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##### tax problems ch 1 essay 2015

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Question;103.;Ariel invests;$50,000 in a city of Las Vegas bond that pays 5% interest. Alternatively;Ariel could have invested the $50,000 in a bond recently issued by Jittery;Joe's, Inc. that pays 8% interest with similar non-tax characteristics as the;city of Las Vegas bond (e.g., similar risk). Assume that Ariel's marginal tax;rate is 25%. What is her after-tax rate of return for the city of Las Vegas;bond? For the Jittery Joe's, Inc. bond? How much explicit tax does Ariel pay;on the city of Las Vegas bond? How much implicit tax does she pay on the city;of Las Vegas bond? How much explicit tax would she have paid on the Jittery;Joe's, Inc. bond? Which bond should she choose?;104.;Nelson has;the choice between investing in a city of Fruithurst bond at 4% or a J.B.;Ribs, Inc. bond at 6.5%. Assuming that both bonds have the same non-tax;characteristics and that Nelson has a 40% marginal tax rate, in which bond;should he invest? What interest rate offered by J.B. Ribs, Inc. would make;Nelson indifferent between investing in the two bonds?;105.;Namratha has;the choice between investing in a city of Watkinsville bond at 4.5% or a;Moe's, Inc. bond at 7%. Assuming that both bonds have the same non-tax;characteristics and that Namratha has a 25% marginal tax rate, in which bond;should she invest? What interest rate offered by Moe's, Inc. would make;Namratha indifferent between investing in the two bonds?;106.;Given the;following tax structure, what is the minimum tax that would need to be;assessed on Lizzy to make the tax progressive with respect to average tax;rates? What is the minimum tax that would need to be assessed on Lizzy to;make the tax progressive with respect to effective tax rates?;107.;Given the;following tax structure, what is the minimum tax that would need to be;assessed on Dora to make the tax progressive with respect to average tax;rates? What is the minimum tax that would need to be assessed on Dora to make;the tax progressive with respect to effective tax rates?;108.;Junior earns;$80,000 taxable income as a regional circuit stock car driver and is taxed at;an average rate of 25 percent (i.e., $20,000 of tax). If Congress increases;the income tax rate such that Junior's average tax rate increases from 25% to;30%, how much more income tax will he pay assuming that the income effect is larger;than the substitution effect? What effect will this tax rate change have on;the tax base and tax collected? What will happen to the government's tax;revenues if Junior chooses to spend more time pursuing his other passions;besides work (e.g., earns only $60,000 in taxable income) in response to the;tax rate change? What is the term that describes this type of reaction to a;tax rate increase? (Round your answers to two decimal places.);109.;Given the;following tax structure, what amount of tax would need to be assessed on;Carrie to make the tax horizontally equitable? What is the minimum tax that;Simon should pay to make the tax structure vertically equitable based on;Fantasia's tax rate? This would result in what type of tax rate structure?;110.;Consider the;following tax rate structures. Is it horizontally equitable? Why or why not?;Is it vertically equitable? Why or why not?;111.;Consider the;following tax rate structure. Is it horizontally equitable? Why or why not?;Is it vertically equitable? Why or why not?;112.;Jed Clampett;is expanding his family-run beer distributorship into Georgia or Tennessee.;His parents began the business many years ago and now three generations of Clampetts;work in the family business. Jed will relocate the entire family (his;parents, spouse, children, etc.) to either state after the move. What types;of taxes may influence his decision of where to locate his business? What;non-tax factors may influence the decision?;113.;Congress;would like to increase tax revenues by 20 percent. Assume that the average;taxpayer in the United States earns $80,000 and pays an average tax rate of;17.5%. If the income effect is larger than the substitution effect, what;average tax rate will result in a 20 percent increase in tax revenues? This;is an example of what type of forecasting?

Paper#38029 | Written in 18-Jul-2015

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