346Sim03 - Links to Worksheets in File Introduction...

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1 Links to Worksheets in File Facts Introduction Questions Analysis Roger is a single, cash basis taxpayer with a calendar year tax reporting period. During the current year, he won a $1,000,000 lottery and must know decide whether he wants to receive a lump-sum payout of that amount immediately, at the end of five years, or at the end of ten years. (Please ignore this unrealistic menu of alternatives.) He anticipates that his marginal tax rates on that income at those times will be 35%, 28%, and 20%, respectively. Objectives & Outcomes The objective of this computerized tax simulation is to help you learn how tax planning for income is affected by a taxpayer's marginal tax rates and the interaction between those tax rates (as they change over time) and the taxpayer's discount rate (in net present value calculations). To accomplish this objective, you must -read the Facts, Issues, & Authorities sections below, -use the related Excel spreadsheet to analyze the taxpayer's facts, given the tax law, -record your answer to the questions in this file, and -submit your Excel file in the manner prescribed in the course syllabus (e.g., upload via Canvas).
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2 Issue Which of the three alternatives should Roger take, assuming that he has a 2% discount rate? Authorities Internal Revenue Code (IRC) §1 imposes a tax on an individual's taxable income. IRC §63 defines taxable income to mean gross income, which generally includes all income from whatever source derived (per §61) minus allowable deductions. Section 74 specifically requires that prizes and awards be included in gross income, while §441 requires taxable income to be computed on the basis of the taxpayer's taxable year.
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5 Links to Worksheets in File Questions Introduction Questions Analysis 1. A taxpayer's general tax
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