The U.S. Economy: Private and Public Sectors ANSWERS TO END-OF-CHAPTER QUESTIONS 4-1 4-2 4-3 Distinguish between the functional and personal distribution of income. Which is being referred to in each of the following statements? “The combined share of wage income and proprietary income has remained remarkably stable at about 80 percent since the Second World War.” “The relative income of the richest households is higher today than in 1970.” The functional distribution of income shows
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what the government gives them by way of welfare checks and food stamps. We have a progressive tax system for a purpose and that is to make sure the government does not take an unreasonable amount of taxes from your paycheck. The more income you earn‚ the more taxes you pay‚ and vice versa. I believe the federal government should step in more and influence the distribution of income by the implementation of new tax and social policies. But they should do this in a way that keeps in mind an overall
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Introduction: This report is to find out whether the tax avoidance arrangements exists in the situation of taxpayers restructured their business as a trading trust for the purposes of section BG1 of the Income Tax Act 2007. Issue: Mr A and Mr B‚ two independent shareholders work full time in the IT Consultancy business. They were paid $80‚000 salary each in the first year but decreased to $50‚000 in the second year because business has gone down due to earthquake. They had received a dividend
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Three Debatable Issues On November 6‚ 2012 American’s will have the opportunity to decide on the next President‚ current President‚ Barack Obama or Mitt Romney. There are three major issues being debated during the 2012 election‚ which are same sex marriage‚ abortion and healthcare. Each candidate has an opposite stance on each issue being discussed. One of the hot button issues is same sex marriage. In 1996‚ Congress passed the Defense of Marriage Act‚ which outlaws same sex marriage
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Ordinary‚ necessary‚ and reasonable in amount * Properly documented * An expense of the taxpayer Expenditure is not deductable if it is… * A capital expenditure * Expense related to tax-exempt income * Illegal or in violation of public policy‚ or * Specifically disallowed by tax law Business or investment activity? – requirements have two parts * Activity must be engaged in for profit * Trade or business vs. investment classification – distinction important only to
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Review Questions 1. What is a progressive tax system? How does it differ from a regressive tax system? A progressive tax takes a larger percentage of income from high-income groups than from low-income groups and is based on the concept of ability to pay. 2. What is gross income? What types of income are included in gross income? Gross income is the starting point for determining Federal and state income tax of individuals‚ corporations‚ estates and trusts‚ whether resident or nonresident. 3. What
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Business Entities 2011‚ eBook - 1st 2/e Content Chapter1: An Introduction to Tax Who Cares About Taxes and Why? LO1 A clear understanding of the role of taxes in everyday decisions will help you make an informed decision about the value of studying taxation or pursuing a career in taxation. One view of taxation is that it represents an inconvenience every April 15th (the annual due date for filing federal individual tax returns without extensions). However‚ the role of taxation is much more pervasive
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P R E N T I C E H A L L’ S F E D E R A L TA X AT I O N 2013 Individuals EDITORS THOMAS R. POPE University of Kentucky KENNETH E. ANDERSON University of Tennessee CONTRIBUTING AUTHORS D. DALE BANDY University of Central Florida LEANN LUNA University of Tennessee N. ALLEN FORD University of Kansas TIMOTHY J. RUPERT Northeastern University ROBERT L. GARDNER Brigham Young University CHARLENE HENDERSON Mississippi State University RICHARD J. JOSEPH Hult International
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Gross Income‚ Taxable Income‚ and Net Income Gross income refers to all income but not excluding exempt income and subject to final income tax. Example of gross income include: salaries and wages‚ commission‚ sale of and other dealings in property‚ rents‚ dividends‚ and securities. Exclusion from gross income or those incomes that are exempted from tax include: life insurance proceeds paid to beneficiaries upon the death of the insured; compensation for injuries or sickness‚ retirement benefits
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equity which is whether the taxes are fair or impartial. Another criteria is simplicity‚ which states that tax laws should be written so that both the taxpayers and the tax collectors can understand them. The third and last criteria is efficiency‚ which says that the tax should be easy to administer and reasonably successful as a revenue-generating device. Other determinants whether a tax is beneficial to taxpayers are the principles of taxation. The first is based on the two ideas. One of those
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