Exam (elaborations)
Tax 4001 Exam 1 Review (1)
Tax 4001 Exam 1 Review (1)
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Tax 4001 Exam 1 Reviewad valorem taxes - ANS-real property taxes and personal property taxes; significant
source of revenue for local governments
tax planning - ANS-the structuring of transactions to reduce tax costs or increase tax
savings to maximize NPV
variables of tax planning - ANS-entity, time period, jurisdiction, character
tax planning strategies - ANS-- tax costs decrease and cost flows increase when
income is generated by an entity subject to a low rate
- in present value terms, tax costs decrease, and cost flows increase when a tax is
deferred until a later taxable year
- tax costs decrease and cost flows increase when income is generated in a jurisdiction
with a low tax rate
- tax costs decrease and cost flows increase when income is taxed at a preferential rate
because of its character
U.S. jurisdiction over citizens - ANS-the U.S. claims jurisdiction to tax a U.S. citizen's
entire income if the citizen permanently resides in a foreign country
U.S. jurisdiction over permanent residents - ANS-permanent residents issued a green
card authorization of residing and working allows the U.S. to claim jurisdiction to tax
entire income
U.S. jurisdiction over Nonresident Aliens - ANS-the U.S. claims jurisdiction to tax on
shares of income earned in the United States even if someone is a citizen and resident
of another country
Taxing jurisdiction increase revenues in three ways: - ANS-1. Exploit a new tax base
2. Increase the rate of an existing tax
3. Eliminating exemptions/enlarge existing tax base
*when tax rate increases tax revenue increases
*when tax rate increases tax liability increases for taxpayers
related party transaction - ANS-a transaction between parties who share a common
economic interest or objective and who may not be dealing at arm's length
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