...CHAPTER 1 UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS Question/ Problem 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Learning Objective LO 1 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 3 Topic Revenue neutrality Controlling the economy Encouraging industries Research and development expenditures Social considerations Earned income credit Charitable contributions Fines and penalties Home ownership Higher education incentives Tax credit versus deduction Alleviating the effect of multiple taxation Double taxation and effect of a credit versus a deduction Wherewithal to pay concept: transfer to controlled corporation Avoiding the corporate income tax Wherewithal to pay: example Recognized gain versus realized gain: amount Like-kind exchange versus involuntary conversion: losses Settlement time period Installment method Keogh Plan: grace period Bracket creep: indexation Community property states Community property states Deterrence provisions $13,000 annual gift tax exclusion: audit Status: Present Edition New New New New New Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Modified Modified New New New New New New New New New New New Q/P in Prior Edition 6 7 8 9 10 11 12 13 14 15 Instructor: For difficulty, timing, and assessment information about each item, see p. 1-3. 1-1 © 2012 Cengage...
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...CHAPTER 1 UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS DISCUSSION QUESTIONS 1. (LO 1) When enacting tax legislation, Congress often is guided by the concept of revenue neutrality so that any changes neither increase nor decrease the net revenues raised under the prior rules. Revenue neutrality does not mean that any one taxpayer’s tax liability remains the same. Since this liability depends upon the circumstances involved, one taxpayer’s increased tax liability could be another’s tax saving. Revenue-neutral tax reform does not reduce deficits, but at least it does not aggravate the problem. 2. (LO 2) Economic, social, equity, and political factors play a significant role in the formulation of tax laws. Furthermore, the IRS and the courts have had impacts on the evolution of tax laws. For example, control of the economy has been an important economic consideration in passing a number of laws (e.g., rapid depreciation, changes in tax rates). 3. (LO 2) The tax law encourages technological progress by allowing immediate (or accelerated) deductions and tax credits for research and development expenditures. 4. (LO 2) Saving leads to capital formation and thus makes funds available to finance home construction and industrial expansion. For example, the tax laws provide incentives to encourage savings by giving private retirement plans preferential treatment. 5. (LO 2) a. Section 1244 allows ordinary loss...
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...Recognized Courses in Accounting/Tax Research and Analysis and Accounting/Business Communications September 3, 2014 The Texas State Board of Public Accountancy requires each candidate to complete a minimum of two semester hours in accounting research and analysis or tax research and analysis from a recognized college or university. The semester hours may be obtained through a discrete course or offered through an integrated approach. If the course content is offered through integration, the college or university must advise the Board which course(s) contain the research and analysis content. Courses identified through integration must dedicate 1 semester hour, or quarter hour equivalent, to research and analysis. Courses used to meet this requirement may not be used to meet the requirement for accounting or business communications described below. Course(s) identified by a university to meet the requirements for research and analysis in accounting or taxation should primarily address the identification, organization, and integration of diverse sources of information such as authoritative literature and pronouncements, to reach a conclusion or make a decision; and should analyze accounting and taxation issues by reviewing information, using empirical data and analytical methods, recognizing data in patterned activities, forecasting, and integrating data. CPAs may be asked to conduct research and analysis when providing attest services, professional accounting...
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...Tax Research Memo Personal Injury winning treatment and other issues research ________________________________________________________________ XYZ CPAs NearLakes City John Smith tax issues 1 a Issue: Treatment for purposes of Federal Tax Income of $300,000 fee received out of the amount awarded by Jury. Applicable Law: Any winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC Sec 104(a)(2).Taxability also depends upon the place of residence of the taxpayer. Conclusion: As per the provisions of IRC Sec 104(a) (2), $300,000 received by John Smith as fees from jury award is taxable for federal tax income purposes. 1b Issue: Treatment for purposes of Federal Tax Income of $25,000 expenses paid upfront and received out of the amount awarded by Jury. Applicable Law: Any winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC Sec 104(a)(2).Any expenses can be claimed as a deduction.Taxability also depends upon the place of residence of the taxpayer. Conclusion: Expenses paid upfront and received as part of the jury award can be claimed as a deduction in the hands of the recipient (IRC Sec 104(a) (2). 1c Issue: Reducing the taxable amount of income for both (a) and (b) above. Applicable Law: An...
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...History of The Federal Income Tax It all started in the year 1909 when an uneasy alliance of Democrats and western Republicans joined to support passage of an individual income tax. Some observers believed the justices would invalidate an income tax, just as they had done so in 1895. Others however, thought the Court had changed to reflect growing bipartisan and popular support for the levy. A few income tax supporters wanted to press the issue regardless of the Court's likely response, eager to make the case for progressive taxation. In any case, the income tax coalition developed a moderate proposal and sought to attach it to tariff legislation in the Senate. In doing my research I found out that the GOP leaders were alarmed by rebellion in their own levels, with numerous Republican progressives indicating their support for a new income tax. Senate Finance Committee Chairman Nelson Aldrich tried to fend off the income tax proposal, but pro-tax forces enjoyed considerable momentum, this was indicating that the proposal was on its way for the federal income tax. Worried that Aldrich would lose the battle, I believe that the purposes for these income tax are that president Taft convinced the senator that a modest tax on corporate income would siphon off support for general income taxation. In doing so, it would deny victory to the congressional income tax coalition, preserving GOP unity. Framed as an excise tax on the privilege of doing business as a corporation, the...
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...Itemized Tax Deductions for Individuals: Data Analysis Sean Lowry Analyst in Public Finance February 12, 2014 Congressional Research Service 7-5700 www.crs.gov R43012 CRS Report for Congress Prepared for Members and Committees of Congress Itemized Tax Deductions for Individuals: Data Analysis Summary Reforming or limiting itemized tax deductions for individuals has gained the interest of policymakers as one way to increase federal tax revenue, increase the share of taxes paid by higher-income tax filers, simplify the tax code, or reduce incentives that might lead to inefficient economic behavior. However, limits on deductions could cause adverse economic effects or changes in the distributional burden of the federal income tax code. This report is intended to identify who claims itemized deductions, for how much, and for which provisions? This report analyzes data to inform the policy debate about reforming itemized tax deductions for individuals. In 2011, 32% of all tax filers chose to itemize their deductions rather than claim the standard deduction. In addition, the data indicate that both the share of tax filers who itemize their deductions and the amount claimed by each tax filer as adjusted gross income (AGI) increases. AGI is the basic measure of income under the federal income tax and is the income measurement before itemized deductions and personal exemptions are taken into account. Although higherincome tax filers are more likely to itemize their deductions...
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...Concepts in Federal Taxation 2011 Murphy Higgins 18th Edition Solutions Manual Click here to download immediately!!! http://www.testbankpdf.com/taxation/concepts-in-federal-taxation-2011murphy-higgins-18th-edition-solutions-manual/ ----------------------------------------------------------------------Concepts Concepts Concepts Concepts in in in in Federal Federal Federal Federal Taxation Taxation Taxation Taxation 2011 2011 2011 2011 Murphy Murphy Murphy Murphy Higgins Higgins Higgins Higgins 18th 18th 18th 18th Edition Edition Edition Edition Solutions Solutions Solutions Solutions Manual Manual Manual Manual -------------------------------------------------------------------------***THIS IS NOT THE ACTUAL BOOK. YOU ARE BUYING the Solution Manual in e-version of the following book*** Name: Concepts in Federal Taxation 2011 Author: Murphy Higgins Edition: 18th ISBN-10: 0538467924 Type: Solutions Manual - The file contains solutions and questions to all chapters and all questions. All the files are carefully checked and accuracy is ensured. - The file is either in .doc, .pdf, excel, or zipped in the package and can easily be read on PCs and Macs. - Delivery is INSTANT. You can download the files IMMEDIATELY once payment is done. If you have any questions, please feel free to contact us. Our response is the fastest. All questions will always be answered in 6 hours. This is the quality of service we are providing and we hope to be your helper. Delivery is in the next moment...
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...INTRODUCTION TO FEDERAL INCOME TAX ACCT 5135 Spring 2014 MONDAY 5:45-9:05pm HMH 1-103 Instructor: Tammy Naples, CPA, MBT Office Hours: By appointment, CSOM 4-259 Phone: 612-624-6077 E-mail: naples@umn.edu TA: Nathan Reigstad reigs025@umn.edu Course Prerequisite: ACCT 2050 Introduction to Financial Reporting Course Objectives: To introduce the student to the philosophical, economic and legal aspects of the United States federal system of income taxation. Specifically, the course will: (1) provide a historical perspective with respect to the system of income taxation in general and with respect to various specific provisions within the system; (2) examine the interrelationships between legislative authority (the Internal Revenue Code), judicial, and administrative authority; (3) analyze the structure of the Internal Revenue Code and its provisions with respect to specific areas of the law; (4) introduce the reading of case law and other tax authority; and (5) provide a basic knowledge of tax research tools and techniques. You will not be a tax expert when you complete this course, but you will be familiar with fundamental income tax rules, primarily with respect to individuals, and how the federal tax system works. The instructor will also attempt to provide some insight into the role of the tax professional in private and public practice in order to help you to determine...
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...I:1-1 The Supreme Court held the income tax to be unconstitutional in 1895 because the income tax was considered to be a direct tax. At that time, the U.S. Constitution required that an income tax be apportioned among the states in proportion to their populations. This type of tax system would be extremely difficult to administer because different rates of tax would apply to individual taxpayers depending on their states of residence. p. I:1 2. I:1-2 The pay-as-you-go withholding was needed in 1943 to avoid significant tax collection problems as the tax base broadened from 6% of the population in 1939 to 74% in 1945. Pay as you go permitted the federal government to deduct taxes directly out of an employee's wages. p. I:1-3. I:1-3 Under a progressive tax rate structure, the tax rate increases as the taxpayer's income increases. Currently, for 2011, tax rates of 10%, 15%, 25%, 28%, 33% or 35% apply depending upon the taxpayer's filing status and taxable income levels. Under a proportional tax rate or "flat tax" structure, the same tax rate applies to all taxpayers regardless of their income levels. Under a regressive tax rate structure, the tax rate decreases with an increase in income level. The concept of vertical equity holds that taxpayers with higher income levels should pay a higher proportion of tax and that the tax should be borne by those who have the "ability to pay." Thus, Congressman Patrick's opposition to the flat tax is theoretically correct; all taxpayers...
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...“plans prepared and approved before The of use. A budget is defined in the institution of cost and management Accounting, 1966 edited of Terminology as a financial and/or quantitative statement prepared and approved prior to a defined period of the policy to be pursued during that period for the purpose of attaining a given objective”. Going by the above definitions of budget by previous authors, it could be deduced that a budget as an element of control in it. Control here means a “standard of comparison for checking an experiment which result is known” (Horby : 2000 page 251). Budgetary control according to Pickles and Lafferty (1974:3145) relate to “the use of budgets as control devices whereby predetermined plans or standard, output, income and expenditure are compared with actual attained so that, if necessary corrective action may be taken...
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...page in pure black and white to save toner and paper. Collectively, the presentations are a “Tax Update”. Each year, professional accounting associations offer tax updates for their members. The update is usually prepared and presented by a fellow member of the association. When the year being summarized contains major tax legislation, the annual tax update is primarily a review of the new law. When a year passes without major legislation, tax updates draw material from other tax news (i.e. new regulations, rulings and/or cases). We will model our update after the second style; that is, no student will be asked to prepare an update of the tax legislation that just passed. Each student will be assigned a period of time to cover in the update. Each student’s task is to review tax news for that period of time and prepare a10 minute presentation on a topic or topics that the student found interesting in the tax news. We will split the tax news into periods of time by using Federal Taxes Weekly Alert Newsletters (available in RIA Checkpoint) as the basis for selecting topics. For example: Ganon may be assigned to base her update on Federal Taxes Weekly Alert Newsletter, 01/13/2011 - Volume 57, No. 2. You may find this newsletter by using the Newsstand feature in RIA Checkpoint. Click on Newsstand tab, on the top of the screen. Then click on the Newsletter Library on left. Click on Federal Taxes Weekly Alert Newsletter to expand that level. Click on 2011 to view all issues by week...
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...The Case for Fair Tax Reform The current economic situation of the United States can be blamed on a multitude of variables and is the fault of numerous politicians from both parties as well as an abundance of special interest groups with lobbying power, not to mention several Presidential administrations. This paper will not examine all of these variables or individuals; it will concentrate on the isolated issue of tax reform on the highest earners and how it negatively affects the federal deficit and income inequality inside of the United States. What this paper will prove is that if the United States does not raise taxes on the highest earners, history shows that the divide between rich and poor as well as the divide between surplus and deficit will only widen into the future. When President Ronald Reagan shrank the tax brackets in 1987, it was the beginning of a new economic era. The theory behind cutting taxes on the richest people was that with extra money, the most profitable companies and taxpayers would invest their extra capital into the market and in the process create more jobs, expanding the economy. This may not have been the catalyst for the service economy revolution but it certainly coincided with it. A significant amount of opportunity cost was invested into foreign markets creating a cheaper workforce abroad, while domestically shrinking the labor market. According to MIT professor James Poterba, income inequality began to increase after the 1986 tax...
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...issue litigated in the case in question using the tax research steps outlined in Appendix A of your text. * Compare the American Institute of CPAs’ (AICPA) Statements on Tax Standards (SSTS) and the Treasury Department Circular 230 rules to practice before the Internal Revenue Service (IRS). Suggest which document creates better guidance in the preparation of tax returns and written advice provided to taxpayers. From the e-Activity, evaluate the importance of the principal issue litigated in the case in question using the tax research steps outlined in Appendix A of your text. Determine the Facts: The respondent, Marshall R. Jones, determined deficiencies in Alacare Home Health Services Federal income tax of $136,895 for 1995 and $58,726 for 1996 and accuracy-related penalties under section 6662(a) of $27,379 for 1995 and $11,745 for 1996. Identify the issues: As a Medicare-certified home health care agency, Alacare must comply with accounting guidelines contained in the Medicare Provider Reimbursement Manual Publication. The respondent determined that Alacare’s policy of expensing assets that cost less than $500 was not a proper method of accounting, and that Alacare must capitalize the cost of the disputed assets over their useful lives. Locate applicable authorities: Medicare Provider Reimbursement Manual (HCFA Publication 15-1): Guidelines for Capitalization of Historical Costs and Improvements Costs of Depreciable Assets. Income Tax Regulations: SEC 446(a)...
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...Learning by Doing Strayer University PAD 525 Abstract According to Szypszak (2012) “the law should not be encrypted, nor require a lawyer to decipher. Legal research is not locating a definitive answer to a simple question; productive research is dependent upon “good sense” that a formal rule might exist” (pg. 307). Denoted in Szypszak (2012) an approach many researchers utilize to interpret the language of the U.S. Constitution and the U.S. legal system in order to explain the principles and process of constitutional, regulatory, and administrative laws at the federal and state levels is using the “case” approach. The methodology of research for this paper is using technology and information resources for researching cases, laws, and other legal communications (Szypszak, 2012). Learning by Doing 1. Your state’s statute that defines what is considered to be a public record that must be made available to the public upon request. The Virginia Freedom of Information Act (FOIA), located § 2.2-3700 et. seq. of the Code of Virginia, guarantees citizens of the Commonwealth and representatives of the media access to public records held by public bodies, public officials, and public employees. The guiding principle of FOIA states that the objective of FOIA is to encourage attentiveness by all persons of governmental activities. In broadening this strategy, FOIA requires that the law be interpreted liberally, in favor of access, and that any exemption allowing...
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... Federal State Local Major Role Making laws relating to domain of Constitution Collecting revenue Industrial relations Revenue collection Law enforcement Education Municipality administration and development Expenditure Item Transfer payments Social Security Medicare Law enforcement Education Infrastructural and facilities development and maintenance Revenue Item 1 Payroll Taxes Income Tax Property Taxes Revenue Item 2 Income Taxes Transfers Transfers Revenue Item 3 Corporate Taxes Sales and gross Taxes Sales and gross Taxes The Federal revenue sources enumerated above are just some of the means through the US Government makes money. Payroll taxes are federal or state taxes that are withheld by employers on behalf of their employees, along with social security and Medicare taxes. This is computed by the IRS form W-4. This is also commonly known as withholding tax. The other is a fixed or variable charge on the company for hiring a worker; this deduction goes toward contributing to social security. In most jurisdictions, quarterly reporting of withholding taxes by employers is required. This is in addition to the annual filing of taxes. Income taxes, as the term implies, is the tax on an employee’s monthly income. This is usually computed on annual gross income, and then distributed monthly or quarterly. This tax is levied on all income – received and receivable – with some exceptions, considered admissible deductions. The tax rate is annual income-slab based...
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