Federal Income Tax Note

Federal Income Tax Test #1 Notes

Chapter 1

Section 1.1 (Learning and Coping with Taxation)

* One of the most common changes in circumstance that can affect the tax position of an individual is marital status.

Section 1.2 (A Brief History of U.S. Taxation)

* 1-2A (Early Periods) (1-3)

* 1-2B (Revenue Acts) (1-4)

* 1-2C (Historical Trends) (1-4)

* The income tax has proved to be a major source of revenue for the Federal government.

* Estimated income tax collections from individuals and corporations amount to 57 percent of the total receipts.

Section 1.3 (Criteria Used in the Selection of a Tax Structure)

* Adam Smith’s cannons of taxation

* Equality

* Convenience

* Certainty

* Economy

Section 1.4 (The Tax Structure)

* 1-4A (Tax Base) (1-5)

* 1-4B (Tax Rates) (1-5)

* 1-4C (Incidence of Taxation (1-6)

* Tax Base: The amount to which the tax rate is applied

* Taxable income: gross income reduced by certain deductions (both business and personal).

* Proportional Tax: the rate of tax remains constant for any given income level. Examples of proportional taxes include most excise taxes, general sales taxes, and employment taxes (FICA and FUTA).

* Progressive Tax: a higher rate of tax applies as the tax base increases. The federal income tax, Federal gift and estate taxes, and most state income tax rate structures are progressive.

Section 1.5 (Major Types of Taxes)

* 1-5A (Property Taxes) (1-6)

* 1-5B (Transaction Taxes) (1-8)

* 1-5C (Taxes on Transfers at Death) (1-11)

* 1-5D (Gift Taxes) (1-12)

* 1-5E (Income Taxes) (1-14)

* 1-5F (Employment Taxes) (1-16)

* 1-5G (Other U.S. Taxes) (1-18)

* 1-5H (Proposed U.S. Taxes) (1-19)

* Property Taxes: Correctly referred to as ad valorem taxes because they are based on value, property taxes are a tax on wealth, or capital.

* Property Taxes on realty are used exclusively by states and...