Solution Manual for McGraw-Hill's Taxation of
z z z z z
z Individuals 2024 Edition, 15th Edition
z z z z
By Brian Spilker, Benjamin Ayers, All Chapters 1 - 14
z z z z z z z z z
,TABLE OF CONTENTS
z z z
Part zI: zIntroduction zto zTaxation
Chapter z1: zAn zIntroduction zto zTax
Chapter z2: zTax zCompliance, zthe zIRS, zand zTax zAuthorities
Chapter z3: zTax zPlanning zStrategies zand zRelated zLimitations
Part zII: zBasic zIndividual zTaxation
Chapter z4: zIndividual zIncome zTax zOverview, zDependents, zand zFiling zStatus
Chapter z5: zGross zIncome zand zExclusions
Chapter z6: zIndividual zDeductions
Chapter z7: zInvestments
Chapter z8: zIndividual zIncome zTax zComputation zand zTax zCredits
Part zIII: zBusiness-Related zTransactions
Chapter z9: zBusiness zIncome, zDeductions, zand zAccounting zMethods
Chapter z10: zProperty zAcquisition zand zCost zRecovery
Chapter z11: zProperty zDispositions
Part zIV: zSpecialized zTopics
Chapter z12: zCompensation
Chapter z13: zRetirement zSavings zand zDeferred zCompensation
Chapter z14: zTax zConsequences zof zHome zOwnership
,Chapter 1z
An Introduction to Tax
z z z
Discussion Questions
z
(1) [LO z1] zJessica’s zfriend zZachary zonce zstated zthat zhe zcouldn’t zunderstand zwhy
someone zwould ztake za ztax zcourse. zWhy zis zthis za zrather znaïve zview?
Taxes zare za zpart zof zeveryday zlife zand zhave za zfinancial zeffect zon zmany zof zthe zmajor z personal
zdecisions zthat zindividuals zface z(e.g., zinvestment zdecisions, zevaluating z alternative zjob zoffers,
zsaving zfor zeducation zexpenses, zgift zor zestate zplanning, zetc.).
(2) [LO z1] zWhat zare zsome zaspects zof zbusiness zthat zrequire zknowledge zof ztaxation?
z What zare zsome zaspects zof zpersonal zfinance zthat zrequire zknowledge zof ztaxation?
Taxes zplay zan zimportant zrole zin zfundamental zbusiness zdecisions zsuch zas zthe z following:
• What zorganizational zform zshould za zbusiness zuse?
• Where zshould zthe zbusiness zlocate?
• How zshould zbusiness zacquisitions zbe zstructured?
• How zshould zthe zbusiness zcompensate zemployees?
• What zis zthe zappropriate zmix zof zdebt zand zequity zfor zthe zbusiness?
• Should zthe zbusiness zrent zor zown zits zequipment zand zproperty?
• How zshould zthe zbusiness zdistribute zprofits zto zits zowners?
One zmust zconsider zall ztransaction zcosts z(including ztaxes) zto zevaluate zthe zmerits zof z a ztransaction.
Common zpersonal zfinancial zdecisions zthat ztaxes zinfluence zinclude: zchoosing z investments,
zretirement zplanning, zchoosing zto zrent zor zbuy za zhome, zevaluating z alternative zjob zoffers, zsaving
zfor zeducation zexpenses, zand zdoing zgift zor zestate z planning.
(3) [LO z1] zDescribe zsome zways zin zwhich ztaxes zaffect zthe zpolitical zprocess zin zthe
z United zStates.
U.S. zpresidential zcandidates zoften zdistinguish zthemselves zfrom ztheir zopponents
, based zupon ztheir ztax zrhetoric. zLikewise, zthe zmajor zpolitical zparties zgenerally zhave z very zdiverse
zviews zof zthe zappropriate zway zto ztax zthe zpublic. zDetermining zwho zis z taxed, zwhat zis ztaxed, zand
zhow zmuch zis ztaxed zare zdifficult zquestions. zVoters zmust z have za zbasic zunderstanding zof ztaxes zto
zevaluate zthe zmerits zof zalternative ztax z proposals zoffered zby zopposing zpolitical zcandidates zand
ztheir zpolitical zparties.
(4) [LO z2] zCourtney zrecently zreceived za zspeeding zticket zon zher zway zto zthe zuniversity.
z Her zfine zwas z$200. zIs zthis zconsidered za ztax? zWhy zor zwhy znot?
The z$200 zspeeding zticket zis znot zconsidered za ztax. zInstead, zit zis zconsidered za zfine z or zpenalty.
zTaxes zdiffer zfrom zfines zand zpenalties zbecause ztaxes zare znot zintended z to zpunish zor zprevent
zillegal zbehavior.
(5) [LO z2] zMarlon zand zLatoya zrecently zstarted zbuilding za zhouse. zThey zhad zto zpay
$300 zto zthe zcounty zgovernment zfor za zbuilding zpermit. zIs zthe z$300 zpayment za ztax?
z Why zor zwhy znot?
The zbuilding zpermit zis znot zconsidered za ztax zbecause z$300 zpayment zis zdirectly z linked zto za
zbenefit zthat zthey zreceived z(i.e., zthe zability zto zbuild za zhouse).
(6) [LO z2] zTo zhelp zpay zfor zthe zcity’s znew zstadium, zthe zcity zof zBirmingham zrecently
z enacted za z1 zpercent zsurcharge zon zhotel zrooms. zIs zthis za ztax? zWhy zor zwhy znot?
The z1 zpercent zsurcharge zis za ztax. zThe z1 zpercent zsurcharge zis zan zearmarked ztax z– z i.e., zcollected
zfor za zspecific zpurpose. zThe zsurcharge zis zconsidered za ztax zbecause z the ztax zpayments zmade zby
ztaxpayers zdo znot zdirectly zrelate zto zthe zspecific zbenefit z received zby zthe ztaxpayers.
(7) [LO z2] zAs znoted zin zExample z1-2, ztolls, zparking zmeter zfees, zand zannual zlicensing
z fees zare znot zconsidered ztaxes. zCan zyou zidentify zother zfees zthat zare zsimilar?
There zare zseveral zpossible zanswers zto zthis zquestion. zSome zcommon zexamples z include zentrance
zfees zto znational zparks, ztag zfees zpaid zto zlocal/state zgovernment z for zautomobiles, zboats, zetc.
(8) [LO z2] zIf zthe zgeneral zobjective zof zour ztax zsystem zis zto zraise zrevenue, zwhy zdoes zthe
z income ztax zallow zdeductions zfor zcharitable zcontributions zand zretirement zplan
z contributions?
In zaddition zto zthe zgeneral zobjective zof zraising zrevenue, zCongress zuses zthe zfederal z tax zsystem zto
zencourage zcertain zbehavior zand zdiscourage zother zbehavior. zThe z charitable zcontribution zdeduction
zis zintended zto zencourage ztaxpayers zto zsupport z the zinitiatives zof zcharitable zorganizations,
zwhereas zdeductions zfor zretirement z contributions zare zintended zto zencourage zretirement zsavings.
zAnother zobjective zof z the ztax zsystem zis zto zredistribute zwealth.
z z z z z
z Individuals 2024 Edition, 15th Edition
z z z z
By Brian Spilker, Benjamin Ayers, All Chapters 1 - 14
z z z z z z z z z
,TABLE OF CONTENTS
z z z
Part zI: zIntroduction zto zTaxation
Chapter z1: zAn zIntroduction zto zTax
Chapter z2: zTax zCompliance, zthe zIRS, zand zTax zAuthorities
Chapter z3: zTax zPlanning zStrategies zand zRelated zLimitations
Part zII: zBasic zIndividual zTaxation
Chapter z4: zIndividual zIncome zTax zOverview, zDependents, zand zFiling zStatus
Chapter z5: zGross zIncome zand zExclusions
Chapter z6: zIndividual zDeductions
Chapter z7: zInvestments
Chapter z8: zIndividual zIncome zTax zComputation zand zTax zCredits
Part zIII: zBusiness-Related zTransactions
Chapter z9: zBusiness zIncome, zDeductions, zand zAccounting zMethods
Chapter z10: zProperty zAcquisition zand zCost zRecovery
Chapter z11: zProperty zDispositions
Part zIV: zSpecialized zTopics
Chapter z12: zCompensation
Chapter z13: zRetirement zSavings zand zDeferred zCompensation
Chapter z14: zTax zConsequences zof zHome zOwnership
,Chapter 1z
An Introduction to Tax
z z z
Discussion Questions
z
(1) [LO z1] zJessica’s zfriend zZachary zonce zstated zthat zhe zcouldn’t zunderstand zwhy
someone zwould ztake za ztax zcourse. zWhy zis zthis za zrather znaïve zview?
Taxes zare za zpart zof zeveryday zlife zand zhave za zfinancial zeffect zon zmany zof zthe zmajor z personal
zdecisions zthat zindividuals zface z(e.g., zinvestment zdecisions, zevaluating z alternative zjob zoffers,
zsaving zfor zeducation zexpenses, zgift zor zestate zplanning, zetc.).
(2) [LO z1] zWhat zare zsome zaspects zof zbusiness zthat zrequire zknowledge zof ztaxation?
z What zare zsome zaspects zof zpersonal zfinance zthat zrequire zknowledge zof ztaxation?
Taxes zplay zan zimportant zrole zin zfundamental zbusiness zdecisions zsuch zas zthe z following:
• What zorganizational zform zshould za zbusiness zuse?
• Where zshould zthe zbusiness zlocate?
• How zshould zbusiness zacquisitions zbe zstructured?
• How zshould zthe zbusiness zcompensate zemployees?
• What zis zthe zappropriate zmix zof zdebt zand zequity zfor zthe zbusiness?
• Should zthe zbusiness zrent zor zown zits zequipment zand zproperty?
• How zshould zthe zbusiness zdistribute zprofits zto zits zowners?
One zmust zconsider zall ztransaction zcosts z(including ztaxes) zto zevaluate zthe zmerits zof z a ztransaction.
Common zpersonal zfinancial zdecisions zthat ztaxes zinfluence zinclude: zchoosing z investments,
zretirement zplanning, zchoosing zto zrent zor zbuy za zhome, zevaluating z alternative zjob zoffers, zsaving
zfor zeducation zexpenses, zand zdoing zgift zor zestate z planning.
(3) [LO z1] zDescribe zsome zways zin zwhich ztaxes zaffect zthe zpolitical zprocess zin zthe
z United zStates.
U.S. zpresidential zcandidates zoften zdistinguish zthemselves zfrom ztheir zopponents
, based zupon ztheir ztax zrhetoric. zLikewise, zthe zmajor zpolitical zparties zgenerally zhave z very zdiverse
zviews zof zthe zappropriate zway zto ztax zthe zpublic. zDetermining zwho zis z taxed, zwhat zis ztaxed, zand
zhow zmuch zis ztaxed zare zdifficult zquestions. zVoters zmust z have za zbasic zunderstanding zof ztaxes zto
zevaluate zthe zmerits zof zalternative ztax z proposals zoffered zby zopposing zpolitical zcandidates zand
ztheir zpolitical zparties.
(4) [LO z2] zCourtney zrecently zreceived za zspeeding zticket zon zher zway zto zthe zuniversity.
z Her zfine zwas z$200. zIs zthis zconsidered za ztax? zWhy zor zwhy znot?
The z$200 zspeeding zticket zis znot zconsidered za ztax. zInstead, zit zis zconsidered za zfine z or zpenalty.
zTaxes zdiffer zfrom zfines zand zpenalties zbecause ztaxes zare znot zintended z to zpunish zor zprevent
zillegal zbehavior.
(5) [LO z2] zMarlon zand zLatoya zrecently zstarted zbuilding za zhouse. zThey zhad zto zpay
$300 zto zthe zcounty zgovernment zfor za zbuilding zpermit. zIs zthe z$300 zpayment za ztax?
z Why zor zwhy znot?
The zbuilding zpermit zis znot zconsidered za ztax zbecause z$300 zpayment zis zdirectly z linked zto za
zbenefit zthat zthey zreceived z(i.e., zthe zability zto zbuild za zhouse).
(6) [LO z2] zTo zhelp zpay zfor zthe zcity’s znew zstadium, zthe zcity zof zBirmingham zrecently
z enacted za z1 zpercent zsurcharge zon zhotel zrooms. zIs zthis za ztax? zWhy zor zwhy znot?
The z1 zpercent zsurcharge zis za ztax. zThe z1 zpercent zsurcharge zis zan zearmarked ztax z– z i.e., zcollected
zfor za zspecific zpurpose. zThe zsurcharge zis zconsidered za ztax zbecause z the ztax zpayments zmade zby
ztaxpayers zdo znot zdirectly zrelate zto zthe zspecific zbenefit z received zby zthe ztaxpayers.
(7) [LO z2] zAs znoted zin zExample z1-2, ztolls, zparking zmeter zfees, zand zannual zlicensing
z fees zare znot zconsidered ztaxes. zCan zyou zidentify zother zfees zthat zare zsimilar?
There zare zseveral zpossible zanswers zto zthis zquestion. zSome zcommon zexamples z include zentrance
zfees zto znational zparks, ztag zfees zpaid zto zlocal/state zgovernment z for zautomobiles, zboats, zetc.
(8) [LO z2] zIf zthe zgeneral zobjective zof zour ztax zsystem zis zto zraise zrevenue, zwhy zdoes zthe
z income ztax zallow zdeductions zfor zcharitable zcontributions zand zretirement zplan
z contributions?
In zaddition zto zthe zgeneral zobjective zof zraising zrevenue, zCongress zuses zthe zfederal z tax zsystem zto
zencourage zcertain zbehavior zand zdiscourage zother zbehavior. zThe z charitable zcontribution zdeduction
zis zintended zto zencourage ztaxpayers zto zsupport z the zinitiatives zof zcharitable zorganizations,
zwhereas zdeductions zfor zretirement z contributions zare zintended zto zencourage zretirement zsavings.
zAnother zobjective zof z the ztax zsystem zis zto zredistribute zwealth.
