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Exam 1: Introduction to Taxation

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Question 21

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Morgan inherits her father's personal residence including all of the furnishings.She plans to add a swimming pool and sauna to the property and rent it as a furnished house.What are some of the ad valorem property tax problems Morgan can anticipate?

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The real estate taxes probably will incr...

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Question 22

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The Federal excise tax on cigarettes is an example of a proportional tax.

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Question 23

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A taxpayer is considering the formation of a business that would derive some amounts of tax-exempt interest,qualified dividends,and capital gains.Explain how these income categories would be reported and taxed under the various types of entity forms discussed in the chapter.Consider the tax implications both to the entities and to their owners.

Under the usual state inheritance tax,two heirs,a cousin and a son of the deceased,would not be taxed at the same rate.

Elk,a C corporation,has $370,000 operating income and $290,000 operating expenses during the year.In addition,Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

State and local governments are sometimes forced to find ways to generate additional revenue.Comment on the pros and cons of the following procedures: a. Decouple what would be part of the piggyback format of the state income tax b. Tax amnesty provisions. c. Internet shaming

Which,if any,of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?

Adrian is the president and sole shareholder of Pigeon Corporation.He also lends money and rents a building to the corporation.Discuss how these business relationships between Adrian and Pigeon Corporation can help avoid double taxation.What limitations are there on the use of such relationships?

Which,if any,of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

During the current year,Skylark Company had operating income of $420,000 and operating expenses of $250,000.In addition,Skylark had a long-term capital loss of $20,000,and a charitable contribution of $5,000.How does Toby,the sole owner of Skylark Company,report this information on his individual income tax return under following assumptions?

An inheritance tax is a tax on a decedent's right to pass property at death.

Amber Company has $100,000 in net income in 2013 before deducting any compensation or other payment to its sole owner,Alfredo.Assume that Alfredo is in the 33% marginal tax bracket.Discuss the tax aspects of each of the following independent arrangements.(Assume that any salaries are reasonable in amount and ignore any employment tax considerations.)

The tax law provides various tax credits,deductions,and exclusions that are designed to encourage taxpayers to obtain additional education.These provisions can be justified on both economic and equity grounds.

The annual exclusion,currently $14,000,is available for gift and estate tax purposes.

Rajib is the sole shareholder of Robin Corporation,a calendar year S corporation.Robin earned net profit of $350,000 ($520,000 gross income - $170,000 operating expenses)and distributed $80,000 to Rajib.Rajib must report Robin Corporation profit of $350,000 on his Federal income tax return.

Unlike FICA,FUTA requires that employers comply with state as well as Federal rules.

In terms of revenue neutrality,comment on a tax cut enacted by Congress that: a. contains revenue offsets. b. includes a sunset provision

Double taxation of corporate income results because dividend distributions are included in a shareholder's gross income but are not deductible by the corporation.

The tax law allows,under certain conditions,deferral of gain recognition for involuntary conversions. a. What is the justification for this relief measure? b. What happens if the proceeds are not entirely reinvested?

States impose either a state income tax or a general sales tax,but not both types of taxes.