SOLUTION MANUAL FOR k k
Fundamentals of Taxation for Individuals A Practical Approach, 2024 Edition Gregory A. Carnes,
k k k k k k k k k k k k
Suzanne Youngberg
k k
Chapter 1-18 k
Chapter 1—The Professional Practice of Taxation k k k k k
End-of-Chapter Solutions k k
Discussion Questions k
1.
k
Title: Discussion Question 1
k k k
Difficulty: Easy k
kLearning Objective 1: 1.1 k k k
Standard 1: AACSB || Knowledge
k k k k
Standard 2: AICPA || AC: Reporting
k k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.1
k k k k
Solution:
The goal of tax planning is to maximize after-tax income. After-tax income is net income after
k k k k k k k k k k k k k k k
reducing revenue for all expenses including federal income taxes. Tax planning should consider tax
k k k k k k k k k k k k k k
factors as well as non-tax factors.
k k k k k k
Time On Task: 2 minutes
k k k k
2.
Title: Discussion Question 2 Difficulty:
k k k k
Easy
k
Learning Objective 1: 1.2
k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting
k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.2
k k k k
Solution:
The formula to calculate an individual‘s taxable income is as follows:
k k k k k k k k k k
Gross income k
Less: Deductions for Adjusted Gross Income k k k k k
Adjusted Gross Income
k k k
Less: Greater of Standard Deduction or Itemized Deductions
k k k k k k k
Less: Qualified Business Income Deduction Taxable
k k k k k
incomek
Time On Task: 2 minutes
k k k k
3.
Title: Discussion Question 3 Difficulty:
k k k k
Easy
k
1-1
,Learning Objective 1: 1.2 k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.2
k k k k
Solution:
Form 1040 is used to file an individual‘s income tax return information. Form 1040SR can be used
k k k k k k k k k k k k k k k k
by those 65 and older.
k k k k k
Time On Task: 1 minute
k k k k
4.
Title: Discussion Question 4
k k k
Difficulty: Medium
k k
Learning Objective 1: 1.3
k k k k
Standard 1: AACSB || Knowledge k k k k
Standard 2: AICPA || AC: Reporting
k k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
A lower-income taxpayer needs every after-tax dollar earned to pay bills and does not have much
k k k k k k k k k k k k k k k
discretionary income. If the income tax rate increases, the lower-income taxpayer may have to
k k k k k k k k k k k k k k
work more hours at their current job or take on another job to have the same amount of after-tax
k k k k k k k k k k k k k k k k k k k
income. A wealthier taxpayer may view the increased tax rate adversely but has more flexibility
k k k k k k k k k k k k k k k
with their discretionary income. The wealthier taxpayer may view their leisure time as more
k k k k k k k k k k k k k k
important than working extra hours to earn the same after-tax pay.
k k k k k k k k k k k
Time On Task: 4 minutes
k k k k
5.
Title: Discussion Question 5 Difficulty:
k k k k
Easy
k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
Tax planning is the process of estimating an individual‘s tax liability for multiple scenarios
k k k k k k k k k k k k k
and/or multiple years and considering ways to reduce it. The appropriate goal for tax planning is to
k k k k k k k k k k k k k k k k k
maximize after-tax income. After-tax income is net income after reducing revenue for all
k k k k k k k k k k k k k
expenses including federal income taxes. Tax compliance is determining the tax effects for
k k k k k k k k k k k k k
transactions that have already occurred, including the preparation of tax returns.
k k k k k k k k k k k
Time On Task: 4 minutes
k k k k
6.
Title: Discussion Question 6
k k k
1-2
,Difficulty: Medium k
Learning Objective 1: 1.3
k k k k
Standard 1: AACSB || Knowledge k k k k
Standard 2: AICPA || AC: Reporting
k k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
An open transaction means that the proposed transaction is not yet completed. A closed
k k k k k k k k k k k k k
transaction means that the relevant events have already happened, and the facts are set. This
k k k k k k k k k k k k k k k
distinction is important because in an open transaction, the facts and results can be changed to
k k k k k k k k k k k k k k k k
achieve a better outcome. A closed transaction does not allow for this.
k k k k k k k k k k k k
Time On Task: 3 minutes k k k k
7.
Title: Discussion Question 7 Difficulty:
k k k k
Easy
k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
The marginal tax rate is the rate that applies to the next additional dollar earned. The average tax
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rate is total income tax divided by taxable income. The effective tax rate is total income tax
k k k k k k k k k k k k k k k k k
divided by total income.
k k k k
Time On Task: 3 minutes k k k k
8.
Title: Discussion Question 8
k k k
Difficulty: Medium
k k
Learning Objective 1: 1.3
k k k k
Standard 1: AACSB || Analytic k k k k
Standard 2: AICPA || AC: Measurement Analysis and Interpretation Standard
k k k k k k k k k
3: Bloom's || Application
k k k k
Section Reference 1: 1.3 k k k
Solution:
k
If a taxpayer is in a higher tax bracket in the current year and expects to be in a lower tax bracket
k k k k k k k k k k k k k k k k k k k k k
next year, he would have tax savings from delaying the receipt of income to next year. If the
k k k k k k k k k k k k k k k k k k
current year‘s tax rate is higher, he would receive more tax benefit from accelerating deductible
k k k k k k k k k k k k k k k
expenses into the current year rather than waiting until the next year when the marginal tax rate
k k k k k k k k k k k k k k k k k
would be less.
k k k
Time On Task: 4 minutes k k k k
9.
Title: Discussion Question 9 Difficulty:
k k k k
Easy
k
1-3
, Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Analytic
k k k k k
Standard 2: AICPA || AC: Measurement Analysis and Interpretation Standard
k k k k k k k k k
3: Bloom's || Application
k k k k
Section Reference 1: 1.3 k k k
Solution:
k
It would be better to accelerate income into the current year if the taxpayer‘s current income tax rate
k k k k k k k k k k k k k k k k k
is less than it will be in future years.
k k k k k k k k k
Time On Task: 2 minutes
k k k k
10.
Title: Discussion Question 10
k k k
Difficulty: Easy
k k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
Three of the following tax planning opportunities are:
k k k k k k k
rates vary across different time periods k k k k k
rates vary across different jurisdictions k k k k
rates vary across different types of income, and k k k k k k k
rates vary across different types of taxpayers. k k k k k k
Time On Task: 3 minutes
k k k k k
11.
Title: Discussion Question 11
k k k
Difficulty: Medium
k k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Analytic
k k k k k
Standard 2: AICPA || AC: Measurement Analysis and Interpretation Standard
k k k k k k k k k
3: Bloom's || Application
k k k k
Section Reference 1: 1.3 k k k
Solution:
k
Tax rates may vary across different jurisdictions. This will result in more or less after-tax cash
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flow. The revenue generated may be the same, but the after-tax cash flow could be substantially
k k k k k k k k k k k k k k k k
different.
k
Time On Task: 3 minutes
k k k k
12.
Title: Discussion Question 12
k k k
Difficulty: Medium
k k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Analytic
k k k k k
Standard 2: AICPA || AC: Measurement Analysis and Interpretation
k k k k k k k k
1-4
Fundamentals of Taxation for Individuals A Practical Approach, 2024 Edition Gregory A. Carnes,
k k k k k k k k k k k k
Suzanne Youngberg
k k
Chapter 1-18 k
Chapter 1—The Professional Practice of Taxation k k k k k
End-of-Chapter Solutions k k
Discussion Questions k
1.
k
Title: Discussion Question 1
k k k
Difficulty: Easy k
kLearning Objective 1: 1.1 k k k
Standard 1: AACSB || Knowledge
k k k k
Standard 2: AICPA || AC: Reporting
k k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.1
k k k k
Solution:
The goal of tax planning is to maximize after-tax income. After-tax income is net income after
k k k k k k k k k k k k k k k
reducing revenue for all expenses including federal income taxes. Tax planning should consider tax
k k k k k k k k k k k k k k
factors as well as non-tax factors.
k k k k k k
Time On Task: 2 minutes
k k k k
2.
Title: Discussion Question 2 Difficulty:
k k k k
Easy
k
Learning Objective 1: 1.2
k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting
k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.2
k k k k
Solution:
The formula to calculate an individual‘s taxable income is as follows:
k k k k k k k k k k
Gross income k
Less: Deductions for Adjusted Gross Income k k k k k
Adjusted Gross Income
k k k
Less: Greater of Standard Deduction or Itemized Deductions
k k k k k k k
Less: Qualified Business Income Deduction Taxable
k k k k k
incomek
Time On Task: 2 minutes
k k k k
3.
Title: Discussion Question 3 Difficulty:
k k k k
Easy
k
1-1
,Learning Objective 1: 1.2 k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.2
k k k k
Solution:
Form 1040 is used to file an individual‘s income tax return information. Form 1040SR can be used
k k k k k k k k k k k k k k k k
by those 65 and older.
k k k k k
Time On Task: 1 minute
k k k k
4.
Title: Discussion Question 4
k k k
Difficulty: Medium
k k
Learning Objective 1: 1.3
k k k k
Standard 1: AACSB || Knowledge k k k k
Standard 2: AICPA || AC: Reporting
k k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
A lower-income taxpayer needs every after-tax dollar earned to pay bills and does not have much
k k k k k k k k k k k k k k k
discretionary income. If the income tax rate increases, the lower-income taxpayer may have to
k k k k k k k k k k k k k k
work more hours at their current job or take on another job to have the same amount of after-tax
k k k k k k k k k k k k k k k k k k k
income. A wealthier taxpayer may view the increased tax rate adversely but has more flexibility
k k k k k k k k k k k k k k k
with their discretionary income. The wealthier taxpayer may view their leisure time as more
k k k k k k k k k k k k k k
important than working extra hours to earn the same after-tax pay.
k k k k k k k k k k k
Time On Task: 4 minutes
k k k k
5.
Title: Discussion Question 5 Difficulty:
k k k k
Easy
k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
Tax planning is the process of estimating an individual‘s tax liability for multiple scenarios
k k k k k k k k k k k k k
and/or multiple years and considering ways to reduce it. The appropriate goal for tax planning is to
k k k k k k k k k k k k k k k k k
maximize after-tax income. After-tax income is net income after reducing revenue for all
k k k k k k k k k k k k k
expenses including federal income taxes. Tax compliance is determining the tax effects for
k k k k k k k k k k k k k
transactions that have already occurred, including the preparation of tax returns.
k k k k k k k k k k k
Time On Task: 4 minutes
k k k k
6.
Title: Discussion Question 6
k k k
1-2
,Difficulty: Medium k
Learning Objective 1: 1.3
k k k k
Standard 1: AACSB || Knowledge k k k k
Standard 2: AICPA || AC: Reporting
k k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
An open transaction means that the proposed transaction is not yet completed. A closed
k k k k k k k k k k k k k
transaction means that the relevant events have already happened, and the facts are set. This
k k k k k k k k k k k k k k k
distinction is important because in an open transaction, the facts and results can be changed to
k k k k k k k k k k k k k k k k
achieve a better outcome. A closed transaction does not allow for this.
k k k k k k k k k k k k
Time On Task: 3 minutes k k k k
7.
Title: Discussion Question 7 Difficulty:
k k k k
Easy
k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
The marginal tax rate is the rate that applies to the next additional dollar earned. The average tax
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rate is total income tax divided by taxable income. The effective tax rate is total income tax
k k k k k k k k k k k k k k k k k
divided by total income.
k k k k
Time On Task: 3 minutes k k k k
8.
Title: Discussion Question 8
k k k
Difficulty: Medium
k k
Learning Objective 1: 1.3
k k k k
Standard 1: AACSB || Analytic k k k k
Standard 2: AICPA || AC: Measurement Analysis and Interpretation Standard
k k k k k k k k k
3: Bloom's || Application
k k k k
Section Reference 1: 1.3 k k k
Solution:
k
If a taxpayer is in a higher tax bracket in the current year and expects to be in a lower tax bracket
k k k k k k k k k k k k k k k k k k k k k
next year, he would have tax savings from delaying the receipt of income to next year. If the
k k k k k k k k k k k k k k k k k k
current year‘s tax rate is higher, he would receive more tax benefit from accelerating deductible
k k k k k k k k k k k k k k k
expenses into the current year rather than waiting until the next year when the marginal tax rate
k k k k k k k k k k k k k k k k k
would be less.
k k k
Time On Task: 4 minutes k k k k
9.
Title: Discussion Question 9 Difficulty:
k k k k
Easy
k
1-3
, Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Analytic
k k k k k
Standard 2: AICPA || AC: Measurement Analysis and Interpretation Standard
k k k k k k k k k
3: Bloom's || Application
k k k k
Section Reference 1: 1.3 k k k
Solution:
k
It would be better to accelerate income into the current year if the taxpayer‘s current income tax rate
k k k k k k k k k k k k k k k k k
is less than it will be in future years.
k k k k k k k k k
Time On Task: 2 minutes
k k k k
10.
Title: Discussion Question 10
k k k
Difficulty: Easy
k k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Knowledge
k k k k k
Standard 2: AICPA || AC: Reporting k k k k k
Standard 3: Bloom's || Knowledge
k k k k k
Section Reference 1: 1.3
k k k k
Solution:
Three of the following tax planning opportunities are:
k k k k k k k
rates vary across different time periods k k k k k
rates vary across different jurisdictions k k k k
rates vary across different types of income, and k k k k k k k
rates vary across different types of taxpayers. k k k k k k
Time On Task: 3 minutes
k k k k k
11.
Title: Discussion Question 11
k k k
Difficulty: Medium
k k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Analytic
k k k k k
Standard 2: AICPA || AC: Measurement Analysis and Interpretation Standard
k k k k k k k k k
3: Bloom's || Application
k k k k
Section Reference 1: 1.3 k k k
Solution:
k
Tax rates may vary across different jurisdictions. This will result in more or less after-tax cash
k k k k k k k k k k k k k k k
flow. The revenue generated may be the same, but the after-tax cash flow could be substantially
k k k k k k k k k k k k k k k k
different.
k
Time On Task: 3 minutes
k k k k
12.
Title: Discussion Question 12
k k k
Difficulty: Medium
k k
Learning Objective 1: 1.3 k k k
Standard 1: AACSB || Analytic
k k k k k
Standard 2: AICPA || AC: Measurement Analysis and Interpretation
k k k k k k k k
1-4
