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Tax 2012 ch. 1

Principles of Taxation for Business and Investment Planning

QuestionAnswer
What is a Tax? 4 characteristics. 1) An enforced, involuntary contribution 2) Required and determined by law 3) Provides revenue for public and governmental purposes 4) For which no specific benefits or services are received
What is the purpose of a tax? 4 reasons. Revenue, encouraging (or discouraging) social behavior, encouraging economic behaviors, and equity
Taxpayer; any economic entity that pays tax (includes persons and corporations)
Incidence ultimate economic burden of a tax. This is not always the tax payer. E.g. sales tax is pushed to the consumer.
Jurisdiction right of a government to levy a tax. Generally federal, state, and local.
Tax Computation Tax = Tax Base * Tax Rate
Tax base the value subject to taxation (expressed in $). Stems from an item, occurence, transaction, or activity on which a tax is levied.
Tax rates can be ______ or _________. flat or graduated
A flat tax rate a single rate applied to the entire tax base
A graduated tax rate multiple rates apply to specified portions or brackets of the tax base.
Tax revenue total tax collected by the government and available for public use
Taxes are pervasive and dynamic because they are everywhere and constantly changing.
There are 4 main types of state & local taxes Property, sales, excise, and income
Property (ad valorem taxes) have two types real property (realty - permanent assets) or personal property (personalty - anything tangible or moveable)
Zoning refers to different tax rates for realty depending on location.
State and local tax realty tax rates fluctuate and are based on ________ ________. budget needs.
Abatements refer to tax __________.; holidays
Personalty are usually taxed by _____ governments local
A broad-based state tax that typically excludes necessities such as food, drugs, etc Sales/use tax.
Use tax serves as a backstop for the ________ tax sales
An ______ tax is imposed on the retail sale of specific goods or services excise
What is an example of something that is taxed through an excise tax? Cigarettes, gasoline, hotels and motels.
Most states have both income tax and sales tax. True or False? True
The base of excise taxes is usually _______ not value quantity. e.g. per gallon, per pack, per night
Most state revenues come from _______ & ______ tax sales and income taxes
The vast majority of federal tax revenue is from _________ taxes income
Most federal income tax revenue comes from _________. personal income taxes
Social security and medicare are examples of __________ taxes and _________ taxes earmarked and employment
True or False? Federal governments also have unemployment taxes, excise taxes, and transfer taxes True
Earmarked taxes are _________ to government expenditures linked.
The first tax code was created in what year? 1939.
What were the years that the two major revisions of the tax code occured? 1954 & 1986
The _________ amendment was ratified in __________ and made income tax constitutional 16th and 1913
The _________ amendment made income tax constitutional. the 16th
True or False? Many foreign taxes have a similar structure to the US taxes. True
What type of tax is very common internationally but does not exist in the US? VAT Tax
Value added tax is based on using sales tax on the incremental level added during production. True or false? True.
VAT tax is similar to sales tax because taxes are passed down to the ______________. consumer
Many businesses operate in multiple tax jurisdictions. Because of this jurisdictions (compete/co-operate) for tax revenue. compete
Increasing the tax rate or expanding the tax base can cause taxpayers to ______ the tax jurisdiction leave
Annexation refers to a city ________ their boundaries increasing so that they can tax more.
Sales tax has been expanding to include services. True or false? True.
Sales taxes can be difficult to expand because of negative public response and the __________. U.S. Constitution.
In Quill Corp. vs North Dakota courts decided that states cannot make companies (that are based out of state) ______ collect sales tax.
Tax shelters are complex transactions with no business purpose except for ________________ tax deductions.
The tax law includes _________ law, __________ pronouncements, and ____________ decisions. statutory, administrative, and judicial.
Statutory authority refers to the ______________ tax laws. federal - generally means the Internal Revenue Code.
Administrative authority refers to the ______ ________. treasury department
Administrative authority includes revenue rulings, procedures, and department of treasury regulations. True or false? True
Judicial authority refers to the __________ system. court
The Surpreme Court verdict is the equivalent of ______ and becomes the final word in any tax dispute. law
Created by: 835093078