Test Bank
McGraw-Hill's Taxation of Individuals 2024
Edition 15th Edition.
,Table Of Content.
Part I: Introduction to Taxation
Chapter 1: An Introduction to Tax
Chapter 2: Tax Compliance, the IRS, and Tax Authorities
Chapter 3: Tax Planning Strategies and Related Limitations
Part II: Basic Individual Taxation
Chapter 4: Individual Income Tax Overview, Dependents, and Filing Status
Chapter 5: Gross Income and Exclusions
Chapter 6: Individual Deductions
Chapter 7: Investments
Chapter 8: Individual Income Tax Computation and Tax Credits
Part III: Business-Related Transactions
Chapter 9: Business Income, Deductions, and Accounting Methods
Chapter 10: Property Acquisition and Cost Recovery
Chapter 11: Property Dispositions
Part IV: Specialized Topics
Chapter 12: Compensation
Chapter 13: Retirement Savings and Deferred Compensation
Chapter 14: Tax Consequences of Home Ownership
,Chapter 1
An Introduction to Tax
Discussion Questions
(1) [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.).
(2) [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.
(3) [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
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.
(4) [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.
(5) [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).
(6) [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 ?
McGraw-Hill's Taxation of Individuals 2024
Edition 15th Edition.
,Table Of Content.
Part I: Introduction to Taxation
Chapter 1: An Introduction to Tax
Chapter 2: Tax Compliance, the IRS, and Tax Authorities
Chapter 3: Tax Planning Strategies and Related Limitations
Part II: Basic Individual Taxation
Chapter 4: Individual Income Tax Overview, Dependents, and Filing Status
Chapter 5: Gross Income and Exclusions
Chapter 6: Individual Deductions
Chapter 7: Investments
Chapter 8: Individual Income Tax Computation and Tax Credits
Part III: Business-Related Transactions
Chapter 9: Business Income, Deductions, and Accounting Methods
Chapter 10: Property Acquisition and Cost Recovery
Chapter 11: Property Dispositions
Part IV: Specialized Topics
Chapter 12: Compensation
Chapter 13: Retirement Savings and Deferred Compensation
Chapter 14: Tax Consequences of Home Ownership
,Chapter 1
An Introduction to Tax
Discussion Questions
(1) [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.).
(2) [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.
(3) [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
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.
(4) [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.
(5) [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).
(6) [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 ?
