SOLUTION MANUAL
MCGRAW-HILL'S TAXATION OF
INDIVIDUALS 2026 EDITION
,Solutions Manual—Taxation Of Individuals, By Spilker Et Al.
Solution Manual For
Mcgraw-Hill's Taxation Of Individuals 2026 Edition,
Spilker
Chapter 1-14
Chapter 1
An Introduction To Tax
Discussion Questions
[LO 1] Jessica’s Friend Zachary Once Stated That He Couldn’t Understand
Why Someone Would Take A Tax Course. Why Is This A Rather Naïve
View?
Taxes Are A Part Of Everyday Life And Have A Financial Effect On Many Of The
Major Personal Decisions That Individuals Face (E.G., Investment Decisions,
Evaluating Alternative Job Offers, Saving For Education Expenses, Gift Or Estate
Planning, Etc.).
[LO 1] What Are Some Aspects Of Business That Require Knowledge Of
Taxation? What Are Some Aspects Of Personal Finance That Require
Knowledge Of Taxation?
Taxes Play An Important Role In Fundamental Business Decisions Such As
The Following:
What Organizational Form Should A Business Use?
Where Should The Business Locate?
How Should Business Acquisitions Be Structured?
How Should The Business Compensate Employees?
What Is The Appropriate Mix Of Debt And Equity For The Business?
Should The Business Rent Or Own Its Equipment And Property?
How Should The Business Distribute Profits To Its Owners?
One Must Consider All Transaction Costs (Including Taxes) To Evaluate The
Merits Of A Transaction.
Common Personal Financial Decisions That Taxes Influence Include:
Choosing Investments, Retirement Planning, Choosing To Rent Or Buy A
Home, Evaluating Alternative Job Offers, Saving For Education Expenses,
And Doing Gift Or Estate Planning.
[LO 1] Describe Some Ways In Which Taxes Affect The Political Process
In The United States.
U.S. Presidential Candidates Often Distinguish Themselves From Their Opponents
© Mcgraw Hill LLC. All Rights Reserved. No Reproduction Or Distribution Without The Prior Written Consent Of Mcgraw Hill LLC.
, Solutions Manual—Taxation Of Individuals, By Spilker Et Al.
Based Upon Their Tax Rhetoric. Likewise, The Major Political Parties Generally
Have Very Diverse Views Of The Appropriate Way To Tax The Public.
Determining Who Is Taxed, What Is Taxed, And How Much Is Taxed Are
Difficult Questions. Voters Must Have A Basic Understanding Of Taxes To
Evaluate The Merits Of Alternative Tax Proposals Offered By Opposing Political
Candidates And Their Political Parties.
[LO 2] Courtney Recently Received A Speeding Ticket On Her Way To The
University. Her Fine Was $200. Is This Considered A Tax? Why Or Why Not?
The $200 Speeding Ticket Is Not Considered A Tax. Instead, It Is Considered A
Fine Or Penalty. Taxes Differ From Fines And Penalties Because Taxes Are
Not Intended To Punish Or Prevent Illegal Behavior.
[LO 2] Marlon And Latoya Recently Started Building A House. They Had To Pay
$300 To The County Government For A Building Permit. Is The $300 Payment
A Tax? Why Or Why Not?
The Building Permit Is Not Considered A Tax Because $300 Payment Is
Directly Linked To A Benefit That They Received (I.E., The Ability To Build
A House).
[LO 2] To Help Pay For The City’s New Stadium, The City Of Birmingham
Recently Enacted A 1 Percent Surcharge On Hotel Rooms. Is This A Tax?
Why Or Why Not?
The 1 Percent Surcharge Is A Tax. The 1 Percent Surcharge Is An Earmarked
Tax – I.E., Collected For A Specific Purpose. The Surcharge Is Considered A
Tax Because The Tax Payments Made By Taxpayers Do Not Directly Relate To
The Specific Benefit Received By The Taxpayers.
[LO 2] As Noted In Example 1-2, Tolls, Parking Meter Fees, And Annual
Licensing Fees Are Not Considered Taxes. Can You Identify Other Fees That
Are Similar?
There Are Several Possible Answers To This Question. Some Common
Examples Include Entrance Fees To National Parks, Tag Fees Paid To
Local/State Government For Automobiles, Boats, Etc.
[LO 2] If The General Objective Of Our Tax System Is To Raise Revenue, Why
Does The Income Tax Allow Deductions For Charitable Contributions And
Retirement Plan Contributions?
In Addition To The General Objective Of Raising Revenue, Congress Uses The
Federal Tax System To Encourage Certain Behavior And Discourage Other
Behavior. The Charitable Contribution Deduction Is Intended To Encourage
Taxpayers To Support The Initiatives Of Charitable Organizations, Whereas
Deductions For Retirement Contributions Are Intended To Encourage
Retirement Savings. Another Objective Of The Tax System Is To Redistribute
Wealth.
, © Mcgraw Hill LLC. All Rights Reserved. No Reproduction Or Distribution Without The Prior Written Consent Of Mcgraw Hill LLC.
2
Solutions Manual—Taxation Of Individuals, By Spilker Et Al.
[LO 2] One Common Argument For Imposing So-Called Sin Taxes Is The
Social Goal Of Reducing Demand For Such Products. Using Cigarettes As An
Example, Is There A Segment Of The Population That Might Be Sensitive To
Price And For Whom High Taxes Might Discourage Purchases?
The Most Obvious Segment Sensitive To Price May Be Teenagers And Younger
Adults That Typically Have Less Disposable Income, Although Price Sensitivity
Or Elasticity Will Vary By Taxpayer.
[LO 3] Dontae Stated That He Didn’t Want To Earn Any More Money
Because It Would ―Put Him In A Higher Tax Bracket.‖ What Is Wrong With
Dontae’s Reasoning?
Although Earning Additional Taxable Income May Increase Dontae‘S Marginal
Tax Rate (I.E., Put Him In A Higher Tax Bracket), The Additional Income
Earned Does Not Affect The Taxes That Dontae Will Pay On His Existing
Income. Moving To A Higher Tax Bracket Simply Means That Dontae Will Pay
A Higher Tax Rate On The Additional Income Earned (Not On The Income That
He Already Has).
[LO 3] Describe The Three Different Tax Rates Discussed In The Chapter
And How Taxpayers Might Use Them.
The Marginal Tax Rate Is The Tax Rate That Applies To The Taxpayer‘S
Additional Taxable Income Or Deductions That The Taxpayer Is Evaluating
In A Decision. Specifically,
Δtax (Newtotaltax Oldtotaltax)
Marginal Tax Rate Δtaxableincome (N Ewtaxableincome Oldtaxableincome)
The Marginal Tax Rate Is Particularly Useful In Tax Planning Because It
Represents The Rate Of Taxation Or Savings That Would Apply To Additional
Taxable Income Or Tax Deductions.
The Average Tax Rate Represents The Taxpayer‘S Average Level Of Taxation
On Each Dollar Of Taxable Income. Specifically,
Totaltax
Average Tax Rate = Taxableincome
The Average Tax Rate Is Often Used In Budgeting Tax Expense As A Portion Of
Income (I.E., What Percent Of Taxable Income Earned Is Paid In Tax).
MCGRAW-HILL'S TAXATION OF
INDIVIDUALS 2026 EDITION
,Solutions Manual—Taxation Of Individuals, By Spilker Et Al.
Solution Manual For
Mcgraw-Hill's Taxation Of Individuals 2026 Edition,
Spilker
Chapter 1-14
Chapter 1
An Introduction To Tax
Discussion Questions
[LO 1] Jessica’s Friend Zachary Once Stated That He Couldn’t Understand
Why Someone Would Take A Tax Course. Why Is This A Rather Naïve
View?
Taxes Are A Part Of Everyday Life And Have A Financial Effect On Many Of The
Major Personal Decisions That Individuals Face (E.G., Investment Decisions,
Evaluating Alternative Job Offers, Saving For Education Expenses, Gift Or Estate
Planning, Etc.).
[LO 1] What Are Some Aspects Of Business That Require Knowledge Of
Taxation? What Are Some Aspects Of Personal Finance That Require
Knowledge Of Taxation?
Taxes Play An Important Role In Fundamental Business Decisions Such As
The Following:
What Organizational Form Should A Business Use?
Where Should The Business Locate?
How Should Business Acquisitions Be Structured?
How Should The Business Compensate Employees?
What Is The Appropriate Mix Of Debt And Equity For The Business?
Should The Business Rent Or Own Its Equipment And Property?
How Should The Business Distribute Profits To Its Owners?
One Must Consider All Transaction Costs (Including Taxes) To Evaluate The
Merits Of A Transaction.
Common Personal Financial Decisions That Taxes Influence Include:
Choosing Investments, Retirement Planning, Choosing To Rent Or Buy A
Home, Evaluating Alternative Job Offers, Saving For Education Expenses,
And Doing Gift Or Estate Planning.
[LO 1] Describe Some Ways In Which Taxes Affect The Political Process
In The United States.
U.S. Presidential Candidates Often Distinguish Themselves From Their Opponents
© Mcgraw Hill LLC. All Rights Reserved. No Reproduction Or Distribution Without The Prior Written Consent Of Mcgraw Hill LLC.
, Solutions Manual—Taxation Of Individuals, By Spilker Et Al.
Based Upon Their Tax Rhetoric. Likewise, The Major Political Parties Generally
Have Very Diverse Views Of The Appropriate Way To Tax The Public.
Determining Who Is Taxed, What Is Taxed, And How Much Is Taxed Are
Difficult Questions. Voters Must Have A Basic Understanding Of Taxes To
Evaluate The Merits Of Alternative Tax Proposals Offered By Opposing Political
Candidates And Their Political Parties.
[LO 2] Courtney Recently Received A Speeding Ticket On Her Way To The
University. Her Fine Was $200. Is This Considered A Tax? Why Or Why Not?
The $200 Speeding Ticket Is Not Considered A Tax. Instead, It Is Considered A
Fine Or Penalty. Taxes Differ From Fines And Penalties Because Taxes Are
Not Intended To Punish Or Prevent Illegal Behavior.
[LO 2] Marlon And Latoya Recently Started Building A House. They Had To Pay
$300 To The County Government For A Building Permit. Is The $300 Payment
A Tax? Why Or Why Not?
The Building Permit Is Not Considered A Tax Because $300 Payment Is
Directly Linked To A Benefit That They Received (I.E., The Ability To Build
A House).
[LO 2] To Help Pay For The City’s New Stadium, The City Of Birmingham
Recently Enacted A 1 Percent Surcharge On Hotel Rooms. Is This A Tax?
Why Or Why Not?
The 1 Percent Surcharge Is A Tax. The 1 Percent Surcharge Is An Earmarked
Tax – I.E., Collected For A Specific Purpose. The Surcharge Is Considered A
Tax Because The Tax Payments Made By Taxpayers Do Not Directly Relate To
The Specific Benefit Received By The Taxpayers.
[LO 2] As Noted In Example 1-2, Tolls, Parking Meter Fees, And Annual
Licensing Fees Are Not Considered Taxes. Can You Identify Other Fees That
Are Similar?
There Are Several Possible Answers To This Question. Some Common
Examples Include Entrance Fees To National Parks, Tag Fees Paid To
Local/State Government For Automobiles, Boats, Etc.
[LO 2] If The General Objective Of Our Tax System Is To Raise Revenue, Why
Does The Income Tax Allow Deductions For Charitable Contributions And
Retirement Plan Contributions?
In Addition To The General Objective Of Raising Revenue, Congress Uses The
Federal Tax System To Encourage Certain Behavior And Discourage Other
Behavior. The Charitable Contribution Deduction Is Intended To Encourage
Taxpayers To Support The Initiatives Of Charitable Organizations, Whereas
Deductions For Retirement Contributions Are Intended To Encourage
Retirement Savings. Another Objective Of The Tax System Is To Redistribute
Wealth.
, © Mcgraw Hill LLC. All Rights Reserved. No Reproduction Or Distribution Without The Prior Written Consent Of Mcgraw Hill LLC.
2
Solutions Manual—Taxation Of Individuals, By Spilker Et Al.
[LO 2] One Common Argument For Imposing So-Called Sin Taxes Is The
Social Goal Of Reducing Demand For Such Products. Using Cigarettes As An
Example, Is There A Segment Of The Population That Might Be Sensitive To
Price And For Whom High Taxes Might Discourage Purchases?
The Most Obvious Segment Sensitive To Price May Be Teenagers And Younger
Adults That Typically Have Less Disposable Income, Although Price Sensitivity
Or Elasticity Will Vary By Taxpayer.
[LO 3] Dontae Stated That He Didn’t Want To Earn Any More Money
Because It Would ―Put Him In A Higher Tax Bracket.‖ What Is Wrong With
Dontae’s Reasoning?
Although Earning Additional Taxable Income May Increase Dontae‘S Marginal
Tax Rate (I.E., Put Him In A Higher Tax Bracket), The Additional Income
Earned Does Not Affect The Taxes That Dontae Will Pay On His Existing
Income. Moving To A Higher Tax Bracket Simply Means That Dontae Will Pay
A Higher Tax Rate On The Additional Income Earned (Not On The Income That
He Already Has).
[LO 3] Describe The Three Different Tax Rates Discussed In The Chapter
And How Taxpayers Might Use Them.
The Marginal Tax Rate Is The Tax Rate That Applies To The Taxpayer‘S
Additional Taxable Income Or Deductions That The Taxpayer Is Evaluating
In A Decision. Specifically,
Δtax (Newtotaltax Oldtotaltax)
Marginal Tax Rate Δtaxableincome (N Ewtaxableincome Oldtaxableincome)
The Marginal Tax Rate Is Particularly Useful In Tax Planning Because It
Represents The Rate Of Taxation Or Savings That Would Apply To Additional
Taxable Income Or Tax Deductions.
The Average Tax Rate Represents The Taxpayer‘S Average Level Of Taxation
On Each Dollar Of Taxable Income. Specifically,
Totaltax
Average Tax Rate = Taxableincome
The Average Tax Rate Is Often Used In Budgeting Tax Expense As A Portion Of
Income (I.E., What Percent Of Taxable Income Earned Is Paid In Tax).
