SOLUTION MANUAL FOR %ty %ty
Principles of Taxation for Business and Investment Planning 202
%ty %ty %ty %ty %ty %ty %ty %ty
Edition 27th Edition by Sally M. Jones
%ty %ty %ty %ty %ty %ty
FULL TEST BANK!!! %ty %ty
,Chapter 1 Taxes and Taxing Jurisdictions
Questions and Problems for Discussion
1. Tax payments differ from government fines and penalties because they aren‘t intended to deter
or punish unacceptable behavior. Tax payments differ from fees or user charges because they
don‘t entitle the payer to a specific government good or service, such as a postage stamp or a
driver‘s license. Tax payments also differ from fees or user charges because they are
compulsory.
2. This payment has characteristics of a tax, a penalty, and a user fee. The compulsory payment is
not specifically punitive but does apply selectively to those companies most likely responsible for
the polluted condition of Green River. However, these same companies may be the entities that
benefit most from the environmental clean-up.
3. This payment more closely resembles a fee for a government service than a transaction-based
tax because the transaction occurs between a private party and the jurisdiction itself, rather than
between private parties engaging in a market transaction. The payment also entitles the payer to
a specific benefit (the right to marry under law).
4. To the extent that the decline in exterior maintenance reduces the value of Mr. Powell‘s
apartment complex, he bears the incidence of the increased property tax. To the extent that the
decline reduces the value of adjoining properties or makes the neighborhood less attractive, the
owners of the adjoining properties and the neighborhood residents share the incidence of the tax
increase.
5. People who don‘t directly use public schools (such as Mr. and Mrs. Ahern or people who don‘t
have children) indirectly benefit from a public education system for the general population.
Arguably, public education contributes to a skilled workforce and improves the cultural and social
environment in which Mr. and Mrs. Ahern live. Based on this argument, Mr. and Mrs. Ahern
should not be exempt from the local property tax.
6. The consumers who pay the same price for a smaller bar of soap of lesser quality bear the
incidence of the new gross receipts tax.
7. Real property can‘t be hidden or moved, and its ownership (legal title) is a matter of public
record. In contrast, personal property is mobile and may be easily concealed. Moreover,
jurisdictions may not have an effective means to discover or trace ownership of personal
property.
8. Arguably, private golf courses beautify the locality and are environmentally more desirable than
other commercial activities. They also may require more acreage than other businesses and,
therefore, would be at a competitive disadvantage without a preferential real property tax rate.
9. Many jurisdictions that levy property taxes provide an exemption for public institutions, such as
state universities or private colleges. If University K is entitled to such an exemption, every
commercial building or residence acquired by the University reduces the local jurisdiction‘s
property tax base.
10. Excise taxes are imposed on a much narrower range of consumer goods and services than
sales taxes. Consequently, people can more readily avoid purchasing the specific good or
service subject to excise tax.
,11. The %tytax %tyincrease %tymay %tyhave %tyreduced %tythe %tyaggregate %tydemand %tyfor %tyconsumer
%tygoods %tyand, %tyconsequently, %tymunicipal %tyresidents %tyare %tybuying %tyfewer %tygoods. %tyA
%tysecond %typossibility %tyis %tythat %tymunicipal %tyresidents %tyare %tytraveling %tyto %tyother %tyjurisdictions
%tywith %tylower %tytax %tyrates %tyor %tymaking %tymore %typurchases %tythrough %tymail %tyorder %tycatalogs
%tyor %tyon-line.
12. From %tya %typolitical %typerspective, %tyliquor %tyand %tycigarettes %tysales %tymake %tyan %tyexcellent %tytax
%tybase %tybecause %tyconsumption %tyof %tythe %tytwo %typroducts %tyis %typurely %tydiscretionary, %tyand
%tyany %tydecline %tyin %tyconsumption %tybecause %tyof %tythe %tytax %tyis %tysocially %tydesirable. %tyFrom
%tyan %tyeconomic %typerspective, %tythese %tysales %tyare %tya %tygood %tytax %tybase %tybecause %tythe
%tydemand %tyfor %tyliquor %tyand %tycigarettes %tyis %tyrelatively %typrice %tyinelastic. %tyIn %tyother %tywords,
%typeople %tywho %tydrink %tyand %tysmoke %tyon %tya %tyregular %tybasis %tybuy %tythese %typroducts
%tyregardless %tyof %tya %tyheavy %tyexcise %tytax.
13. The %tyfederal %tyincome % t y tax %tyhas %tythe %tybroader %tybase. %tyThe %tyfederal %typayroll %tytax %tyis
%tyimposed %tyon %tywages, %tysalaries, %tyand %tyother %tyforms %tyof %tycompensation %tyearned %tyby
%tyemployees. %tyThe %tyfederal %tyincome %tytax %tyis %tyimposed %tyon %tyall %tytypes %tyof
%tycompensation %tyas %tywell %tyas %tynet %tybusiness %typrofit, %tyinvestment %tyincome, %tyand %tyany
%tyother %tyincome %tyitem %tyfrom %tywhatever %tysource %tyderived.
14. A %typroperty %tytax %tyis %tya %typeriodic %ty(usually %tyannual) %tytax %tylevied %tyon %tythe %tyownership %tyof
%typroperty %tyand %tybased %tyon %tythe %tyvalue %tyof %tythe %typroperty %tyon %tya %typarticular
%tyassessment %tydate. %tyA %tytransfer %tytax %tyis %tya %tytransaction- %tybased %tytax %tylevied %tyon %tythe
%tytransfer %tyof %typroperty %tyfrom %tyone %typarty %tyto %tyanother. %tyA %tytransfer %tytax %tyis %tybased %tyon
%tythe %tyvalue %tyof %tythe %typroperty %tyat %tydate %tyof %tytransfer.
15. If %tythe %tyfederal %tygovernment %tycould %ty―piggy %tyback‖ %tya %tynational %tysales %tytax %tyon
%tyexisting %tystate %tysales %tytax %tycollection %tysystems, %tythe %tyfederal %tygovernment %tycould
%tyavoid %tycreating %tya %tynew %tyfederal %tyagency %tyfor %tycollecting %tythe %tytax. %tyIn %tycontrast, %tythe
%tyfederal %tygovernment %tywould %tyhave %tyto %tycreate %tya %tynew %tycollection %tysystem %tyfor %tya
%tynational %tyVAT. %tyHowever, %tya %tynational %tyVAT %tywould %tybe %tyless %tylikely %tyto %tycause
%tyjurisdictional %tyconflict %tybetween %tythe %tyfederal %tygovernment %tyand %tythe %tystates %tybecause
%tystates %tydon‘t %tydepend %tyon %tyVATs %tyas %tya %tysource %tyof %tyrevenue.
16. The %tyInternal %tyRevenue %tyCode %tyis %tyfederal %tystatutory %tylaw, %tyenacted %tyby %tyCongress %tyand
%tysigned %tyby %tythe %tyPresident. %tyTechnically, %tyTreasury %tyregulations %tyonly %tyinterpret %tyand
%tyexplain %tythe %tystatute %tyand %tyaren‘t %tylaws %tyin %tytheir %tyown %tyright. %tyThus, %tyregulations %tyare
%tyless %tyauthoritative %tythan %tythe %tyCode %tyitself. %tyHowever, %tybecause %tyCongress %tyauthorized
%tythe %tyTreasury %tyto %tywrite %tyregulations, %tythey %tyare %tythe %tygovernment‘s %tyofficial
%tyinterpretation %tyof %tystatutory %tylaw. %tyPractically, %tythe %tyregulations %tycarry %tyconsiderable
%tyauthoritative %tyweight.
Application %tyProblems
1. a. The %tystatement %tyof %tyfacts %tyidentifies %tythree %tytaxpayers: %tyMr. %tyJosh %tyKenney,
% t y
JK %tyServices, %tyand %tyJK %tyRealty.
%ty
b. The %tygovernment %tyof %tythe %tylocality %tyin %tywhich %tyMr. %tyKenney %tyresides, %tythe %tystate
%tygovernment %tyof %tyVermont, %tyand %tythe %tyU.S. %tygovernment %tyhave %tyjurisdiction %tyto
%tytax %tyMr. %tyKenney. %tyThe %tylocal %tygovernments %tyof %tythe %tyfour %tycounties %tyin %tywhich
%tyJK %tyServices %tyconducts %tybusiness, %tythe %tystate %tygovernment %tyof %tyVermont, %tyand
%tythe %tyU.S. %tygovernment %tyhave %tyjurisdiction %tyto %tytax %tyJK %tyServices. %tyThe %tycity %tyof
%tyBoston, %tythe %tystate %tygovernment %tyof %tyMassachusetts, %tyand %tythe %tyU.S. %tygovernment
%tyhave %tyjurisdiction %tyto %tytax %tyJK %tyRealty.
2. a. % t y % t y The %tyUnited %tyStates %tyhas %tyjurisdiction %tyto %tytax %tyMrs. %tyMay %tybecause %tyshe %tyis %tya %typermanent
%tyresident.
b. The %tyUnited %tyStates %tyhas %tyjurisdiction %tyto %tytax %tyMrs. %tyMay %tyonly %tyon %tythe %tyU.S.
%tysource %tyrental %tyincome %tygenerated %tyby %tythe %tyManhattan %tyreal %tyestate.
, c. The %tyUnited %tyStates %tydoes %tynot %tyhave %tyjurisdiction %tyto %tytax %tyMrs. %tyMay.
d. The %tyUnited %tyStates %tyhas %tyjurisdiction %tyto %tytax %tyMrs. %tyMay %tybecause %tyshe %tyis %tya %tyU.S. %tycitizen.
Principles of Taxation for Business and Investment Planning 202
%ty %ty %ty %ty %ty %ty %ty %ty
Edition 27th Edition by Sally M. Jones
%ty %ty %ty %ty %ty %ty
FULL TEST BANK!!! %ty %ty
,Chapter 1 Taxes and Taxing Jurisdictions
Questions and Problems for Discussion
1. Tax payments differ from government fines and penalties because they aren‘t intended to deter
or punish unacceptable behavior. Tax payments differ from fees or user charges because they
don‘t entitle the payer to a specific government good or service, such as a postage stamp or a
driver‘s license. Tax payments also differ from fees or user charges because they are
compulsory.
2. This payment has characteristics of a tax, a penalty, and a user fee. The compulsory payment is
not specifically punitive but does apply selectively to those companies most likely responsible for
the polluted condition of Green River. However, these same companies may be the entities that
benefit most from the environmental clean-up.
3. This payment more closely resembles a fee for a government service than a transaction-based
tax because the transaction occurs between a private party and the jurisdiction itself, rather than
between private parties engaging in a market transaction. The payment also entitles the payer to
a specific benefit (the right to marry under law).
4. To the extent that the decline in exterior maintenance reduces the value of Mr. Powell‘s
apartment complex, he bears the incidence of the increased property tax. To the extent that the
decline reduces the value of adjoining properties or makes the neighborhood less attractive, the
owners of the adjoining properties and the neighborhood residents share the incidence of the tax
increase.
5. People who don‘t directly use public schools (such as Mr. and Mrs. Ahern or people who don‘t
have children) indirectly benefit from a public education system for the general population.
Arguably, public education contributes to a skilled workforce and improves the cultural and social
environment in which Mr. and Mrs. Ahern live. Based on this argument, Mr. and Mrs. Ahern
should not be exempt from the local property tax.
6. The consumers who pay the same price for a smaller bar of soap of lesser quality bear the
incidence of the new gross receipts tax.
7. Real property can‘t be hidden or moved, and its ownership (legal title) is a matter of public
record. In contrast, personal property is mobile and may be easily concealed. Moreover,
jurisdictions may not have an effective means to discover or trace ownership of personal
property.
8. Arguably, private golf courses beautify the locality and are environmentally more desirable than
other commercial activities. They also may require more acreage than other businesses and,
therefore, would be at a competitive disadvantage without a preferential real property tax rate.
9. Many jurisdictions that levy property taxes provide an exemption for public institutions, such as
state universities or private colleges. If University K is entitled to such an exemption, every
commercial building or residence acquired by the University reduces the local jurisdiction‘s
property tax base.
10. Excise taxes are imposed on a much narrower range of consumer goods and services than
sales taxes. Consequently, people can more readily avoid purchasing the specific good or
service subject to excise tax.
,11. The %tytax %tyincrease %tymay %tyhave %tyreduced %tythe %tyaggregate %tydemand %tyfor %tyconsumer
%tygoods %tyand, %tyconsequently, %tymunicipal %tyresidents %tyare %tybuying %tyfewer %tygoods. %tyA
%tysecond %typossibility %tyis %tythat %tymunicipal %tyresidents %tyare %tytraveling %tyto %tyother %tyjurisdictions
%tywith %tylower %tytax %tyrates %tyor %tymaking %tymore %typurchases %tythrough %tymail %tyorder %tycatalogs
%tyor %tyon-line.
12. From %tya %typolitical %typerspective, %tyliquor %tyand %tycigarettes %tysales %tymake %tyan %tyexcellent %tytax
%tybase %tybecause %tyconsumption %tyof %tythe %tytwo %typroducts %tyis %typurely %tydiscretionary, %tyand
%tyany %tydecline %tyin %tyconsumption %tybecause %tyof %tythe %tytax %tyis %tysocially %tydesirable. %tyFrom
%tyan %tyeconomic %typerspective, %tythese %tysales %tyare %tya %tygood %tytax %tybase %tybecause %tythe
%tydemand %tyfor %tyliquor %tyand %tycigarettes %tyis %tyrelatively %typrice %tyinelastic. %tyIn %tyother %tywords,
%typeople %tywho %tydrink %tyand %tysmoke %tyon %tya %tyregular %tybasis %tybuy %tythese %typroducts
%tyregardless %tyof %tya %tyheavy %tyexcise %tytax.
13. The %tyfederal %tyincome % t y tax %tyhas %tythe %tybroader %tybase. %tyThe %tyfederal %typayroll %tytax %tyis
%tyimposed %tyon %tywages, %tysalaries, %tyand %tyother %tyforms %tyof %tycompensation %tyearned %tyby
%tyemployees. %tyThe %tyfederal %tyincome %tytax %tyis %tyimposed %tyon %tyall %tytypes %tyof
%tycompensation %tyas %tywell %tyas %tynet %tybusiness %typrofit, %tyinvestment %tyincome, %tyand %tyany
%tyother %tyincome %tyitem %tyfrom %tywhatever %tysource %tyderived.
14. A %typroperty %tytax %tyis %tya %typeriodic %ty(usually %tyannual) %tytax %tylevied %tyon %tythe %tyownership %tyof
%typroperty %tyand %tybased %tyon %tythe %tyvalue %tyof %tythe %typroperty %tyon %tya %typarticular
%tyassessment %tydate. %tyA %tytransfer %tytax %tyis %tya %tytransaction- %tybased %tytax %tylevied %tyon %tythe
%tytransfer %tyof %typroperty %tyfrom %tyone %typarty %tyto %tyanother. %tyA %tytransfer %tytax %tyis %tybased %tyon
%tythe %tyvalue %tyof %tythe %typroperty %tyat %tydate %tyof %tytransfer.
15. If %tythe %tyfederal %tygovernment %tycould %ty―piggy %tyback‖ %tya %tynational %tysales %tytax %tyon
%tyexisting %tystate %tysales %tytax %tycollection %tysystems, %tythe %tyfederal %tygovernment %tycould
%tyavoid %tycreating %tya %tynew %tyfederal %tyagency %tyfor %tycollecting %tythe %tytax. %tyIn %tycontrast, %tythe
%tyfederal %tygovernment %tywould %tyhave %tyto %tycreate %tya %tynew %tycollection %tysystem %tyfor %tya
%tynational %tyVAT. %tyHowever, %tya %tynational %tyVAT %tywould %tybe %tyless %tylikely %tyto %tycause
%tyjurisdictional %tyconflict %tybetween %tythe %tyfederal %tygovernment %tyand %tythe %tystates %tybecause
%tystates %tydon‘t %tydepend %tyon %tyVATs %tyas %tya %tysource %tyof %tyrevenue.
16. The %tyInternal %tyRevenue %tyCode %tyis %tyfederal %tystatutory %tylaw, %tyenacted %tyby %tyCongress %tyand
%tysigned %tyby %tythe %tyPresident. %tyTechnically, %tyTreasury %tyregulations %tyonly %tyinterpret %tyand
%tyexplain %tythe %tystatute %tyand %tyaren‘t %tylaws %tyin %tytheir %tyown %tyright. %tyThus, %tyregulations %tyare
%tyless %tyauthoritative %tythan %tythe %tyCode %tyitself. %tyHowever, %tybecause %tyCongress %tyauthorized
%tythe %tyTreasury %tyto %tywrite %tyregulations, %tythey %tyare %tythe %tygovernment‘s %tyofficial
%tyinterpretation %tyof %tystatutory %tylaw. %tyPractically, %tythe %tyregulations %tycarry %tyconsiderable
%tyauthoritative %tyweight.
Application %tyProblems
1. a. The %tystatement %tyof %tyfacts %tyidentifies %tythree %tytaxpayers: %tyMr. %tyJosh %tyKenney,
% t y
JK %tyServices, %tyand %tyJK %tyRealty.
%ty
b. The %tygovernment %tyof %tythe %tylocality %tyin %tywhich %tyMr. %tyKenney %tyresides, %tythe %tystate
%tygovernment %tyof %tyVermont, %tyand %tythe %tyU.S. %tygovernment %tyhave %tyjurisdiction %tyto
%tytax %tyMr. %tyKenney. %tyThe %tylocal %tygovernments %tyof %tythe %tyfour %tycounties %tyin %tywhich
%tyJK %tyServices %tyconducts %tybusiness, %tythe %tystate %tygovernment %tyof %tyVermont, %tyand
%tythe %tyU.S. %tygovernment %tyhave %tyjurisdiction %tyto %tytax %tyJK %tyServices. %tyThe %tycity %tyof
%tyBoston, %tythe %tystate %tygovernment %tyof %tyMassachusetts, %tyand %tythe %tyU.S. %tygovernment
%tyhave %tyjurisdiction %tyto %tytax %tyJK %tyRealty.
2. a. % t y % t y The %tyUnited %tyStates %tyhas %tyjurisdiction %tyto %tytax %tyMrs. %tyMay %tybecause %tyshe %tyis %tya %typermanent
%tyresident.
b. The %tyUnited %tyStates %tyhas %tyjurisdiction %tyto %tytax %tyMrs. %tyMay %tyonly %tyon %tythe %tyU.S.
%tysource %tyrental %tyincome %tygenerated %tyby %tythe %tyManhattan %tyreal %tyestate.
, c. The %tyUnited %tyStates %tydoes %tynot %tyhave %tyjurisdiction %tyto %tytax %tyMrs. %tyMay.
d. The %tyUnited %tyStates %tyhas %tyjurisdiction %tyto %tytax %tyMrs. %tyMay %tybecause %tyshe %tyis %tya %tyU.S. %tycitizen.
