,ACCESS Test Bank for Fundamentals of Taxation 2023 16th Edition Cruz
y y y y y y y y y y
SolutionsyManual
CHAPTER 1 – y y
SOLUTIONS END OF CHAPTE
y y y y
R MATERIAL
y
DiscussionyQuestions
1. (Introduction)yGiveyaybriefyhistoryyofytheyincomeytaxyinytheyUnitedyStates.
Answer:
Theyfirstyfederalyincomeytaxywasyenactedyiny1861ytoyhelpyfinanceytheyCivilyWarya
ndywasydiscardedysoonythereafter.y Iny1894,yanotheryincomeytaxywasypromulgat
edybyyCongressytoyraiseyadditionalytaxyrevenueyandytoyexpandytheysourcesyofyrev
enue.y Iny1895,ytheySupremeyCourtyruledythatytheyfederalyincomeytaxywasyuncon
stitutional.y Iny1913,ytheysixteenthyAmendmentytoytheyU.S.yConstitutionywasyena
cted.y ThisyamendmentygaveyCongressytheypowerytoylevyyandycollectytaxes.y Iny20
20,ytheyfederalygovernmentycollectedyabouty$1.75ytrillionyinyindividualyincomeyt
axes.
Feedback:
LearningyObjective:yIntroductiony
Topic:yIncomeytaxyhistoryyDifficul
ty:y1yEasy
EA:yNo
2. (Introduction)yForytaxyyeary2020,ywhatyproportionyofyindividualyincomeytaxyreturnsywasye
lectronicallyyfiled?yUseyTabley1-1.
Answer:
Iny2020,yelectronicallyyfiledytaxyreturnsywereyabouty94.25%yofytotalyreturns.
Feedback:yCalculatedyfromyTabley1-
1yLearningyObjective:yIntroductionyTop
ic:yIncomeytaxydata
Difficulty:y2yMediumyEA
:yNo
3. Nameytheythreeytypesyofytaxyrateystructuresyandygiveyanyexampleyofyeach.
Answer:
Progressivey–yU.S.yfederalyincomeytax
Proportionaly–y“flat-
tax”yusuallyyleviedyonypropertyyorysalesyatytheystateyorylocalylevel
Regressivey–
ySocialysecurityytaxyFeedback:
LearningyObjective:y01-01
©yMcGrawyHillyLLC.yAllyrightsyreserved.yNoyreproductionyorydistributionywithoutytheypriorywrittenyconsentyofyMcGrawyHillyLL
C.
mynursytest.store
,ACCESS Test Bank for Fundamentals of Taxation 2023 16th Edition Cruz
y y y y y y y y y y
SolutionsyManual
Topic:yTaxyrateystructureyDifficult
y:y1yEasy
EA:yNo
4. Whatyisyayprogressiveytax?y Whyydoyyouythinkytheygovernmentybelievesyityisyaymoreye
quitableytaxythan,ysay,yayregressiveytaxyoryproportionalytax?
Answer:
Ayprogressiveyrateystructureyisyaystructureywhereytheytaxyrateyincreasesyasytheyta
xybaseyincreases.y Theyprogressiveyrateystructureyisyviewedyasymoreyequitableybe
causeytheyamountyofytaxypaidyvariesywithytheyabilityytoypay.y Foryexample,ytheygov
ernmentybelievesythatyasyanyindividualymakesymoreyincome,yaysmallerypercentag
eyofythatyincomeyisyneededytoybuyynecessaryylivingysuppliesyandythusymoreyincom
eyisyavailableytoypayytaxes.
Feedback:
LearningyObjective:y01-
01yTopic:yTaxyrateystructurey
Difficulty:y2yMedium
EA:yNo
5. Whatytypeyofytaxyisyaysalesytax?y Explainyyouryanswer.
Answer:
Theysalesytaxyisyayproportionalytax.y Ayproportionalytaxyisyaytaxywhereytheytaxyra
teyremainsytheysameyregardlessyofytheytaxybase.y Mostycountyyorystateysalesytaxyr
atesyareytheysameyregardlessyofytheyamountyofysalesyuponywhichytheytaxyisylevied.
y Withyayproportionalytax,ytheymarginalytaxyrateyandyaverageytaxyrateyareyalway
sytheysame.
Feedback:
LearningyObjective:y01-
01yTopic:yTaxyrateystructurey
Difficulty:y1yEasy
EA:yNo
6. Whatyisytheydefinitionyofytaxybase,yandyhowydoesyityaffectytheyamountyofytaxylevied?
Answer:
Theytaxybaseyisytheydollaryamountyuponywhichytheytaxyrateyisyappliedyinyorderyt
oydetermineytheyactualytax.y Income,ydollarysales,yandypropertyyvalueyareytheym
oreycommonytaxybasesyinytheyUnitedyStates.
Feedback:
LearningyObjective:y01-
01yTopic:yTaxybase
©yMcGrawyHillyLLC.yAllyrightsyreserved.yNoyreproductionyorydistributionywithoutytheypriorywrittenyconsentyofyMcGrawyHillyLL
C.
mynursytest.store
, ACCESS Test Bank for Fundamentals of Taxation 2023 16th Edition Cruz
y y y y y y y y y y
SolutionsyManual
Difficulty:y1yEasyyE
A:yNo
7. WhatytypeyofytaxyrateystructureyisytheyU.S.yfederalyincomeytax?yExplainyyouryanswer.
Answer:
Theyfederalyincomeytaxyisyayprogressiveytax.y Asytheytaxybaseyincreases,ytheyrateyof
ytaxyincreases.y Taxyratesyrangeyfromyaylowyofy10%ytoyayhighyofy37%.
Feedback:
LearningyObjective:y01-
01yTopic:y Taxyrateystructu
reyDifficulty:y1yEasy
EA:yNo
8. Aychangeytoyay17%yflatytaxycouldycauseyayconsiderableyincreaseyinymanyytaxpayers’ytax
esyandyayconsiderableydecreaseyinytheycaseyofyothers.yExplainythisystatementyinylightyofytheys
tatisticsyinyTabley1-3.
Answer:
Thoseywithytaxableyincomeyabovey$200,000yhaveyaverageytaxyratesygreaterythany
17%,ythoseywithytaxableyincomeybelowy$200,000yhaveyaverageytaxyratesylessytha
ny17%.y Thus,yonyaverage,yifyay17%yflatytaxywereyenacted,ythoseywithytaxableyinc
omeyundery$200,000ywouldyseeytheirytaxyliabilityygoyupyandythoseywithytaxableyin
comeyovery$200,000ywouldyhaveylowerytaxyliability.
Feedback:yBasedyonytheyaverageytaxyratesyinyTabley1-
3yLearningyObjective:y01-01
Topic:yTaxyrateystructurey
Difficulty:y2yMediumy EA
:yNo
9. Explainywhatyisymeantybyyregressiveytax.yWhyyisytheysocialysecurityytaxyconsideredyayr
egressiveytax?
Answer:
Ayregressiveytaxyrateyisyoneywhereytheytaxyrateydecreasesyasytheytaxybaseygetsylar
ger.y Theysocialysecurityytaxyisyassessedyonytheyfirsty$147,000yofywagesy(iny2021).
y Thus,ytheysocialysecurityytaxyrateyisy6.2%y(12.4%yifyself-
employed)yonytheyfirsty$147,000yofywagesyandy0%yonywagesyabovey$147,000.
Feedback:
LearningyObjective:y01-
01yTopic:yTaxyrateystructurey
Difficulty:y1yEasy
EA:yNo
©yMcGrawyHillyLLC.yAllyrightsyreserved.yNoyreproductionyorydistributionywithoutytheypriorywrittenyconsentyofyMcGrawyHillyLL
C.
mynursytest.store
y y y y y y y y y y
SolutionsyManual
CHAPTER 1 – y y
SOLUTIONS END OF CHAPTE
y y y y
R MATERIAL
y
DiscussionyQuestions
1. (Introduction)yGiveyaybriefyhistoryyofytheyincomeytaxyinytheyUnitedyStates.
Answer:
Theyfirstyfederalyincomeytaxywasyenactedyiny1861ytoyhelpyfinanceytheyCivilyWarya
ndywasydiscardedysoonythereafter.y Iny1894,yanotheryincomeytaxywasypromulgat
edybyyCongressytoyraiseyadditionalytaxyrevenueyandytoyexpandytheysourcesyofyrev
enue.y Iny1895,ytheySupremeyCourtyruledythatytheyfederalyincomeytaxywasyuncon
stitutional.y Iny1913,ytheysixteenthyAmendmentytoytheyU.S.yConstitutionywasyena
cted.y ThisyamendmentygaveyCongressytheypowerytoylevyyandycollectytaxes.y Iny20
20,ytheyfederalygovernmentycollectedyabouty$1.75ytrillionyinyindividualyincomeyt
axes.
Feedback:
LearningyObjective:yIntroductiony
Topic:yIncomeytaxyhistoryyDifficul
ty:y1yEasy
EA:yNo
2. (Introduction)yForytaxyyeary2020,ywhatyproportionyofyindividualyincomeytaxyreturnsywasye
lectronicallyyfiled?yUseyTabley1-1.
Answer:
Iny2020,yelectronicallyyfiledytaxyreturnsywereyabouty94.25%yofytotalyreturns.
Feedback:yCalculatedyfromyTabley1-
1yLearningyObjective:yIntroductionyTop
ic:yIncomeytaxydata
Difficulty:y2yMediumyEA
:yNo
3. Nameytheythreeytypesyofytaxyrateystructuresyandygiveyanyexampleyofyeach.
Answer:
Progressivey–yU.S.yfederalyincomeytax
Proportionaly–y“flat-
tax”yusuallyyleviedyonypropertyyorysalesyatytheystateyorylocalylevel
Regressivey–
ySocialysecurityytaxyFeedback:
LearningyObjective:y01-01
©yMcGrawyHillyLLC.yAllyrightsyreserved.yNoyreproductionyorydistributionywithoutytheypriorywrittenyconsentyofyMcGrawyHillyLL
C.
mynursytest.store
,ACCESS Test Bank for Fundamentals of Taxation 2023 16th Edition Cruz
y y y y y y y y y y
SolutionsyManual
Topic:yTaxyrateystructureyDifficult
y:y1yEasy
EA:yNo
4. Whatyisyayprogressiveytax?y Whyydoyyouythinkytheygovernmentybelievesyityisyaymoreye
quitableytaxythan,ysay,yayregressiveytaxyoryproportionalytax?
Answer:
Ayprogressiveyrateystructureyisyaystructureywhereytheytaxyrateyincreasesyasytheyta
xybaseyincreases.y Theyprogressiveyrateystructureyisyviewedyasymoreyequitableybe
causeytheyamountyofytaxypaidyvariesywithytheyabilityytoypay.y Foryexample,ytheygov
ernmentybelievesythatyasyanyindividualymakesymoreyincome,yaysmallerypercentag
eyofythatyincomeyisyneededytoybuyynecessaryylivingysuppliesyandythusymoreyincom
eyisyavailableytoypayytaxes.
Feedback:
LearningyObjective:y01-
01yTopic:yTaxyrateystructurey
Difficulty:y2yMedium
EA:yNo
5. Whatytypeyofytaxyisyaysalesytax?y Explainyyouryanswer.
Answer:
Theysalesytaxyisyayproportionalytax.y Ayproportionalytaxyisyaytaxywhereytheytaxyra
teyremainsytheysameyregardlessyofytheytaxybase.y Mostycountyyorystateysalesytaxyr
atesyareytheysameyregardlessyofytheyamountyofysalesyuponywhichytheytaxyisylevied.
y Withyayproportionalytax,ytheymarginalytaxyrateyandyaverageytaxyrateyareyalway
sytheysame.
Feedback:
LearningyObjective:y01-
01yTopic:yTaxyrateystructurey
Difficulty:y1yEasy
EA:yNo
6. Whatyisytheydefinitionyofytaxybase,yandyhowydoesyityaffectytheyamountyofytaxylevied?
Answer:
Theytaxybaseyisytheydollaryamountyuponywhichytheytaxyrateyisyappliedyinyorderyt
oydetermineytheyactualytax.y Income,ydollarysales,yandypropertyyvalueyareytheym
oreycommonytaxybasesyinytheyUnitedyStates.
Feedback:
LearningyObjective:y01-
01yTopic:yTaxybase
©yMcGrawyHillyLLC.yAllyrightsyreserved.yNoyreproductionyorydistributionywithoutytheypriorywrittenyconsentyofyMcGrawyHillyLL
C.
mynursytest.store
, ACCESS Test Bank for Fundamentals of Taxation 2023 16th Edition Cruz
y y y y y y y y y y
SolutionsyManual
Difficulty:y1yEasyyE
A:yNo
7. WhatytypeyofytaxyrateystructureyisytheyU.S.yfederalyincomeytax?yExplainyyouryanswer.
Answer:
Theyfederalyincomeytaxyisyayprogressiveytax.y Asytheytaxybaseyincreases,ytheyrateyof
ytaxyincreases.y Taxyratesyrangeyfromyaylowyofy10%ytoyayhighyofy37%.
Feedback:
LearningyObjective:y01-
01yTopic:y Taxyrateystructu
reyDifficulty:y1yEasy
EA:yNo
8. Aychangeytoyay17%yflatytaxycouldycauseyayconsiderableyincreaseyinymanyytaxpayers’ytax
esyandyayconsiderableydecreaseyinytheycaseyofyothers.yExplainythisystatementyinylightyofytheys
tatisticsyinyTabley1-3.
Answer:
Thoseywithytaxableyincomeyabovey$200,000yhaveyaverageytaxyratesygreaterythany
17%,ythoseywithytaxableyincomeybelowy$200,000yhaveyaverageytaxyratesylessytha
ny17%.y Thus,yonyaverage,yifyay17%yflatytaxywereyenacted,ythoseywithytaxableyinc
omeyundery$200,000ywouldyseeytheirytaxyliabilityygoyupyandythoseywithytaxableyin
comeyovery$200,000ywouldyhaveylowerytaxyliability.
Feedback:yBasedyonytheyaverageytaxyratesyinyTabley1-
3yLearningyObjective:y01-01
Topic:yTaxyrateystructurey
Difficulty:y2yMediumy EA
:yNo
9. Explainywhatyisymeantybyyregressiveytax.yWhyyisytheysocialysecurityytaxyconsideredyayr
egressiveytax?
Answer:
Ayregressiveytaxyrateyisyoneywhereytheytaxyrateydecreasesyasytheytaxybaseygetsylar
ger.y Theysocialysecurityytaxyisyassessedyonytheyfirsty$147,000yofywagesy(iny2021).
y Thus,ytheysocialysecurityytaxyrateyisy6.2%y(12.4%yifyself-
employed)yonytheyfirsty$147,000yofywagesyandy0%yonywagesyabovey$147,000.
Feedback:
LearningyObjective:y01-
01yTopic:yTaxyrateystructurey
Difficulty:y1yEasy
EA:yNo
©yMcGrawyHillyLLC.yAllyrightsyreserved.yNoyreproductionyorydistributionywithoutytheypriorywrittenyconsentyofyMcGrawyHillyLL
C.
mynursytest.store
