Chapter+1 - AF 450 Federal Taxation I Dr. Julia M. Camp...

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AF 450 – Federal Taxation I Dr. Julia M. Camp Solutions to Suggested Problems Chapter 1: I1-5, I1-10, I1-14, I1-15, I1-17, I1-33, I1-39, I1-40, I1-45, I1-47 I:0-1 The marginal tax rate is of greater significance in measuring the tax effect for Carmen's decision. The marginal tax rate is the percentage that is applied to an incremental amount of taxable income that is added to or subtracted from the tax base. Through the marginal tax rate, the taxpayer may measure the tax effect of the charitable contribution to her church. If her marginal tax rate is 25%, she will save 25¢ for each $1 contributed to her church. The average tax rate is simply the total tax liability divided by taxable income. p. I:1-5. I:0-2 a. Progressive. b. Progressive. c. Proportional. d. Proportional. e. Regressive. pp. I:1-4 and I:1-5 and I:1-12. I:0-3 a. Horizontal equity refers to the concept that similarly situated taxpayers should pay approximately the same amount of tax. Vertical equity, on the other hand, refers to the concept that higher income taxpayers should not only pay a higher amount of tax but should pay a higher percentage of tax. Vertical equity is based on the notion that taxpayers who have the "ability to pay" (e.g., higher income taxpayers) should pay more tax than lower income taxpayers. b. Fairness is an elusive term. Because of widely divergent opinions as to what constitutes fairness, it logically follows that there are also many different and divergent opinions as to what constitutes a "fair" tax structure. pp. I:1-12 through I:1-14. I:0-4
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Chapter+1 - AF 450 Federal Taxation I Dr. Julia M. Camp...

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