Solution Manual for Principles of Taxation for Business and Investment Planning 2024, 27th Edition by Sally M. Jones

SOLUTION MANUAL FOR
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Principles of Taxation for Business and Investment Planning 2024
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Edition 27th Edition by Sally M. Jones
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FULL TEST BANK!!! g g

,Chapterg1gTaxesgandgTaxinggJurisdictions

QuestionsgandgProblemsgforgDiscussion

1. Taxgpaymentsgdiffergfromggovernmentgfinesgandgpenaltiesgbecausegtheygaren‘tgintendedgtogdeter
gorgpunishgunacceptablegbehavior.gTaxgpaymentsgdiffergfromgfeesgorgusergchargesgbecausegthe

ygdon‘tgentitlegthegpayergtogagspecificggovernmentggoodgorgservice,gsuchgasgagpostagegstampgorg
agdriver‘sglicense.gTaxgpaymentsgalsogdiffergfromgfeesgorgusergchargesgbecausegtheygaregcompu
lsory.

2. Thisgpaymentghasgcharacteristicsgofgagtax,gagpenalty,gandgagusergfee.gThegcompulsorygpaymentgis
gnotgspecificallygpunitivegbutgdoesgapplygselectivelygtogthosegcompaniesgmostglikelygresponsiblegfo

rgthegpollutedgconditiongofgGreengRiver.gHowever,gthesegsamegcompaniesgmaygbegthegentitiesgth
atgbenefitgmostgfromgthegenvironmentalgclean-up.

3. Thisgpaymentgmoregcloselygresemblesgagfeegforgaggovernmentgservicegthangagtransaction-
basedgtaxgbecausegthegtransactiongoccursgbetweengagprivategpartygandgthegjurisdictiongitself,grath
ergthangbetweengprivategpartiesgengaginggingagmarketgtransaction.gThegpaymentgalsogentitlesgtheg
payergtogagspecificgbenefitg(thegrightgtogmarrygunderglaw).

4. TogthegextentgthatgthegdeclinegingexteriorgmaintenancegreducesgthegvaluegofgMr.gPowell‘sgapartm
entgcomplex,ghegbearsgthegincidencegofgthegincreasedgpropertygtax.gTogthegextentgthatgthegdecline
greducesgthegvaluegofgadjoininggpropertiesgorgmakesgthegneighborhood glessgattractive,gthegowner

sgofgthegadjoininggpropertiesgandgthegneighborhoodgresidentsgsharegthegincidencegofgthegtaxgincre
ase.

5. Peoplegwhogdon‘tgdirectlygusegpublicgschoolsg(suchgasgMr.gandgMrs.gAherngorgpeoplegwhogdon‘tgh
avegchildren)gindirectlygbenefitgfromgagpublicgeducationgsystemgforgtheggeneralgpopulation.gArgua
bly,gpublicgeducationgcontributesgtogagskilledgworkforcegandgimprovesgthegculturalgandgsocialgenvir
onmentgingwhichgMr.gandgMrs.gAhernglive.gBasedgongthisgargument,gMr.gandgMrs.gAherngshouldgn
otgbegexemptgfromgtheglocalgpropertygtax.

6. Thegconsumersgwhogpaygthegsamegpricegforgagsmallergbargofgsoapgofglessergqualitygbeargthe
gincidencegofgthegnewggrossgreceiptsgtax.



7. Realgpropertygcan‘tgbeghiddengorgmoved,gandgitsgownershipg(legalgtitle)gisgagmattergofgpublic
grecord.gIngcontrast,gpersonal gpropertygisgmobilegandgmaygbegeasilygconcealed.gMoreover,

gjurisdictionsgmaygnotghavegangeffectivegmeansgtogdiscovergorgtracegownershipgofgpersonal

gproperty.



8. Arguably,gprivateggolfgcoursesgbeautifygtheglocalitygandgaregenvironmentallygmoregdesirablegthan
gothergcommercial gactivities.gTheygalsogmaygrequiregmoregacreagegthangothergbusinessesgand,g

therefore,gwouldgbegatgagcompetitivegdisadvantagegwithoutgagpreferentialgrealgpropertygtaxgrate.

9. Manygjurisdictionsgthatglevygpropertygtaxesgprovidegangexemptiongforgpublicginstitutions,gsuchgas
gstateguniversitiesgorgprivategcolleges.gIfgUniversitygKgisgentitledgtogsuchgangexemption,geverygco

mmercialgbuildinggorgresidencegacquiredgbygthegUniversitygreducesgtheglocalgjurisdiction‘sgprop
ertygtaxgbase.

10. Excisegtaxesgaregimposedgongagmuchgnarrowergrangegofgconsumerggoodsgandgservicesgthan
gsalesgtaxes.gConsequently,gpeoplegcangmoregreadilygavoidgpurchasinggthegspecificggoodgor

gservicegsubjectgtogexcisegtax.

,11. Thegtaxgincreasegmayghavegreducedgthegaggregategdemandgforgconsumerggoodsgand,gconseque
ntly,gmunicipalgresidentsgaregbuyinggfewerggoods.gAgsecondgpossibilitygisgthatgmunicipalgresidents
garegtravelinggtogothergjurisdictionsgwithglowergtaxgratesgorgmakinggmoregpurchasesgthroughgmail g

ordergcatalogsgorgon-line.

12. Fromgagpoliticalgperspective,gliquorgandgcigarettesgsalesgmakegangexcellentgtaxgbasegbecausegco
nsumptiongofgthegtwogproductsgisgpurelygdiscretionary,gandganygdeclinegingconsumptiongbecauseg
ofgthegtaxgisgsociallygdesirable.gFromgangeconomicgperspective,gthesegsalesgaregaggoodgtaxgbaseg
becausegthegdemandgforgliquorgandgcigarettesgisgrelativelygpriceginelastic.gIngothergwords,gpeopleg
whogdrinkgandgsmokegongagregulargbasisgbuygthesegproductsgregardlessgofgagheavygexcisegtax.

13. Thegfederalgincomeg taxghasgthegbroadergbase.gThegfederalgpayrollgtaxgisgimposedgongwages,
gsalaries,gandgothergformsgofgcompensationgearnedgbygemployees.gThegfederal gincomegtaxgis

gimposedgongallgtypesgofgcompensationgasgwellgasgnetgbusinessgprofit,ginvestmentgincome,gan

dganygothergincomegitemgfromgwhatevergsourcegderived.

14. Agpropertygtaxgisgagperiodicg(usuallygannual)gtaxgleviedgongthegownershipgofgpropertygandgbasedg
ongthegvaluegofgthegpropertygongagparticulargassessmentgdate.gAgtransfergtaxgisgagtransaction-
gbasedgtaxgleviedgongthegtransfergofgpropertygfromgonegpartygtoganother.gAgtransfergtaxgisgbasedgo

ngthegvaluegofgthegpropertygatgdategofgtransfer.

15. Ifgthegfederalggovernmentgcouldg―piggygback‖gagnationalgsalesgtaxgongexistinggstategsalesgtaxgc
ollectiongsystems,gthegfederalggovernmentgcouldgavoidgcreatinggagnewgfederalgagencygforgcolle
ctinggthegtax.gIngcontrast,gthegfederalggovernmentgwouldghavegtogcreategagnewgcollectiongsyste
mgforgagnationalgVAT.gHowever,gagnationalgVATgwouldgbeglessglikelygtogcausegjurisdictionalgconfl
ictgbetweengthegfederalggovernmentgandgthegstatesgbecausegstatesgdon‘tgdependgongVATsgasga
gsourcegofgrevenue.



16. ThegInternalgRevenuegCodegisgfederalgstatutoryglaw,genactedgbygCongressgandgsignedgbygthegPr
esident.gTechnically,gTreasurygregulationsgonlyginterpretgandgexplaingthegstatutegandgaren‘tglaws
gingtheirgowngright.gThus,gregulationsgareglessgauthoritativegthangthegCodegitself.gHowever,gbecau

segCongressgauthorizedgthegTreasurygtogwritegregulations,gtheygaregtheggovernment‘sgofficialgint
erpretationgofgstatutoryglaw.gPractically,gthegregulationsgcarrygconsiderablegauthoritativegweight.


ApplicationgProblems

1. a.g Thegstatementgofgfactsgidentifiesgthreegtaxpayers:gMr.gJoshgKenney,gJKgServices,gandgJK
gRealty.



b. TheggovernmentgofgtheglocalitygingwhichgMr.gKenneygresides,gthegstateggovernmentgofgVerm
ont,gandgthegU.S.ggovernmentghavegjurisdictiongtogtaxgMr.gKenney.gTheglocalggovernmentsg
ofgthegfourgcountiesgingwhichgJKgServicesgconductsgbusiness,gthegstateggovernmentgofgVer
mont,gandgthegU.S.ggovernmentghavegjurisdictiongtogtaxgJKgServices.gThegcitygofgBoston,gthe
gstateggovernmentgofgMassachusetts,gandgthegU.S.ggovernmentghavegjurisdictiongtogtaxgJKg

Realty.

2. a.g g ThegUnitedgStatesghasgjurisdictiongtogtaxgMrs.gMaygbecausegshegisgagpermanentgresident.

b. ThegUnitedgStatesghasgjurisdictiongtogtaxgMrs.gMaygonlygongthegU.S.gsourcegrentalgincome
ggeneratedgbygthegManhattangrealgestate.



c. ThegUnitedgStatesgdoesgnotghavegjurisdictiongtogtaxgMrs.gMay.

d. ThegUnitedgStatesghasgjurisdictiongtogtaxgMrs.gMaygbecausegshegisgagU.S.gcitizen.

, 3. a.g g ThegUnitedgStatesghasgjurisdictiongtogtaxgMr.gTompkingbecauseghegisgagU.Sgcitizen.

b. ThegUnitedgStatesghasgjurisdictiongtogtaxgMr.gTompkingonlygongthegU.S.gsourcegrentalgincome
ggeneratedgbygthegBuffalogrealgestate.



c. ThegUnitedgStatesghasgjurisdictiongtogtaxgMr.gTompkingbecauseghegisgagpermanentgresident.

d. ThegUnitedgStatesghasgjurisdictiongtogtaxgMr.gTompkingonghisgsharegofgthegU.S.gsource
gbusinessgincomeggeneratedgbygSophicgPartnership.




4. StategA:
Volumegofgsalesgbeforegrategincrease $800,000,000
Originalgtaxgrate .05
Revenuegbeforegrategincrease $40,000,000

Volumegofgsalesgaftergrategincrease $710,000,000
Newgtaxgrate .06
Revenuegaftergrategincrease $42,600,000

Additionalgrevenueg($42,600,000gg$40,000,000) $2,600,000

StategZ:
Volumegofgsalesgaddedgtogtaxgbase $50,000,000
Taxgrate .05
Additionalgrevenue $2,500,000


5. a.g g Thegpropertygtaxgisg$8,300g($415,000gg2%).

b. Thegpropertygtaxgisg$19,000g([$500,000gg2%]g+g[$225,000gg4%]).

6. a.g g Thegpropertygtaxgisg$39,000g($1.3gmilliongg3%).

b. Thegpropertygtaxgisg$85,000g([$2gmilliongg3%]g+g[$2.5gmilliongg1%]).

7. IncreasegingCountygG‘sgaggregategassessedgpropertygtaxgvalue
$23,000,000g
AssessedgvaluegofgLexon‘sgnewgfacility (20,000,000)
NetgincreasegingCountygG‘sgtaxgbase
$3,000,000
Taxgrate
g g .04

NetgeffectgongCountygG‘sgcurrentgyeargrevenue $120,000

8. a.g ValuegofgpropertygpurchasedgingStategK
$600,000
UsegtaxgrategingStategH
g g .06

Pregcreditgusegtax $36,000
SalesgtaxgpaidgtogStategK (18,000)
UsegtaxgowedgtogStategH $18,000

b. ValuegofgpropertygpurchasedgingStategL
$750,000
UsegtaxgrategingStategH
g g .06

Pregcreditgusegtax $45,000
SalesgtaxgpaidgtogStategL (48,750)
UsegtaxgowedgtogStategH -0-