Question & Answer

The U.S. Constitution is the highest tax authority but provides very little in the way of tax laws.  What are the next highest tax authorities beneath the U.S. Constitution?

Compare and contrast the three types of primary tax law sources and give examples of each.

Compare and contrast the three trial-level courts.

Simon just received a 30-day letter from the IRS indicating a proposed assessment.  Does he have to pay the additional tax?  What are his options?  

Describe the differences between the three types of audits in terms of their scope and taxpayer type.

Explain the difference between the DIF system and the National Research Program. How do they relate to each other?

Approximately what percentage of tax returns does the IRS audit?  What are the implications of this number for the IRS’s strategy in selecting returns for audit?

Agua Linda Inc. is a calendar-year corporation. What is the original due date for the corporate tax return? What happens if the original due date falls on a Saturday?

Benita is concerned that she will not be able to complete her tax return by April 15.  Can she request an extension to file her return?  By what date must she do so? Assuming she requests an extension, what is the latest date that she could file her return this year without penalty?

three factors that determine whether a taxpayer is required to file a tax return.

Congress would like to increase tax revenues by 10 percent.  Assume that the average taxpayer in the United States earns $65,000 and pays an average tax rate of 15 percent.  If the income effect is in effect for all taxpayers, what average tax rate will result in a 10 percent increase in tax revenues?  This is an example of what type of forecasting?   

Lorenzo is considering starting a trucking company either in Texas or Oklahoma.  He will relocate his family, which includes his wife, children, and parents, to reside in the same state as his business.  What types of taxes may influence his decision of where to locate his business?  

Consider the following tax rate structure.  Is it horizontally equitable?  Why or why not?  Is it vertically equitable?  Why or why not?

Consider the following tax rate structure.  Is it horizontally equitable?  Why or why not?  Is it vertically equitable?  Why or why not?

Consider the following tax rate structure.  Is it horizontally equitable?  Why or why not?  Is it vertically equitable?  Why or why not?

Using the facts in Problem 51, what is the minimum tax that Pedro should pay to make the tax structure vertically equitable with respect to the amount of tax paid?  This would result in what type of tax rate structure?

Using the facts in Problem 51, what is the minimum tax that Pedro should pay to make the tax structure vertically equitable based on the tax rate paid?  This would result in what type of tax rate structure?

] Given the following tax structure, what tax would need to be assessed on Venita to make the tax horizontally equitable? 

Using the facts from Problem 49, what will happen to the government’s tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $75,000 in taxable income?  What is the term that describes this type of reaction to a tax rate increase?  What types of taxpayers are likely to respond in this manner?

] Song earns $100,000 taxable income as an interior designer and is taxed at an average rate of 20 percent (i.e., $20,000 of tax).  If Congress increases the income tax rate such that Song’s average tax rate increases from 20 percent to 25 percent, how much more income tax will she pay assuming that the income effect is descriptive?  What effect will this tax rate change have on the tax base and tax collected?

Using the facts in Problem 47, what minimum tax would need to be assessed on Shameika to make the tax progressive with respect to effective tax rates?

Given the following tax structure, what minimum tax would need to be assessed on Shameika to make the tax progressive with respect to average tax rates? 

Using the facts in Problem 45, what interest rate does the State of New York bond need to offer to make Fergie indifferent between investing in the two bonds?

] Fergie has the choice between investing in a State of New York bond at 5 percent and a Surething Inc. bond at 8 percent.  Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?

Using the facts in problem 43, what interest rate does Surething Inc. need to offer to make Hugh indifferent between investing in the two bonds?