Essay on Fedral Tax Law

5604 Words May 26th, 2016 23 Pages
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
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Further, the $11,750 in tax savings that result from the graduated rate structure is phased out for corporations with taxable income in excess of $100,000.
By allowing corporations to split or combine (i.e., merge or consolidate) without adverse tax consequences, small corporations are in a position to compete more effectively with larger counterparts. (LO 2) Reasonable persons can, and often do, disagree about what is fair or unfair. In the tax area, moreover, equity is generally tied to a particular taxpayer’s personal situation. For example, the text discusses the difference in tax treatment for taxpayers renting an apartment versus purchasing a house. Another equity difference relates to how a business is organized (i.e., partnership versus corporation). Equity, then, is not what appears fair or unfair to any one taxpayer or group of taxpayers. It is, instead, what the tax law recognizes.
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2016 Corporations Volume/Solutions Manual

7.

(LO 2) This deduction can be explained by social considerations. The deduction shifts some of the financial and administrative burden of socially desirable programs from the public (the government) sector to the private (the citizens) sector.

8.

(LO 2) Encouraging taxpayers to

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