Solution Manual for Principles of Taxation for Business and Investment Planning 2025 Evergreen Release By Sally Jones, Shelley Rhoades-Catanach

SOLUTION MANUAL FOR V V


Principles of Taxation for Business and Investment Planning 2020 23rd Edition
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by Sally Jones, Shelley Rhoades Catanach
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Chapter 1 Taxes and Taxing Jurisdictions
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Questions and Problems for Discussion
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1. Tax payments differ from government fines and penalties because they aren‘t intended to
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deter or punish unacceptable behavior. Tax payments differ from fees or user charges
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because they don‘t entitle the payer to a specific government good or service, such as a
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postage stamp or a driver‘s license. Tax payments also differ from fees or user charges
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because they are compulsory.
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2. This payment has characteristics of a tax, a penalty, and a user fee. The compulsory
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payment is not specifically punitive but does apply selectively to those companies most likely
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responsible for the polluted condition of Green River. However, these same companies may
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be the entities that benefit most from the environmental clean-up.
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3. This payment more closely resembles a fee for a government service than a transaction-
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based tax because the transaction occurs between a private party and the jurisdiction itself,
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rather than between private parties engaging in a market transaction. The payment also
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entitles the payer to a specific benefit (the right to marry under law).
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4. To the extent that the decline in exterior maintenance reduces the value of Mr. Powell‘s
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apartment complex, he bears the incidence of the increased property tax. To the extent that
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the decline reduces the value of adjoining properties or makes the neighborhood less
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attractive, the owners of the adjoining properties and the neighborhood residents share the
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incidence of the tax increase.
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5. People who don‘t directly use public schools (such as Mr. and Mrs. Ahern or people who
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don‘t have children) indirectly benefit from a public education system for the general
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population. Arguably, public education contributes to a skilled workforce and improves the
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cultural and social environment in which Mr. and Mrs. Ahern live. Based on this argument,
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Mr. and Mrs. Ahern should not be exempt from the local property tax.
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6. The consumers who pay the same price for a smaller bar of soap of lesser quality bear
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the incidence of the new gross receipts tax.
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7. Real property can‘t be hidden or moved, and its ownership (legal title) is a matter of
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public record. In contrast, personal property is mobile and may be easily concealed.
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Moreover, jurisdictions may not have an effective means to discover or trace
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ownership of personal property.
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8. Arguably, private golf courses beautify the locality and are environmentally more desirable
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than other commercial activities. They also may require more acreage than other
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businesses and, therefore, would be at a competitive disadvantage without a preferential
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real property tax rate.
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9. Many jurisdictions that levy property taxes provide an exemption for public institutions, such
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as state universities or private colleges. If University K is entitled to such an exemption,
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every commercial building or residence acquired by the University reduces the local
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jurisdiction‘s property tax base.
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,10. Excise taxes are imposed on a much narrower range of consumer goods and services
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than sales taxes. Consequently, people can more readily avoid purchasing the specific
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good or service subject to excise tax.
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11. The tax increase may have reduced the aggregate demand for consumer goods and,
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consequently, municipal residents are buying fewer goods. A second possibility is that
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municipal residents are traveling to other jurisdictions with lower tax rates or making more
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purchases through mail order catalogs or on-line.
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12. From a political perspective, liquor and cigarettes sales make an excellent tax base because
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consumption of the two products is purely discretionary, and any decline in consumption
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because of the tax is socially desirable. From an economic perspective, these sales are a
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good tax base because the demand for liquor and cigarettes is relatively price inelastic. In
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other words, people who drink and smoke on a regular basis buy these products regardless
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of a heavy excise tax.
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13. The federal income has the broader base. The federal payroll tax is imposed on wages,
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salaries, and other forms of compensation earned by employees. The federal income tax is
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imposed on all types of compensation as well as net business profit, investment income,
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and any other income item from whatever source derived.
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14. A property tax is a periodic (usually annual) tax levied on the ownership of property and
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based on the value of the property on a particular assessment date. A transfer tax is a
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transaction- based tax levied on the transfer of property from one party to another. A
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transfer tax is based on the value of the property at date of transfer.
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15. If the federal government could ―piggy back‖ a national sales tax on existing state sales tax
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collection systems, the federal government could avoid creating a new federal agency for
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collecting the tax. In contrast, the federal government would have to create a new
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collection system for a national VAT. However, a national VAT would be less likely to
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cause jurisdictional conflict between the federal government and the states because states
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don‘t depend on VATs as a source of revenue.
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16. The Internal Revenue Code is federal statutory law, enacted by Congress and signed by the
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President. Technically, Treasury regulations only interpret and explain the statute and aren‘t
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laws in their own right. Thus, regulations are less authoritative than the Code itself.
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However, because Congress authorized the Treasury to write regulations, they are the
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government‘s official interpretation of statutory law. Practically, the regulations carry
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considerable authoritative weight.
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Application Problems V




1. a. V The statement of facts identifies three taxpayers: Mr. Josh Kenney, JK Services, and
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JK Realty.
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b. The government of the locality in which Mr. Kenney resides, the state government of
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Vermont, and the U.S. government have jurisdiction to tax Mr. Kenney. The local
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governments of the four counties in which JK Services conducts business, the state
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government of Vermont, and the U.S. government have jurisdiction to tax JK Services.
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The city of Boston, the state government of Massachusetts, and the U.S. government
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have jurisdiction to tax JK Realty.
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2. a. V V The United States has jurisdiction to tax Mrs. May because she is a permanent resident.
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b. The United States has jurisdiction to tax Mrs. May only on the U.S. source rental
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income generated by the Manhattan real estate.
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, c. The United States does not have jurisdiction to tax Mrs. May.
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d. The United States has jurisdiction to tax Mrs. May because she is a U.S. citizen.
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3. a. The United States has jurisdiction to tax Mr. Tompkin because he is a U.S citizen.
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b. The United States has jurisdiction to tax Mr. Tompkin only on the U.S. source rental
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income generated by the Buffalo real estate.
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c. The United States has jurisdiction to tax Mr. Tompkin because he is a permanent resident.
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d. The United States has jurisdiction to tax Mr. Tompkin on his share of the U.S.
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source business income generated by Sophic Partnership.
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4. State A: V



Volume of sales before rate increase
V V V V V $800,000,000
Original tax rate V V .05
Revenue before rate increase V V V $40,000,000

Volume of sales after rate increase
V V V V V $710,000,000
New tax rate V V .06
Revenue after rate increase V V V $42,600,000

Additional revenue ($42,600,000  $40,000,000)
V V V V $2,600,000

State Z: V



Volume of sales added to tax base
V V V V V V $50,000,000
Tax rate V .05
Additional revenue V $2,500,000

5. a. V V The property tax is $8,300 ($415,000  2%).
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b. The property tax is $19,000 ([$500,000  2%] + [$225,000  4%]).
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6. a. V V The property tax is $39,000 ($1.3 million  3%).
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b. The property tax is $85,000 ([$2 million  3%] + [$2.5 million  1%]).
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7. Increase in County G‘s aggregate assessed property tax value
V V V V V V V V $23,000,000
VAssessed value of Lexon‘s new facility
V V V V V (20,000,000)
Net increase in County G‘s tax base
V V V V V V $3,000,000
VTax rate V

V .04
Net effect on County G‘s current year revenue
V V V V V V V $120,000

8. a. V Value of property purchased in State K
V V V V V V $600,000
Use tax rate in State H
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V.06
Pre credit use tax
V V V $36,000
Sales tax paid to State K
V V V V V (18,000)
Use tax owed to State H
V V V V V $18,000

b. Value of property purchased in State L
V V V V V V $750,000
Use tax rate in State H
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.06 V

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, Pre credit use tax
V V V $45,000
Sales tax paid to State L
V V V V V (48,750)
Use tax owed to State H
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