ch1tax1 - TAX 4001 Taxation of Business Entities...

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C1 - 1 TAX 4001 Taxation of Business Entities Introduction To Taxation Text: Chapter 1
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C1 - 2 Learning Objectives Understand the components of a tax Identify the various taxes affecting business enterprises Briefly review history of the Federal income tax Identify the basic tax formula for individuals and taxable business entities Recognize tax planning opportunities and distinguish between implicit and explicit taxes Recognize the economic, social, equity, and political considerations that underlie the tax law
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C1 - 3 The Structure of Taxes Components of a tax Tax rate Tax base (e.g., income, property, sales) Types of tax rate schedules Progressive - rate increases as base increases Proportional - rate is constant despite size of base Regressive - rate of tax decreases as the tax base increases
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C1 - 4 Types of Taxes Transaction taxes - e.g. sales, use, excise, gift, estate, employment taxes Sales Tax represents 46% of states’ tax collections Property taxes - real estate, personal property (e.g. cars), intangible property Property taxes represent 72% of local government tax collections Taxes on privileges and rights - custom duties, franchise tax, occupational taxes Small percentage of taxes
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C1 - 5 Types of Taxes Income taxes Federal income tax Individual Corporate State income taxes Most states have some form of income tax State tax system usually “piggybacks” on Federal Local income taxes City taxes usually apply to anyone who earns income in the city, not just residents of the city
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C1 - 6 A Brief History of the Income Tax 1634 - First income tax in U.S. introduced in the Massachusetts Bay Colony. 1861-1872 - U.S. government introduced income tax to finance the Civil War; tax was repealed after the war. 1893 – Government reinstated the individual income tax to address a deficit; found unconstitutional in Pollock. 1909 - Four percent corporate income tax was enacted; unsuccessfully challenged in Flint vs. Stone Tracy Co. 1913 - Sixteenth Amendment to the Constitution passed.
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C1 - 7 Constitutional Issues Prior to 16 th amendment, the constitutional impediment to the income tax lay in the following passage: …No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census … The 16 th amendment’s full text is as follows: The Congress shall have the power to lay and collect taxes on incomes from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
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This note was uploaded on 08/25/2010 for the course TAX 4001 taught by Professor Hampton,m during the Fall '08 term at University of Central Florida.

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ch1tax1 - TAX 4001 Taxation of Business Entities...

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