Solution Manual for McGraw-Hill's Taxation of Individuals 2024 Edition, 15th Edition By Brian Spilker, Benjamin Ayers, All Chapters 1

Solutions Manual—
12


Taxation of Individuals, by Spilker et al.

SOLUTION MANUAL FOR 12 12



McGraw-
Hill's Taxation of Individuals 2024 Edition, 15th Editi
12 12 12 12 12 12 12



on Spilker
12



Chapter 1-14 12




©12McGraw12Hill12LLC.12All12rights12reserved.12No12reproduction12or12distribution12without12the12prior12written12consent12of12McGraw12Hill12LL
C.
1

, Solutions Manual— 12


Taxation of Individuals, by Spilker et al.
Chapter 1 12



An Introduction to Tax
12 12 12




Discussion Questions 12




(1) [LO 1] Jessica’s friend Zachary once stated that he couldn’t understand w
12 12 12 12 12 12 12 12 12 12 12


hy someone would take a tax course. Why is this a rather naïve view?
12 12 12 12 12 12 12 12 12 12 12 12 12




Taxes are a part of everyday life and have a financial effect on many of the ma
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12


jor personal decisions that individuals face (e.g., investment decisions, evaluati
12 12 12 12 12 12 12 12 12


ng alternative job offers, saving for education expenses, gift or estate planning,
12 12 12 12 12 12 12 12 12 12 12 12


etc.).

(2) [LO 1] What are some aspects of business that require knowledge of taxatio
12 12 12 12 12 12 12 12 12 12 12 12


n? What are some aspects of personal finance that require knowledge of taxa
12 12 12 12 12 12 12 12 12 12 12 12


tion?

Taxes play an important role in fundamental business decisions such as the follo
12 12 12 12 12 12 12 12 12 12 12 12


wing:
 What organizational form should a business use?
12 12 12 12 12 12


 Where should the business locate? 12 12 12 12


 How should business acquisitions be structured?
12 12 12 12 12


 How should the business compensate employees?
12 12 12 12 12


 What is the appropriate mix of debt and equity for the business?
12 12 12 12 12 12 12 12 12 12 12


 Should the business rent or own its equipment and property?
12 12 12 12 12 12 12 12 12


 How should the business distribute profits to its owners?
12 12 12 12 12 12 12 12


One must consider all transaction costs (including taxes) to evaluate the merits
12 12 12 12 12 12 12 12 12 12 12 12


of a transaction.
12 12




Common personal financial decisions that taxes influence include: choosing inv
12 12 12 12 12 12 12 12 12


estments, retirement planning, choosing to rent or buy a home, evaluating altern
12 12 12 12 12 12 12 12 12 12 12


ative job offers, saving for education expenses, and doing gift or estate planning
12 12 12 12 12 12 12 12 12 12 12 12


.


(3) [LO 1] Describe some ways in which taxes affect the political process in t
12 12 12 12 12 12 12 12 12 12 12 12 12


he United States.
12 12




U.S. presidential candidates often distinguish themselves from their opponents
12 12 12 12 12 12 12 12




©12McGraw12Hill12LLC.12All12rights12reserved.12No12reproduction12or12distribution12without12the12prior12written12consent12of12McGraw12Hill12LL
C.
2

, Solutions Manual— 12


Taxation of Individuals, by Spilker et al.
based upon their tax rhetoric. Likewise, the major political parties generally hav
12 12 12 12 12 12 12 12 12 12 12


e very diverse views of the appropriate way to tax the public. Determining who
12 12 12 12 12 12 12 12 12 12 12 12 12 1


2is taxed, what is taxed, and how much is taxed are difficult questions. Voters
12 12 12 12 12 12 12 12 12 12 12 12 12 12


must have a basic understanding of taxes to evaluate the merits of alternative t
12 12 12 12 12 12 12 12 12 12 12 12 12


ax proposals offered by opposing political candidates and their political parties
12 12 12 12 12 12 12 12 12 12


.

(4) [LO 2] Courtney recently received a speeding ticket on her way to the universit
12 12 12 12 12 12 12 12 12 12 12 12 12


y. Her fine was $200. Is this considered a tax? Why or why not?
12 12 12 12 12 12 12 12 12 12 12 12 12




The $200 speeding ticket is not considered a tax. Instead, it is considered a fi
12 12 12 12 12 12 12 12 12 12 12 12 12 12


ne or penalty. Taxes differ from fines and penalties because taxes are not inte
12 12 12 12 12 12 12 12 12 12 12 12 12


nded to punish or prevent illegal behavior.
12 12 12 12 12 12




(5) [LO 2] Marlon and Latoya recently started building a house. They had to pay
12 12 12 12 12 12 12 12 12 12 12 12 12


$300 to the county government for a building permit. Is the $300 payment a ta
12 12 12 12 12 12 12 12 12 12 12 12 12 12


x? Why or why not?
12 12 12 12




The building permit is not considered a tax because $300 payment is directly lin
12 12 12 12 12 12 12 12 12 12 12 12 12


ked to a benefit that they received (i.e., the ability to build a house).
12 12 12 12 12 12 12 12 12 12 12 12 12




(6) [LO 2] To help pay for the city’s new stadium, the city of Birmingham recen
12 12 12 12 12 12 12 12 12 12 12 12 12 12


tly enacted a 1 percent surcharge on hotel rooms. Is this a tax? Why or why
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12


not?

The 1 percent surcharge is a tax. The 1 percent surcharge is an earmarked tax
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12


–
i.e., collected for a specific purpose. The surcharge is considered a tax becaus
12 12 12 12 12 12 12 12 12 12 12 12 12


e the tax payments made by taxpayers do not directly relate to the specific ben
12 12 12 12 12 12 12 12 12 12 12 12 12 12


efit received by the taxpayers.
12 12 12 12




(7) [LO 2] As noted in Example 1-
12 12 12 12 12 12


2, tolls, parking meter fees, and annual licensing fees are not considered taxe
12 12 12 12 12 12 12 12 12 12 12 12


s. Can you identify other fees that are similar?
12 12 12 12 12 12 12 12




There are several possible answers to this question. Some common examples i
12 12 12 12 12 12 12 12 12 12 12


nclude entrance fees to national parks, tag fees paid to local/state government
12 12 12 12 12 12 12 12 12 12 12 12


for automobiles, boats, etc.
12 12 12




(8) [LO 2] If the general objective of our tax system is to raise revenue, why does t
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12


he income tax allow deductions for charitable contributions and retirement plan
12 12 12 12 12 12 12 12 12 12


contributions?
12




In addition to the general objective of raising revenue, Congress uses the federa
12 12 12 12 12 12 12 12 12 12 12 12


l tax system to encourage certain behavior and discourage other behavior. The
12 12 12 12 12 12 12 12 12 12 12 12


charitable contribution deduction is intended to encourage taxpayers to support
12 12 12 12 12 12 12 12 12


©12McGraw12Hill12LLC.12All12rights12reserved.12No12reproduction12or12distribution12without12the12prior12written12consent12of12McGraw12Hill12LL
C.
3

, Solutions Manual— 12


Taxation of Individuals, by Spilker et al.
the initiatives of charitable organizations, whereas deductions for retirement c
12 12 12 12 12 12 12 12 12 12


ontributions are intended to encourage retirement savings. Another objective of
12 12 12 12 12 12 12 12 12 12


the tax system is to redistribute wealth.
12 12 12 12 12 12




©12McGraw12Hill12LLC.12All12rights12reserved.12No12reproduction12or12distribution12without12the12prior12written12consent12of12McGraw12Hill12LL
C.
4