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Tax 2012 ch. 1
Principles of Taxation for Business and Investment Planning
| Question | Answer |
|---|---|
| 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 |
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