Full Solution Manual Solution Manual for McGraw-Hill’s Taxation of Individuals 2024/2026 Edition, 15th Edition by Brian Spilker & Benjamin Ayers | All Chapters 1–1

Solution Manual for McGraw-Hill's Taxation of
u u u u u




Individuals 2024 Edition, 15th Edition
u u u u u




By Brian Spilker, Benjamin Ayers, All Chapters 1 - 14
u u u u u u u u u

,TABLE OF CONTENTS u u u




Part I: Introduction to Taxation
u u u u




Chapter 1: An Introduction to Tax
u u u u u




Chapter 2: Tax Compliance, the IRS, and Tax Authorities
u u u u u u u u




Chapter 3: Tax Planning Strategies and Related Limitations
u u u u u u u




Part II: Basic Individual Taxation
u u u u




Chapter 4: Individual Income Tax Overview, Dependents, and Filing Status
u u u u u u u u u




Chapter 5: Gross Income and Exclusions
u u u u u




Chapter 6: Individual Deductions
u u u




Chapter 7: Investments
u u




Chapter 8: Individual Income Tax Computation and Tax Credits
u u u u u u u u




Part III: Business-Related Transactions
u u u




Chapter 9: Business Income, Deductions, and Accounting Methods
u u u u u u u




Chapter 10: Property Acquisition and Cost Recovery
u u u u u u




Chapter 11: Property Dispositions
u u u




Part IV: Specialized Topics
u u u




Chapter 12: Compensation
u u




Chapter 13: Retirement Savings and Deferred Compensation
u u u u u u




Chapter 14: Tax Consequences of Home Ownership
u u u u u u

,Chapter 1 u




An Introduction to Tax
u u u




Discussion Questions
u




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




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




Taxes are a part of everyday life and have a financial effect on many of the major personal decisions that
u u u u u u u u u u u u u u u u u u u




individuals face (e.g., investment decisions, evaluating alternative job offers, saving for education
u u u u u u u u u u u u




expenses, gift or estate planning, etc.).
u u u u u u




(2) [LO 1] What are some aspects of business that require knowledge of taxation? What are
u u u u u u u u u u u u u u




some aspects of personal finance that require knowledge of taxation?
u u u u u u u u u u




Taxes play an important role in fundamental business decisions such as the following:
u u u u u u u u u u u u




• What organizational form should a business use? u u u u u u




• Where should the business locate? u u u u




• How should business acquisitions be structured? u u u u u




• How should the business compensate employees? u u u u u




• What is the appropriate mix of debt and equity for the business?
u u u u u u u u u u u




• Should the business rent or own its equipment and property? u u u u u u u u u




• How should the business distribute profits to its owners?
u u u u u u u u




One must consider all transaction costs (including taxes) to evaluate the merits of a transaction.
u u u u u u u u u u u u u u




Common personal financial decisions that taxes influence include: choosing investments, retirement
u u u u u u u u u u




planning, choosing to rent or buy a home, evaluating alternative job offers, saving for education expenses,
u u u u u u u u u u u u u u u u




and doing gift or estate planning.
u u u u u u




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




States.
u




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

, based upon their tax rhetoric. Likewise, the major political parties generally have very diverse views of the
u u u u u u u u u u u u u u u u




appropriate way to tax the public. Determining who is taxed, what is taxed, and how much is taxed are
u u u u u u u u u u u u u u u u u u u




difficult questions. Voters must have a basic understanding of taxes to evaluate the merits of alternative tax
u u u u u u u u u u u u u u u u u




uproposals offered by opposing political candidates and their political parties.
u u u u u u u u u




(4) [LO 2] Courtney recently received a speeding ticket on her way to the university. Her fine
u u u u u u u u u u u u u u u




was $200. Is this considered a tax? Why or why not?
u u u u u u u u u u u




The $200 speeding ticket is not considered a tax. Instead, it is considered a fine or penalty. Taxes differ
u u u u u u u u u u u u u u u u u u




from fines and penalties because taxes are not intended to punish or prevent illegal behavior.
u u u u u u u u u u u u u u u




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




$300 to the county government for a building permit. Is the $300 payment a tax? Why or why
u u u u u u u u u u u u u u u u u




not?
u




The building permit is not considered a tax because $300 payment is directly linked to a benefit that they
u u u u u u u u u u u u u u u u u u




received (i.e., the ability to build a house).
u u u u u u u u




(6) [LO 2] To help pay for the city’s new stadium, the city of Birmingham recently enacted a 1
u u u u u u u u u u u u u u u u u




percent surcharge on hotel rooms. Is this a tax? Why or why not?
u u u u u u u u u u u u u




The 1 percent surcharge is a tax. The 1 percent surcharge is an earmarked tax – i.e., collected for a specific
u u u u u u u u u u u u u u u u u u u u




purpose. The surcharge is considered a tax because the tax payments made by taxpayers do not directly
u u u u u u u u u u u u u u u u u




relate to the specific benefit received by the taxpayers.
u u u u u u u u u




(7) [LO 2] As noted in Example 1-2, tolls, parking meter fees, and annual licensing fees are not
u u u u u u u u u u u u u u u u




considered taxes. Can you identify other fees that are similar?
u u u u u u u u u u




There are several possible answers to this question. Some common examples include entrance fees to
u u u u u u u u u u u u u u




national parks, tag fees paid to local/state government for automobiles, boats, etc.
u u u u u u u u u u u u




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




allow deductions for charitable contributions and retirement plan contributions?
u u u u u u u u u




In addition to the general objective of raising revenue, Congress uses the federal tax system to encourage
u u u u u u u u u u u u u u u u




certain behavior and discourage other behavior. The charitable contribution deduction is intended to
u u u u u u u u u u u u u




encourage taxpayers to support the initiatives of charitable organizations, whereas deductions for
u u u u u u u u u u u u




retirement contributions are intended to encourage retirement savings. Another objective of the tax
u u u u u u u u u u u u u




system is to redistribute wealth.
u u u u u