...Problems for Discussion 1. Tax payments differ from government fines and penalties because they are not intended to deter or punish unacceptable behavior. Tax payments differ from fees or user charges because they do not entitle the payer to a specific government good or service, such as a postage stamp or a driver’s license. Tax payments also differ from fees or user charges because they are compulsory. 2. This payment has characteristics of a tax, a penalty, and a user fee. The compulsory payment is not specifically punitive but does apply selectively to those companies most likely responsible for the polluted condition of Green River. However, these same companies may be the entities that benefit most from the environmental clean-up. 3. This payment more closely resembles a fee for a government service than a transaction-based tax because the transaction occurs between a private party and the jurisdiction itself, rather than between private parties engaging in a market transaction. The payment also entitles the payer to a specific benefit (the right to marry under law). 4. To the extent that the decline in exterior maintenance reduces the value of Mr. P’s apartment complex, he bears the incidence of the increased property tax. To the extent that the decline reduces the value of adjoining properties or makes the neighborhood less attractive, the owners of the adjoining properties and the neighborhood residents share the incidence of the tax increase. 5. People who...
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...HW 4 CH. 7. 3: a. Amount realized: $35,000 Realized loss: $10,000 Recognized loss: $0 b. Recognized gain: $0 Realized loss: -$10,000 c. Recognized gain: $0 Realized loss: -$10,000 d. Recognized gain: $0 Realized gain: $3,000 7: a. $3,000 b.$15,000 c. $5,000 d. $12,000 13: a. The valuation date cannot be altered. The valuation of the property cannot be adjusted after the date Dazie received the property. If she were to try and convert the asset from personal to business the lower valuation would be used. b. Dazie’s basis for the property Is its fair market value. c. If the valuation were to change it would not affect the outcome. 21: a. -$5,000 b. $5,000 c. $48,000 d. The 2015 sale of the property will not have an effect on Tonya because she sold it and has not claim to it. e. Ms. Tonya Fletcher The Corral El Paso, TX 79968 Ms. Fletcher, After reviewing your case I have come to the following conclusion. Since your loss on the property is $5,000 it is not recognized. It is lost cash. The boot of $3,000 cash paid to you is recognized as a capital gain and is recognized and will be taxed. 29: Realized Recognized Postponed a. $5,000 $7,000 $2,000 b. 1,000 12,000 11,000 c. 5,000 12,000 7,000 d. 14,000 1,000 -13,000 e. 1,000 9,000 -8,000 f. -3,000 14,000 -11...
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...Chapter 8 Business Income, Deductions, and Accounting Methods SOLUTIONS MANUAL Discussion Questions 1. [LO 1] What is an “ordinary and necessary” business expenditure? “Ordinary” and “necessary” imply that an expense must be customary and helpful, respectively. Because these terms are subjective, the tests are ambiguous. However, ordinary is interpreted by the courts as including expenses which may be unusual for a specific taxpayer (but not for that type of business) and necessary is not interpreted as only essential expenses. These limits can be contrasted with the reasonable limit on amounts and the bona fide requirement for profit motivation. 2. [LO 1] Is cost of goods sold deductible as a business expense for a business selling inventory? Explain. No. Under the return of capital principal, cost of goods sold represents a reduction in gross income rather than a business expense. For example, if a taxpayer sells inventory for $100,000 and reports a cost of goods sold of $40,000, the business’s gross income is $60,000 ($100,000 – 40,000) not $100,000. 3. [LO 1] Tom is an attorney who often represents individuals injured while working (worker liability claims). This year -Tom spent $50 on a book entitled Plumbing For Dummies and paid $500 to take a course on plumbing residences and rental housing. Can you imagine circumstances in which these expenditures would be deductible as “ordinary and necessary” for an attorney. Explain. “Ordinary” and “necessary”...
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...2013 Budget Speech Minister of Finance Pravin Gordhan 27 February 2013 ISBN: 978-0-621-41456-1 RP: 345/2012 To obtain copies please contact: Communications Unit National Treasury Private Bag X115 Pretoria 0001 Tel: +27 12 315 5526 Fax: +27 12 315 5126 Budget documents are available at: www.treasury.gov.za 2013 Budget Speech Honourable Speaker I have the honour to present the fourth budget of President Zuma’s administration. Mr President you said in the State of the Nation address that “we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.” You further said “The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward.” This challenge applies to all sections of our society: business, labour, public representatives, activists and citizens in every part of the country. As we pointed out in the 2012 Budget, global economic uncertainty will remain with us for some time. South Africa’s economic outlook is improving, but requires that we actively pursue a different trajectory if we are to address the challenges ahead. 1 2013 Budget Speech Under your leadership Mr President, we have opened new channels of communication and built more cohesion among...
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...TAX COMPETENCIES, COMPLIANCE COSTS AND INCOME TAX COMPLIANCE AMONG SMEs IN UGANDA BY ANNET NAKIWALA 2007/HD10/11264U A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT S FOR THE AWARD OF THE DEGREE OF MASTER OF SCIENCE IN ACCOUNTING AND FINANCE OF MAKERERE UNIVERSITY September, 2010 TAXCOMPETENCIES, COMPLIANCE COSTS & INCOME TAX COMPLIANCE DECLARATION I, Annet Nakiwala, declare that this dissertation is my own work and that it has never been presented for a degree award at any other university. Signature: ………………………………………… Date: ……………………………………………… ii TAXCOMPETENCIES, COMPLIANCE COSTS & INCOME TAX COMPLIANCE APPROVAL This is to certify that this dissertation has been submitted in partial fulfillment of the requirement for the award of a Masters of Science degree in Accounting and Finance of Makerere University with my approval as University Supervisor. Joseph Ntayi (PhD) Supervisor Signature: ………………… Date: ……………………… Arthur Sserwanga Supervisor Signature: ………………… Date: …………………….. iii TAXCOMPETENCIES, COMPLIANCE COSTS & INCOME TAX COMPLIANCE DEDICATION I dedicate this entire effort to my late Mother Gorreth Nabagereka. We miss you dearly. iv TAXCOMPETENCIES, COMPLIANCE COSTS & INCOME TAX COMPLIANCE ACKNOWLEDGEMENTS Completion of this research has been a result of both direct and indirect support of many people to whom I owe acknowledgement. I owe profound gratitude to my supervisors Dr. Joseph Ntayi and...
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...Private Inurement In order for any healthcare organization or nonprofit hospital to become income tax exempt under Section 501(c)(3) they must ensure that no portion of the hospital or organizations net earnings benefits any individual or private shareholder associated with the organization. When an organization qualifies as a 501(c)(3), the IRS presumes it is a private foundation unless the organization can show it is a public charity. This excludes statutory public charities such as schools and churches. A charity organization can lose tax exempt benefits if found to violate the private inurement proscription. Inurement violations can occur when a financial benefit occurs from the allocation of an organization’s financial resources to an individual without regard to exempt status in mind and based solely on the individual’s relationship with the organization. Individuals or private shareholders are known as “insiders” who have a personal interest in the organization’s activities or the individual is in a position to influence the organization (Zarzar, 2001). According to Karl Emerson, excessive compensation is the most common type of private inurement paid to insiders within an organization. There are other forms of private inurement that can cause an organization to lose their tax exempt status or impose intermediate sanctions such as: organizations purchase of an asset from an insider; sale of organization’s asset to an insider; the organization’s rental of property to...
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...information needed to calculate WACC can be found on a balance sheet. Difficulty:Moderate Instructions Calculating WACC 1 Gather the required information from the balance sheet. Finding the information is the hardest step. Write out the full WACC equation and list the variables separately. It is a good idea to make a list of all your variables before rewriting the equation. WACC = [(E/V) * Re] + [(D/V) * Rd * (1-Tc)] Re= cost of equity (expected rate of return on equity) Rd = cost of debt (expected rate of return on debt) E = market value of company equity D = market value of company debt V = total capital invested, which equals E + D E/V = percentage of financing that is equity D/V = percentage of financing that is debt Tc = corporate tax rate Start calculating the variables. Start with cost of equity and cost of debt. Some companies include these ratios on the balance sheet or income statement. It is a good idea to check both those reports and the executive summary at the beginning of financial statements---why do calculations if the company has done them for you? 2 http://www.ehow.com/print/how_5325911_calculate-wacc-balance-sheet.html 4/6/2013 How to Calculate the WACC From a...
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...ECONOMICS IN ONE LESSON by Henry Hazlitt Nobel Laureate in Economics, F.A. Hayek said in 1974 about Hazlitt‟s book: “It is a brilliant performance. It says precisely the things which need most saying and says them with rare courage and integrity. I know of no other modern book from which the intelligent layman can learn so much about the basic truths of economics in so short a time.” (Back cover) “This book is an analysis of economic fallacies that are at last so prevalent that they have almost become a new orthodoxy....its effort is to show that many of the ideas which now pass for brilliant innovations and advances are in fact mere revivals of ancient errors, and a further proof of the dictum that those who are ignorant of the past are condemned to repeat it.” (pp. 9-10) “As Morris R. Cohen has remarked: „The notion that we can dismiss the views of all previous thinkers surely leaves no basis for the hope that our own work will prove of any value to others.‟” (interior quote: Reason and Nature (1931), p.x.; Hazlitt, p.10) “It is the beliefs which politically influential groups hold and which governments act upon that we are interested in here, not the historical origins of those beliefs....Fallacies, when they have reached the popular stage, become anonymous anyway.” (p.11) The Lesson: “Economics is haunted by more fallacies than any other study known to man. This is no accident.” (p. 15) “While every group has certain economic interests identical with those of all groups, every...
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...1. Case summary: Russia used export taxes on oil after the fall of Soviet Union which caused a huge GDP declined. After that the new Russian government freed most consumer and producer prices and this abolished the state foreign trade monopoly. The export and the value add were proven as the largest sources of tax revenue for the Russian. Government reduced income tax after implementing this strategy. This strategy accelerate the GDP increase and the budget revenue doubled from 12%-24%. Only for this reason Russian fiscal balance had shifted from a deficit of 6% to a surplus of 9% of GDP. These proved that in Russia export duties and other taxes on energy producers provide the largest sources of tax revenue which is centralized in the federal budget. Major Problems with the Oil Industry In 1991, after a long period of economic and political stagnation, the Soviet Union collapsed. The energy industry contracted along with the rest of the Soviet economy. Oil production in 1996 was less than 6 million barrels a day – about half of pre-1990 levels. This contraction was partly due to the overall slowdown in the Russian economy that caused a decrease in energy demand. The energy sector also suffered because of the inefficiencies inflicted upon the Russian economy during the administrative-command system of the Soviet Union and the reluctance of post-Soviet governors of Russia to implement policies that would remedy these inefficiencies in an era of otherwise open market conditions...
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...Research Problem 1 1. Discuss the different types of interests and the IRS rule related to the deductibility of each type for tax purposes. Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. There are different types of interests, including investment interest, qualified residence interest, student loan interest, and personal interest, which are either deductible or nondeductible. Personal interests are interests on car loans, credit cards, loans for appliances and furniture and interest on loans made by one person to another. Personal interest is nondeductible. If interest is paid on a qualified student loan, taxpayers may be able to deduct the interest as deduction for AGI. Generally, the allowable amount for student loan is lesser of $2,500 or the amount of interest taxpayer actually paid. Investment interest is interest paid on money borrowed to purchase or hold investment property. It is tax deductible on income tax return up to the amount of the net investment income. However, if the interest is incurred to produce tax exempt income, it cannot be deducted. Investment interest is not any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. The qualified residence interest is interest taxpayer pays on a loan secured by one’s main home or a second home. The loan may be a mortgage to buy primary home, a second mortgage, a home equity loan, or line...
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...function and survive. It is this constant necessity for capital that gives way to much of the debate within tax accounting. In the United States, citizens and taxable businesses have an obligation to pay taxes to the government’s tax collecting body, the Internal Revenue Service. The IRS functions as the implementing body for the U.S. tax laws found in the Internal Revenue Code. While the IRC serves as the main source of regulation for taxation, actual implementation is a very subjective issue and left open to multiple interpretations. Within the IRC, taxpayers are entitled to numerous deductions that, in essence, reduce their tax liability. The ability to reduce taxes creates an incentive to analyze the Code and utilize every method possible that will help save money. This practice, in turn, opens the door for tax avoidance and aggressive tax accounting. One of the most aggressive tax issues that the IRS faces is the usage of tax shelters. A tax shelter is an investment that utilizes loopholes in order to avoid the payment of taxes. Many tax shelters that have been developed are considered completely legal and follow the IRC properly, serving some major economic purpose. In the late twentieth century, it became common practice for big accounting firms to develop and market different tax shelters in order to reduce their client’s tax liabilities. Some of the tax...
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...National Government The President discussed 5 important points in his 2013State of the Union Speech and they were: Immigration Reform: Minimum Wage Increase: Tax Reform & Debt Ceiling: Climate Change and Gun Control. At a time when Republicans are insisting on spending cuts, Obama pushed more public spending on universal preschool, construction work on bridges and schools and a jobs program rebuilding vacant homes in rundown neighborhoods. He pushed for an increase in the minimum wage to $9 an hour, with future increases tied to the cost of living. And he continued to push in support of left-leaning social issues including gun control, immigration reform, climate change and advancing equal rights for gays. President Obama stated how the American people does not expect government to solve every problem nor agree on every issue, but we do expect for the government to put the nation’s interests before party. He stated that their work must begin by making some basic decisions about the budget, decisions that will have a huge impact on the strength of American recovery. Over the last few years, both parties have been working together to reduce the deficit and has done so by more than $2.5 trillion, mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances....
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...x Chapter 1 Summary of End-of-Chapter Problem Revisions |2012 Edition |2011 Edition | | |Problem Number |Problem Number |2012 Edition Modifications | |1 |1 | | |2 |2 | | |3 |3 | | |4 |4 | | |5 |5 | | |6 |6 | | |7 |7 | | |8 |8 | | |9 |9 | ...
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...Why accounting is important The significance of accounting has never been more needed than today in the market, with the economic crisis and the worlds market in decline. Maybe a lot of people are losing their jobs in many fields, accounting stays is staying strong. The reasons why this is happening is because accounting is a very important aspect in the economy and the society. If we ask an accountant, why we need accounting, he will say that is the only way to grow our business and flourish. It is the backbone of the business financial world. It was created for the development of trade and commerce during the medieval times. Italy was the first country that had made a record of accounting entrees, and it was published in 1494 by a Venetian Monk. Record keeping has been around as long as the trade and business industries. A fact which is interesting is that the principles upon which the first accounting practises were established, has changed very little in the many hundreds of years that accounting is been in use. The process of recording those transactions has evolved the past two hundred years. Thanks to the creation of computers, many of the bookkeeping transactions that are very important can be performed by data entry clerks, but the result is still the same: it gives the financial statement the businesses needs to make decisions about the current status or projected future health of the business. The accounting is divided into two categories: financial accounting...
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