness.income.generated.by.Sophic.Partnership.
4. State.A:
Volume.of.sales.before.rate.increase $800,000,000
Original.tax.rate .05
Revenue.before.rate.increase $40,000,000
Volume.of.sales.after.rate.increase $710,000,000
New.tax.rate .06
Revenue.after.rate.increase $42,600,000
Additional.revenue.($42,600,000.−.$40,000,000) $2,600,000
State.Z:
Volume.of.sales.added.to.tax.base $50,000,000
Tax.rate .05
Additional.revenue $2,500,000
5. a.. . The.property.tax.is.$8,300.($415,000..2%).
b. The.property.tax.is.$19,000.([$500,000..2%].+.[$225,000..4%]).
6. a.. . The.property.tax.is.$39,000.($1.3.million..3%).
b. The.property.tax.is.$85,000.([$2.million..3%].+.[$2.5.million..1%]).
7. Increase.in.County.G‘s.aggregate.assessed.property.tax.value
$23,000,000.
Assessed.value.of.Lexon‘s.new.facility (20,000,000)
Net.increase.in.County.G‘s.tax.base
$3,000,000.
Tax.rate . .04
Net.effect.on.County.G‘s.current.year.revenue $120,000
8. a.. Value.of.property.purchased.in.State.K
$600,000
Use.tax.rate.in.State.H
. . .06
Pre.credit.use.tax $36,000
Sales.tax.paid.to.State.K (18,000)
Use.tax.owed.to.State.H $18,000
b. Value.of.property.purchased.in.State.L
$750,000
Use.tax.rate.in.State.H
. . .06
Pre.credit.use.tax $45,000
Sales.tax.paid.to.State.L (48,750)
Use.tax.owed.to.State.H -0-
. .
Principles of Taxation for Business and Investment Planning 2024
. . . . . . . .
Edition 27th Edition by Sally M. Jones
. . . . . .
FULL TEST BANK!!! . .
,Chapter.1.Taxes.and.Taxing.Jurisdictions
Questions.and.Problems.for.Discussion
1. Tax.payments.differ.from.government.fines.and.penalties.because.they.aren‘t.intended.to.deter.or.p
unish.unacceptable.behavior..Tax.payments.differ.from.fees.or.user.charges.because.they.don‘t.e
ntitle.the.payer.to.a.specific.government.good.or.service,.such.as.a.postage.stamp.or.a.driver‘s.lice
nse..Tax.payments.also.differ.from.fees.or.user.charges.because.they.are.compulsory.
2. This.payment.has.characteristics.of.a.tax,.a.penalty,.and.a.user.fee..The.compulsory.payment.is.not.s
pecifically.punitive.but.does.apply.selectively.to.those.companies.most.likely.responsible.for.the.pollu
ted.condition.of.Green.River..However,.these.same.companies.may.be.the.entities.that.benefit.most.
from.the.environmental.clean-up.
3. This.payment.more.closely.resembles.a.fee.for.a.government.service.than.a.transaction-
based.tax.because.the.transaction.occurs.between.a.private.party.and.the.jurisdiction.itself,.rather.th
an.between.private.parties.engaging.in.a.market.transaction..The.payment.also.entitles.the.payer.to.a
.specific.benefit.(the.right.to. marry.under.law).
4. To.the.extent.that.the.decline.in.exterior.maintenance.reduces.the.value.of.Mr..Powell‘s.apartment.co
mplex,.he.bears.the.incidence.of.the.increased.property.tax..To.the.extent.that.the.decline.reduces.th
e.value.of.adjoining.properties.or.makes.the.neighborhood.less.attractive,.the.owners.of.the.adjoinin
g.properties.and.the.neighborhood.residents.share.the.incidence.of.the.tax.increase.
5. People.who.don‘t.directly.use.public.schools.(such.as.Mr..and.Mrs..Ahern.or.people.who.don‘t.have.c
hildren).indirectly.benefit.from.a.public.education.system.for.the.general.population..Arguably,.public
.education.contributes.to.a.skilled.workforce.and.improves.the.cultural.and.social.environment.in.whic
h.Mr..and.Mrs..Ahern.live..Based.on.this.argument,.Mr..and.Mrs..Ahern.should.not.be.exempt.from.th
e.local.property.tax.
6. The.consumers.who.pay.the.same.price.for.a.smaller.bar.of.soap.of.lesser.quality.bear.the.incid
ence.of.the.new.gross.receipts.tax.
7. Real.property.can‘t.be.hidden.or.moved,.and.its.ownership.(legal.title).is.a.matter.of.public.reco
rd..In.contrast,.personal.property.is.mobile.and.may.be.easily.concealed..Moreover,.jurisdicti
ons.may.not.have.an.effective.means.to.discover.or.trace.ownership.of.personal.property.
8. Arguably,.private.golf.courses.beautify.the.locality.and.are.environmentally.more.desirable.than.oth
er.commercial.activities..They.also.may.require.more.acreage.than.other.businesses.and,.therefor
e,.would.be.at.a.competitive.disadvantage.without.a.preferential.real.property.tax.rate.
9. Many.jurisdictions.that.levy.property.taxes.provide.an.exemption.for.public.institutions,.such.as.stat
e.universities.or.private.colleges..If.University.K.is.entitled.to.such.an.exemption,.every.commercia
l.building.or.residence.acquired.by.the.University.reduces.the.local.jurisdiction‘s.property.tax.base.
10. Excise.taxes.are.imposed.on.a.much.narrower.range.of.consumer.goods.and.services.than.sale
s.taxes..Consequently,.people.can.more.readily.avoid.purchasing.the.specific.good.or.service.
subject.to.excise.tax.
,11. The.tax.increase.may.have.reduced.the.aggregate.demand.for.consumer.goods.and,.consequently,
.municipal.residents.are.buying.fewer.goods..A.second.possibility.is.that.municipal.residents.are.trav
eling.to.other.jurisdictions.with.lower.tax.rates.or.making.more.purchases.through.mail.order.catalog
s.or.on-line.
12. From.a.political.perspective,.liquor.and.cigarettes.sales.make.an.excellent.tax.base.because.consu
mption.of.the.two.products.is.purely.discretionary,.and.any.decline.in.consumption.because.of.the.ta
x.is.socially.desirable..From.an.economic.perspective,.these.sales.are.a.good.tax.base.because.the.
demand.for.liquor.and.cigarettes.is.relatively.price.inelastic..In.other.words,.people.who.drink.and.sm
oke.on.a.regular.basis.buy.these.products.regardless.of.a.heavy.excise.tax.
13. The.federal.income. tax.has.the.broader.base..The.federal.payroll.tax.is.imposed.on.wages,.salar
ies,.and.other.forms.of.compensation.earned.by.employees..The.federal.income.tax.is.imposed.
on.all.types.of.compensation.as.well.as.net.business.profit,.investment.income,.and.any.other.inc
ome.item.from.whatever.source.derived.
14. A.property.tax.is.a.periodic.(usually.annual).tax.levied.on.the.ownership.of.property.and.based.on.the
.value.of.the.property.on.a.particular.assessment.date..A.transfer.tax.is.a.transaction-
.based.tax.levied.on.the.transfer.of.property.from.one.party .to.another..A.transfer.tax.is.based.on.the.v
alue.of.the.property.at.date.of.transfer.
15. If.the.federal.government.could.―piggy.back‖.a.national.sales.tax.on.existing.state.sales.tax.collecti
on.systems,.the.federal.government.could.avoid.creating.a.new.federal.agency.for.collecting.the.ta
x..In.contrast,.the.federal.government.would.have.to.create.a.new.collection.system.for.a.national.V
AT..However,.a.national.VAT.would.be.less.likely.to.cause.jurisdictional.conflict.between.the.federa
l.government.and.the.states.because.states.don‘t.depend.on.VATs.as.a.source.of.revenue.
16. The.Internal.Revenue.Code.is.federal.statutory.law,.enacted.by.Congress.and.signed.by.the.Presid
ent..Technically,.Treasury.regulations.only.interpret.and.explain.the.statute.and.aren‘t.laws.in.their.o
wn.right..Thus,.regulations.are.less.authoritative.than.the.Code.itself..However,.because.Congress.
authorized.the.Treasury.to.write.regulations,.they.are.the.government‘s.official.interpretation.of.stat
utory.law..Practically,.the.regulations.carry.considerable.authoritative.weight.
Application.Problems
1. a.. The.statement.of.facts.identifies.three.taxpayers:.Mr..Josh.Kenney,.JK.Services,.and.JK.Rea
lty.
b. The.government.of.the.locality.in.which.Mr..Kenney.resides,.the.state.government.of.Vermont,.
and.the.U.S..government.have.jurisdiction.to.tax.Mr..Kenney..The.local.governments.of.the.fou
r.counties.in.which.JK.Services.conducts.business,.the.state.government.of.Vermont,.and.the.
U.S..government.have.jurisdiction.to.tax.JK.Services..The.city.of.Boston,.the.state.government.
of.Massachusetts,.and.the.U.S..government.have.jurisdiction.to.tax.JK.Realty.
2. a.. . The.United.States.has.jurisdiction.to.tax.Mrs..May.because.she.is.a.permanent.resident.
b. The.United.States.has.jurisdiction.to.tax.Mrs..May.only.on.the.U.S..source.rental.income.gen
erated.by.the.Manhattan.real.estate.
c. The.United.States.does.not.have.jurisdiction.to.tax.Mrs..May.
d. The.United.States.has.jurisdiction.to.tax.Mrs..May.because.she.is.a.U.S..citizen.
, 3. a.. . The.United.States.has.jurisdiction.to.tax.Mr..Tompkin.because.he.is.a.U.S.citizen.
b. The.United.States.has.jurisdiction.to.tax.Mr..Tompkin.only.on.the.U.S..source.rental.income.gen
erated.by.the.Buffalo.real.estate.
c. The.United.States.has.jurisdiction.to.tax.Mr..Tompkin.because.he.is.a.permanent.resident.
d. The.United.States.has.jurisdiction.to.tax.Mr..Tompkin.on.his.share.of.the.U.S..source.busi
ness.income.generated.by.Sophic.Partnership.
4. State.A:
Volume.of.sales.before.rate.increase $800,000,000
Original.tax.rate .05
Revenue.before.rate.increase $40,000,000
Volume.of.sales.after.rate.increase $710,000,000
New.tax.rate .06
Revenue.after.rate.increase $42,600,000
Additional.revenue.($42,600,000.−.$40,000,000) $2,600,000
State.Z:
Volume.of.sales.added.to.tax.base $50,000,000
Tax.rate .05
Additional.revenue $2,500,000
5. a.. . The.property.tax.is.$8,300.($415,000..2%).
b. The.property.tax.is.$19,000.([$500,000..2%].+.[$225,000..4%]).
6. a.. . The.property.tax.is.$39,000.($1.3.million..3%).
b. The.property.tax.is.$85,000.([$2.million..3%].+.[$2.5.million..1%]).
7. Increase.in.County.G‘s.aggregate.assessed.property.tax.value
$23,000,000.
Assessed.value.of.Lexon‘s.new.facility (20,000,000)
Net.increase.in.County.G‘s.tax.base
$3,000,000.
Tax.rate . .04
Net.effect.on.County.G‘s.current.year.revenue $120,000
8. a.. Value.of.property.purchased.in.State.K
$600,000
Use.tax.rate.in.State.H
. . .06
Pre.credit.use.tax $36,000
Sales.tax.paid.to.State.K (18,000)
Use.tax.owed.to.State.H $18,000
b. Value.of.property.purchased.in.State.L
$750,000
Use.tax.rate.in.State.H
. . .06
Pre.credit.use.tax $45,000
Sales.tax.paid.to.State.L (48,750)
Use.tax.owed.to.State.H -0-
