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Tax 2012 ch. 1
Principles of Taxation for Business and Investment Planning
|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
|any economic entity that pays tax (includes persons and corporations)
|ultimate economic burden of a tax. This is not always the tax payer. E.g. sales tax is pushed to the consumer.
|right of a government to levy a tax. Generally federal, state, and local.
|Tax = Tax Base * Tax Rate
|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.
|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 ________ ________.
|Abatements refer to tax __________.;
|Personalty are usually taxed by _____ governments
|A broad-based state tax that typically excludes necessities such as food, drugs, etc
|Use tax serves as a backstop for the ________ tax
|An ______ tax is imposed on the retail sale of specific goods or services
|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?
|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
|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
|Earmarked taxes are _________ to government expenditures
|The first tax code was created in what year?
|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.
|True or False? Many foreign taxes have a similar structure to the US taxes.
|What type of tax is very common internationally but does not exist in the US?
|Value added tax is based on using sales tax on the incremental level added during production. True or false?
|VAT tax is similar to sales tax because taxes are passed down to the ______________.
|Many businesses operate in multiple tax jurisdictions. Because of this jurisdictions (compete/co-operate) for tax revenue.
|Increasing the tax rate or expanding the tax base can cause taxpayers to ______ the tax jurisdiction
|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?
|Sales taxes can be difficult to expand because of negative public response and the __________.
|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 ________________
|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 ______ ________.
|Administrative authority includes revenue rulings, procedures, and department of treasury regulations. True or false?
|Judicial authority refers to the __________ system.
|The Surpreme Court verdict is the equivalent of ______ and becomes the final word in any tax dispute.