Solution Manual for Principles of Taxation for Business and Investment Planning 27th Edition by Jones and Kubick, All Chapters 1-18 Complete Newest Edition

SOLUTION MANUAL FOR
k k

PrincipleskofkTaxationkforkBusinesskandkInvestmentkPlanningk2020k23rdkEditionk
bykSallykJones,kShelleykRhoadeskCatanach

Chapterk1kTaxeskandkTaxingkJurisdictions

QuestionskandkProblemskforkDiscussion

1. Taxkpaymentskdifferkfromkgovernmentkfineskandkpenaltieskbecausektheykaren‘tkintendedktokdeterk
orkpunishkunacceptablekbehavior.kTaxkpaymentskdifferkfromkfeeskorkuserkchargeskbecausektheyk
don‘tkentitlekthekpayerktokakspecifickgovernmentkgoodkorkservice,ksuchkaskakpostagekstampkorkakd
river‘sklicense.kTaxkpaymentskalsokdifferkfromkfeeskorkuserkchargeskbecausektheykarekcompulsor
y.

2. Thiskpaymentkhaskcharacteristicskofkaktax,kakpenalty,kandkakuserkfee.kThekcompulsorykpaymentkisk
notkspecificallykpunitivekbutkdoeskapplykselectivelyktokthosekcompanieskmostklikelykresponsiblekfork
thekpollutedkconditionkofkGreenkRiver.kHowever,ktheseksamekcompanieskmaykbekthekentitieskthatkb
enefitkmostkfromkthekenvironmentalkclean-up.

3. Thiskpaymentkmorekcloselykresembleskakfeekforkakgovernmentkservicekthankaktransaction-
basedktaxkbecausekthektransactionkoccurskbetweenkakprivatekpartykandkthekjurisdictionkitself,krathe
rkthankbetweenkprivatekpartieskengagingkinkakmarketktransaction.kThekpaymentkalsokentitleskthekpa
yerktokakspecifickbenefitk(thekrightktokmarrykunderklaw).

4. TokthekextentkthatkthekdeclinekinkexteriorkmaintenancekreduceskthekvaluekofkMr.kPowell‘skapartmen
tkcomplex,khekbearskthekincidencekofkthekincreasedkpropertyktax.kTokthekextentkthatkthekdeclinekred
uceskthekvaluekofkadjoiningkpropertieskorkmakeskthekneighborhoodklesskattractive,kthekownerskofkth
ekadjoiningkpropertieskandkthekneighborhoodkresidentsksharekthekincidencekofkthektaxkincrease.

5. Peoplekwhokdon‘tkdirectlykusekpublickschoolsk(suchkaskMr.kandkMrs.kAhernkorkpeoplekwhokdon‘tkha
vekchildren)kindirectlykbenefitkfromkakpublickeducationksystemkforkthekgeneralkpopulation.kArguably
,kpublickeducationkcontributesktokakskilledkworkforcekandkimproveskthekculturalkandksocialkenvironm
entkinkwhichkMr.kandkMrs.kAhernklive.kBasedkonkthiskargument,kMr.kandkMrs.kAhernkshouldknotkbeke
xemptkfromktheklocalkpropertyktax.

6. Thekconsumerskwhokpayktheksamekpricekforkaksmallerkbarkofksoapkofklesserkqualitykbearktheki
ncidencekofktheknewkgrosskreceiptsktax.

7. Realkpropertykcan‘tkbekhiddenkorkmoved,kandkitskownershipk(legalktitle)kiskakmatterkofkpublick
record.kInkcontrast,kpersonalkpropertykiskmobilekandkmaykbekeasilykconcealed.kMoreover,kju
risdictionskmayknotkhavekankeffectivekmeansktokdiscoverkorktracekownershipkofkpersonalkpro
perty.

8. Arguably,kprivatekgolfkcourseskbeautifyktheklocalitykandkarekenvironmentallykmorekdesirablekthank
otherkcommercialkactivities.kTheykalsokmaykrequirekmorekacreagekthankotherkbusinesseskand,kth
erefore,kwouldkbekatkakcompetitivekdisadvantagekwithoutkakpreferentialkrealkpropertyktaxkrate.

9. Manykjurisdictionskthatklevykpropertyktaxeskprovidekankexemptionkforkpublickinstitutions,ksuchkask
statekuniversitieskorkprivatekcolleges.kIfkUniversitykKkiskentitledktoksuchkankexemption,keverykcom
mercialkbuildingkorkresidencekacquiredkbykthekUniversitykreducesktheklocalkjurisdiction‘skpropert
yktaxkbase.




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,10. Excisektaxeskarekimposedkonkakmuchknarrowerkrangekofkconsumerkgoodskandkserviceskthank
salesktaxes.kConsequently,kpeoplekcankmorekreadilykavoidkpurchasingkthekspecifickgoodkorks
erviceksubjectktokexcisektax.
11. Thektaxkincreasekmaykhavekreducedkthekaggregatekdemandkforkconsumerkgoodskand,kconsequen
tly,kmunicipalkresidentskarekbuyingkfewerkgoods.kAksecondkpossibilitykiskthatkmunicipalkresidentska
rektravelingktokotherkjurisdictionskwithklowerktaxkrateskorkmakingkmorekpurchaseskthroughkmailkord
erkcatalogskorkon-line.

12. Fromkakpoliticalkperspective,kliquorkandkcigarettesksaleskmakekankexcellentktaxkbasekbecausekcon
sumptionkofkthektwokproductskiskpurelykdiscretionary,kandkanykdeclinekinkconsumptionk becausekofk
thektaxkisksociallykdesirable.kFromkankeconomickperspective,ktheseksaleskarekakgoodktaxk basekbec
ausekthekdemandkforkliquork andkcigaretteskiskrelativelyk pricekinelastic.kInkotherk words,kpeoplekwho
kdrinkkandksmokekonkakregularkbasiskbuykthesekproductskregardlesskofkakheavykexcisektax.



13. Thekfederalkincomekhaskthekbroaderkbase.kThekfederalkpayrollktaxkiskimposedkonkwages,ksalaries,k
andkotherkformskofkcompensationkearnedkbykemployees.kThekfederalkincomektaxkiskimposedkonk al
lktypeskofkcompensationkaskwellkasknetkbusinesskprofit,kinvestmentkincome,kandkanykotherkincomek
itemkfromkwhateverksourcekderived.

14. Akpropertyktaxkiskakperiodick(usuallykannual)ktaxkleviedkonkthekownershipkofkpropertykandkbasedko
nkthekvaluekofkthekpropertykonkakparticularkassessmentkdate.kAktransferktaxkiskaktransaction-
kbasedktaxkleviedkonkthektransferkofkpropertykfromkonekpartyktokanother.kAktransferktaxkiskbasedkonk

thekvaluekofkthekpropertykatkdatekofktransfer.

15. Ifkthekfederalkgovernmentkcouldk―piggykback‖kaknationalksalesktaxkonkexistingkstateksalesktaxkcoll
ectionksystems,kthekfederalkgovernmentkcouldkavoidkcreatingkaknewkfederalkagencykforkcollectin
gkthektax.kInkcontrast,kthekfederalkgovernmentkwouldkhavektokcreatekaknewkcollectionksystemkfork
aknationalkVAT.kHowever,kaknationalkVATkwouldkbeklessklikelyktokcausekjurisdictionalkconflictkbet
weenkthekfederalkgovernmentkandkthekstateskbecausekstateskdon‘tkdependkonkVATskaskaksource
kofkrevenue.



16. ThekInternalkRevenuekCodekiskfederalkstatutoryklaw,kenactedkbykCongresskandksignedkbykthekPre
sident.kTechnically,kTreasurykregulationskonlykinterpretkandkexplainkthekstatutekandkaren‘tklawskink
theirkownkright.kThus,kregulationskareklesskauthoritativekthankthekCodekitself.kHowever,kbecausek
CongresskauthorizedkthekTreasuryktokwritekregulations,ktheykarekthekgovernment‘skofficialkinterpre
tationkofkstatutoryklaw.kPractically,kthekregulationskcarrykconsiderablekauthoritativekweight.


ApplicationkProblems

1. a.k Thekstatementkofkfactskidentifieskthreektaxpayers:kMr.kJoshkKenney,kJKkServices,kandkJKk
Realty.

b. ThekgovernmentkofktheklocalitykinkwhichkMr.kKenneykresides,kthekstatekgovernmentkofkVermo
nt,kandkthekU.S.kgovernmentkhavekjurisdictionktoktaxkMr.kKenney.kTheklocalkgovernmentskofkt
hekfourkcountieskinkwhichkJKkServiceskconductskbusiness,kthekstatekgovernmentkofkVermont,
kandkthekU.S.kgovernmentkhavekjurisdictionktoktaxkJKkServices.kThekcitykofkBoston,kthekstatek

governmentkofkMassachusetts,kandkthekU.S.kgovernmentkhavekjurisdictionktoktaxkJKkRealty.

2. a.k k ThekUnitedkStateskhaskjurisdictionktoktaxkMrs.kMaykbecausekshekiskakpermanentkresident.

b. ThekUnitedkStateskhaskjurisdictionktoktaxkMrs.kMaykonlykonkthekU.S.ksourcekrentalkincomek
generatedkbykthekManhattankrealkestate.




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, c. ThekUnitedkStateskdoesknotkhavekjurisdictionktoktaxkMrs.kMay.

d. ThekUnitedkStateskhaskjurisdictionktoktaxkMrs.kMaykbecausekshekiskakU.S.kcitizen.
3. a.k k ThekUnitedkStateskhaskjurisdictionktoktaxkMr.kTompkinkbecausekhekiskakU.Skcitizen.

b. ThekUnitedkStateskhaskjurisdictionktoktaxkMr.kTompkinkonlykonkthekU.S.ksourcekrentalkincomek
generatedkbykthekBuffalokrealkestate.

c. ThekUnitedkStateskhaskjurisdictionktoktaxkMr.kTompkinkbecausekhekiskakpermanentkresident.

d. ThekUnitedkStateskhaskjurisdictionktoktaxkMr.kTompkinkonkhisksharekofkthekU.S.ksourcek
businesskincomekgeneratedkbykSophickPartnership.

4. StatekA:
Volumekofksaleskbeforekratekincrease $800,000,000
Originalktaxkrate .05
Revenuekbeforekratekincrease $40,000,000

Volumekofksaleskafterkratekincrease $710,000,000
Newktaxk rate .06
Revenuekafterkratekincrease $42,600,000

Additionalkrevenuek($42,600,000k−k$40,000,000) $2,600,000

StatekZ:
Volumekofksaleskaddedktoktaxkbase $50,000,000
Taxkrate .05
Additionalkrevenue $2,500,000

5. a.k k Thekpropertyktaxkisk$8,300k($415,000kk2%).

b. Thekpropertyktaxkisk$19,000k([$500,000kk2%]k+k[$225,000kk4%]).

6. a.k k Thekpropertyktaxkisk$39,000k($1.3kmillionkk3%).

b. Thekpropertyktaxkisk$85,000k([$2kmillionkk3%]k+k[$2.5kmillionkk1%]).

7. IncreasekinkCountykG‘skaggregatekassessedkpropertyktaxkvalue
$23,000,000k
AssessedkvaluekofkLexon‘sknewkfacility (20,000,000)
NetkincreasekinkCountykG‘sktaxkbase
$3,000,000
Taxkrate
k k .04

NetkeffectkonkCountykG‘skcurrentkyearkrevenue $120,000

8. a.k ValuekofkpropertykpurchasedkinkStatekK
$600,000
UsektaxkratekinkStatekH
k k .06

Prekcreditkusektax $36,000
Salesktaxk paidktokStatekK (18,000)
UsektaxkowedktokStatekH $18,000

b. ValuekofkpropertykpurchasedkinkStatekL
$750,000
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, UsektaxkratekinkStatekH
k k .06

Prekcreditkusektax $45,000
Salesktaxk paidktokStatekL (48,750)
UsektaxkowedktokStatekH -0-




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