Solution Manual for McGraw-Hill's Taxation of
Individuals 2024 Edition, 15th Edition
By Brian Spilker, Benjamin Ayers, All Chapters 1 - 14
,TABLE OF CONTENTS BE BE BE
Part I: Introduction to Taxation
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Chapter 1: An Introduction to Tax
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Chapter 2: Tax Compliance, the IRS, and Tax Authorities
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Chapter 3: Tax Planning Strategies and Related Limitations
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Part II: Basic Individual Taxation
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Chapter 4: Individual Income Tax Overview, Dependents, and Filing Status
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Chapter 5: Gross Income and Exclusions
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Chapter 6: Individual Deductions
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Chapter 7: Investments
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Chapter 8: Individual Income Tax Computation and Tax Credits
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Part III: Business-Related Transactions
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Chapter 9: Business Income, Deductions, and Accounting Methods
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Chapter 10: Property Acquisition and Cost Recovery
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Chapter 11: Property Dispositions
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Part IV: Specialized Topics
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Chapter 12: Compensation
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Chapter 13: Retirement Savings and Deferred Compensation
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Chapter 14: Tax Consequences of Home Ownership
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,Chapter 1BE
An Introduction to Tax
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Discussion Questions
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(1) [LO 1] Jessica’s friend Zachary once stated that he couldn’t understand why
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someone would take a tax course. Why is this a rather naïve view?
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Taxes are a part of everyday life and have a financial effect on many of the major personal decisions t
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hat individuals face (e.g., investment decisions, evaluating alternative job offers, saving for educatio
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n expenses, gift or estate planning, etc.).
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(2) [LO 1] What are some aspects of business that require knowledge of taxation? What
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are some aspects of personal finance that require knowledge of taxation?
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Taxes play an important role in fundamental business decisions such as the following:
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• What organizational form should a business use?
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• Where should the business locate? BE BE BE BE
• How should business acquisitions be structured?
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• How should the business compensate employees?
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• What is the appropriate mix of debt and equity for the business?
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• Should the business rent or own its equipment and property?
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• How should the business distribute profits to its owners?
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One must consider all transaction costs (including taxes) to evaluate the merits of a transaction.
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Common personal financial decisions that taxes influence include: choosing investments, retirement p
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lanning, choosing to rent or buy a home, evaluating alternative job offers, saving for education expen
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ses, and doing gift or estate planning.
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(3) [LO 1] Describe some ways in which taxes affect the political process in the Unite
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d States.
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U.S. presidential candidates often distinguish themselves from their opponents
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, based upon their tax rhetoric. Likewise, the major political parties generally have very diverse views of
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the appropriate way to tax the public. Determining who is taxed, what is taxed, and how much is ta
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xed are difficult questions. Voters must have a basic understanding of taxes to evaluate the merits of al
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ternative tax proposals offered by opposing political candidates and their political parties.
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(4) [LO 2] Courtney recently received a speeding ticket on her way to the university. Her fi
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ne was $200. Is this considered a tax? Why or why not?
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The $200 speeding ticket is not considered a tax. Instead, it is considered a fine or penalty. Taxes
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differ from fines and penalties because taxes are not intended to punish or prevent illegal behavior.
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(5) [LO 2] Marlon and Latoya recently started building a house. They had to pay
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$300 to the county government for a building permit. Is the $300 payment a tax? Why o
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r why not?
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The building permit is not considered a tax because $300 payment is directly linked to a benefit that
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they received (i.e., the ability to build a house).
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(6) [LO 2] To help pay for the city’s new stadium, the city of Birmingham recently enacte
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d a 1 percent surcharge on hotel rooms. Is this a tax? Why or why not?
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The 1 percent surcharge is a tax. The 1 percent surcharge is an earmarked tax –
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i.e., collected for a specific purpose. The surcharge is considered a tax because the tax payments ma
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de by taxpayers do not directly relate to the specific benefit received by the taxpayers.
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(7) [LO 2] As noted in Example 1-
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2, tolls, parking meter fees, and annual licensing fees are not considered taxes. Can yo
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u identify other fees that are similar?
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There are several possible answers to this question. Some common examples include entrance fees to n
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ational parks, tag fees paid to local/state government for automobiles, boats, etc.
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(8) [LO 2] If the general objective of our tax system is to raise revenue, why does the incom
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e tax allow deductions for charitable contributions and retirement plan contributions?
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In addition to the general objective of raising revenue, Congress uses the federal tax system to encoura
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ge certain behavior and discourage other behavior. The charitable contribution deduction is intended
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to encourage taxpayers to support the initiatives of charitable organizations, whereas deductions for
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retirement contributions are intended to encourage retirement savings. Another objective of the tax
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system is to redistribute wealth.
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Individuals 2024 Edition, 15th Edition
By Brian Spilker, Benjamin Ayers, All Chapters 1 - 14
,TABLE OF CONTENTS BE BE BE
Part I: Introduction to Taxation
BE BE BE BE
Chapter 1: An Introduction to Tax
BE BE BE BE BE
Chapter 2: Tax Compliance, the IRS, and Tax Authorities
BE BE BE BE BE BE BE BE
Chapter 3: Tax Planning Strategies and Related Limitations
BE BE BE BE BE BE BE
Part II: Basic Individual Taxation
BE BE BE BE
Chapter 4: Individual Income Tax Overview, Dependents, and Filing Status
BE BE BE BE BE BE BE BE BE
Chapter 5: Gross Income and Exclusions
BE BE BE BE BE
Chapter 6: Individual Deductions
BE BE BE
Chapter 7: Investments
BE BE
Chapter 8: Individual Income Tax Computation and Tax Credits
BE BE BE BE BE BE BE BE
Part III: Business-Related Transactions
BE BE BE
Chapter 9: Business Income, Deductions, and Accounting Methods
BE BE BE BE BE BE BE
Chapter 10: Property Acquisition and Cost Recovery
BE BE BE BE BE BE
Chapter 11: Property Dispositions
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Part IV: Specialized Topics
BE BE BE
Chapter 12: Compensation
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Chapter 13: Retirement Savings and Deferred Compensation
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Chapter 14: Tax Consequences of Home Ownership
BE BE BE BE BE BE
,Chapter 1BE
An Introduction to Tax
BE BE BE
Discussion Questions
BE
(1) [LO 1] Jessica’s friend Zachary once stated that he couldn’t understand why
BE BE BE BE BE BE BE BE BE BE BE
someone would take a tax course. Why is this a rather naïve view?
BE BE BE BE BE BE BE BE BE BE BE BE
Taxes are a part of everyday life and have a financial effect on many of the major personal decisions t
BE BE BE BE BE BE BE BE BE BE BE BE BE BE BE BE B E BE BE
hat individuals face (e.g., investment decisions, evaluating alternative job offers, saving for educatio
BE BE BE BE BE BE B E BE BE BE BE BE
n expenses, gift or estate planning, etc.).
BE BE BE BE BE BE
(2) [LO 1] What are some aspects of business that require knowledge of taxation? What
BE BE BE BE BE BE BE BE BE BE BE BE B E BE
are some aspects of personal finance that require knowledge of taxation?
BE BE BE BE BE BE BE BE BE BE
Taxes play an important role in fundamental business decisions such as the following:
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• What organizational form should a business use?
BE BE BE BE BE BE
• Where should the business locate? BE BE BE BE
• How should business acquisitions be structured?
BE BE BE BE BE
• How should the business compensate employees?
BE BE BE BE BE
• What is the appropriate mix of debt and equity for the business?
BE BE BE BE BE BE BE BE BE BE BE
• Should the business rent or own its equipment and property?
BE BE BE BE BE BE BE BE BE
• How should the business distribute profits to its owners?
BE BE BE BE BE BE BE BE
One must consider all transaction costs (including taxes) to evaluate the merits of a transaction.
BE BE BE BE BE BE BE BE BE BE BE BE B E BE
Common personal financial decisions that taxes influence include: choosing investments, retirement p
BE BE BE BE BE BE BE BE B E BE BE
lanning, choosing to rent or buy a home, evaluating alternative job offers, saving for education expen
BE BE BE BE BE BE BE BE B E BE BE BE BE BE BE
ses, and doing gift or estate planning.
BE BE BE BE BE B E
(3) [LO 1] Describe some ways in which taxes affect the political process in the Unite
BE BE BE BE BE BE BE BE BE BE BE BE BE B E
d States.
BE
U.S. presidential candidates often distinguish themselves from their opponents
BE BE BE BE BE BE BE BE
, based upon their tax rhetoric. Likewise, the major political parties generally have very diverse views of
BE BE BE BE BE BE BE BE BE BE BE B E BE BE BE
the appropriate way to tax the public. Determining who is taxed, what is taxed, and how much is ta
BE BE BE BE BE BE BE BE BE BE B E BE BE BE BE BE BE BE BE
xed are difficult questions. Voters must have a basic understanding of taxes to evaluate the merits of al
BE BE BE BE BE B E BE BE BE BE BE BE BE BE BE BE BE
ternative tax proposals offered by opposing political candidates and their political parties.
BE B E BE BE BE BE BE BE BE BE BE
(4) [LO 2] Courtney recently received a speeding ticket on her way to the university. Her fi
BE BE BE BE BE BE BE BE BE BE BE BE BE B E BE
ne was $200. Is this considered a tax? Why or why not?
BE BE BE BE BE BE BE BE BE BE BE
The $200 speeding ticket is not considered a tax. Instead, it is considered a fine or penalty. Taxes
BE BE BE BE BE BE BE BE BE BE BE BE BE BE B E BE BE BE
differ from fines and penalties because taxes are not intended to punish or prevent illegal behavior.
BE BE BE BE BE BE BE BE BE B E BE BE BE BE BE
(5) [LO 2] Marlon and Latoya recently started building a house. They had to pay
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$300 to the county government for a building permit. Is the $300 payment a tax? Why o
BE BE BE BE BE BE BE BE BE BE BE BE BE BE B E BE
r why not?
BE BE
The building permit is not considered a tax because $300 payment is directly linked to a benefit that
BE BE BE BE BE BE BE BE BE BE BE BE B E BE BE BE BE BE
they received (i.e., the ability to build a house).
BE BE BE BE BE BE BE BE
(6) [LO 2] To help pay for the city’s new stadium, the city of Birmingham recently enacte
BE BE BE BE BE BE BE BE BE BE BE BE BE BE B E
d a 1 percent surcharge on hotel rooms. Is this a tax? Why or why not?
BE BE BE BE BE BE BE BE BE BE BE BE BE BE BE
The 1 percent surcharge is a tax. The 1 percent surcharge is an earmarked tax –
BE BE BE BE BE BE BE BE BE BE BE BE BE BE BE
i.e., collected for a specific purpose. The surcharge is considered a tax because the tax payments ma
B E BE BE BE BE BE BE BE BE BE BE BE BE B E BE BE BE
de by taxpayers do not directly relate to the specific benefit received by the taxpayers.
BE BE BE BE BE BE BE BE BE BE B E BE BE BE
(7) [LO 2] As noted in Example 1-
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2, tolls, parking meter fees, and annual licensing fees are not considered taxes. Can yo
BE BE BE BE BE BE BE B E BE BE BE BE BE BE
u identify other fees that are similar?
BE BE BE BE BE BE
There are several possible answers to this question. Some common examples include entrance fees to n
BE BE BE BE BE BE BE BE BE BE B E BE BE BE BE
ational parks, tag fees paid to local/state government for automobiles, boats, etc.
BE BE BE BE BE BE BE B E BE BE BE
(8) [LO 2] If the general objective of our tax system is to raise revenue, why does the incom
BE BE BE BE BE BE BE BE BE BE BE BE BE BE BE BE B E
e tax allow deductions for charitable contributions and retirement plan contributions?
BE BE BE BE BE BE BE BE BE B E
In addition to the general objective of raising revenue, Congress uses the federal tax system to encoura
BE BE BE BE BE BE BE BE BE BE BE BE B E BE BE BE
ge certain behavior and discourage other behavior. The charitable contribution deduction is intended
BE BE BE BE BE BE BE B E BE BE BE BE BE
to encourage taxpayers to support the initiatives of charitable organizations, whereas deductions for
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retirement contributions are intended to encourage retirement savings. Another objective of the tax
B E BE BE BE BE BE BE BE BE BE B E BE BE
system is to redistribute wealth.
BE BE BE BE
