Answers Chapter 1 Homework-Introduction
CHAPTER 1: EXPLORING THE TAX ENVIRONMENT
DISCUSSION PROBLEMS
1) CUSTER COUNTRY IS CONSIDERING RAISING REVENUES BY IMPOSING A $25 FEE ON COUPLES WHO OBTAIN A MARRIAGE LICENSE WITHIN THE JURISDICTION. DOES THIS FEE MEET THE DEFINITION OF A TRANSACTION-BASED TAX?
NO, IT MORE CLOSELY RESEMBLES A FEE FOR A GOVERNMENT SERVICE. THE PAYMENT ENTITLES THE PAYER TO A SPECIFIC BENEFIT (THE RIGHT TO MARRY UNDER THE LAW).
2) A LOCAL GOVERNMENT RECENTLY IMPOSED A NEW 2 PERCENT TAX ON THE GROSS RECEIPTS OF BUSINESSES OPERATING WITHIN ITS JURISDICTION. THE XYZ COMPANY, WHICH MANUFACTURES SOAP AND OTHER TOILETRIES, RESPONDED TO THE TAX BY REDUCING THE SIZE OF ITS BARS OF SOAP AND PURCHASING A CHEAPER GRADE OF INGREDIENTS. BY MAKING THESE CHANGES, XYZ MAINTAINED ITS BEFORE-TAX LEVEL OF PROFITS. WHO BEARS THE INCIDENCE OF THE NEW GROSS RECEIPTS TAX?
THE CONSUMERS WHO PAY THE SAME PRICE FOR A SMALLER BAR OF SOAP OF LESSER QUALITY BEAR THE INCIDENCE OF THE NEW GROSS RECEIPTS TAX.
3) WHY IS THE REAL PROPERTY A BETTER TAX BASE THAN PERSONAL PROPERTY?
REAL PROPERTY CANNOT BE HIDDEN OR MOVED, AND ITS OWNERSHIP (LEGAL TITLE) IS A MATTER OF PUBLIC RECORD. IN CONTRAST, PERSONAL PROPERTY IS MOBILE AND MAY BE EASILY CONCEALED.
4) UNIVERSITY K IS LOCATED IN A SMALL TOWN THAT DEPENDS HEAVILY ON REAL PROPERTY TAXES AS A SOURCE OF REVENUE. OVER THE PAST DECADE, UNIVERSITY K HAS EXPANDED BY PURCHASING A NUMBER OF COMMERCIAL BUILDINGS AND PERSONAL RESIDENCES AND CONVERTING THEM TO CLASSROOMS AND DORMITORIES. IN WHAT WAY COULD THIS EXPANSION RESULT IN A DECLINE IN THE TOWN’S TAX REVENUES?
NORMALLY, UNIVERSITY-OWNED BUILDINGS WOULD BE EXEMPT FROM PROPERTY TAX. THIS WOULD CONVERT OTHERWISE TAXABLE BUILDINGS INTO TAX-EXEMPT BUILDINGS.
5) THE INTERNAL REVENUE CODE AND TREASURY REGULATIONS ARE TWO MAJOR SOURCES OF FEDERAL TAX LAW. DIFFERENTIATE BETWEEN THE CODE AND THE REGULATIONS IN TERMS OF THEIR RELATIVE WEIGHT OF AUTHORITY.
THE
DISCUSSION PROBLEMS
1) CUSTER COUNTRY IS CONSIDERING RAISING REVENUES BY IMPOSING A $25 FEE ON COUPLES WHO OBTAIN A MARRIAGE LICENSE WITHIN THE JURISDICTION. DOES THIS FEE MEET THE DEFINITION OF A TRANSACTION-BASED TAX?
NO, IT MORE CLOSELY RESEMBLES A FEE FOR A GOVERNMENT SERVICE. THE PAYMENT ENTITLES THE PAYER TO A SPECIFIC BENEFIT (THE RIGHT TO MARRY UNDER THE LAW).
2) A LOCAL GOVERNMENT RECENTLY IMPOSED A NEW 2 PERCENT TAX ON THE GROSS RECEIPTS OF BUSINESSES OPERATING WITHIN ITS JURISDICTION. THE XYZ COMPANY, WHICH MANUFACTURES SOAP AND OTHER TOILETRIES, RESPONDED TO THE TAX BY REDUCING THE SIZE OF ITS BARS OF SOAP AND PURCHASING A CHEAPER GRADE OF INGREDIENTS. BY MAKING THESE CHANGES, XYZ MAINTAINED ITS BEFORE-TAX LEVEL OF PROFITS. WHO BEARS THE INCIDENCE OF THE NEW GROSS RECEIPTS TAX?
THE CONSUMERS WHO PAY THE SAME PRICE FOR A SMALLER BAR OF SOAP OF LESSER QUALITY BEAR THE INCIDENCE OF THE NEW GROSS RECEIPTS TAX.
3) WHY IS THE REAL PROPERTY A BETTER TAX BASE THAN PERSONAL PROPERTY?
REAL PROPERTY CANNOT BE HIDDEN OR MOVED, AND ITS OWNERSHIP (LEGAL TITLE) IS A MATTER OF PUBLIC RECORD. IN CONTRAST, PERSONAL PROPERTY IS MOBILE AND MAY BE EASILY CONCEALED.
4) UNIVERSITY K IS LOCATED IN A SMALL TOWN THAT DEPENDS HEAVILY ON REAL PROPERTY TAXES AS A SOURCE OF REVENUE. OVER THE PAST DECADE, UNIVERSITY K HAS EXPANDED BY PURCHASING A NUMBER OF COMMERCIAL BUILDINGS AND PERSONAL RESIDENCES AND CONVERTING THEM TO CLASSROOMS AND DORMITORIES. IN WHAT WAY COULD THIS EXPANSION RESULT IN A DECLINE IN THE TOWN’S TAX REVENUES?
NORMALLY, UNIVERSITY-OWNED BUILDINGS WOULD BE EXEMPT FROM PROPERTY TAX. THIS WOULD CONVERT OTHERWISE TAXABLE BUILDINGS INTO TAX-EXEMPT BUILDINGS.
5) THE INTERNAL REVENUE CODE AND TREASURY REGULATIONS ARE TWO MAJOR SOURCES OF FEDERAL TAX LAW. DIFFERENTIATE BETWEEN THE CODE AND THE REGULATIONS IN TERMS OF THEIR RELATIVE WEIGHT OF AUTHORITY.
THE