South-Western Federal Taxation 2022: Individual Income Taxes 45th edition by James C. Young Solution

and the notion that the taxpayer’s economic position has not changed. In part b., for example,
Mia has retained none of the award and has reinvested in property similar to that taken by the
city.
50.  (LO 8) If the collection is worth more than $1,000, the mother has probably made a gift of the excess
value to her son. There is a possibility that the transaction could result in the assessment of a gift tax.
Sales or other transactions between related parties are subject to the arm’s length test. In this case, for
example, would the mother have made this sale for $1,000 if the purchaser had been an unrelated
third party?
RESEARCH PROBLEMS
These research problems require that students utilize online resources to research and answer the questions.
As a result, solutions may vary among students and courses. You should determine the skill and experience
levels of the students before assigning these problems, coaching where necessary. Encourage students to use
reliable websites and blogs of the IRS and other government agencies, media outlets, businesses, tax
professionals, academics, think tanks, and political outlets to research their answers.
1.  The sole proprietor is subject to Federal taxes on income, self-employment and payroll taxes (if the
sole proprietor has employees), and the gasoline excise tax. State taxes include income and sales and
use taxes. Local taxes include property tax, business license tax, and perhaps income tax.
2.  An example of a carbon tax proposal of the 116th Congress is H.R. 5457, Carbon Reduction and Tax
Credit Act. An example of a financial transaction tax proposal of the 116th Congress is S. 1587,
Inclusive Prosperity Act of 2019. Similar proposals may exist for the 117th Congress. Students might
also find plans for these types of taxes that do not have legislative language.
An Introduction to Taxation and Understanding the Federal Tax Law  1-9
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3.  An example of a sweetened beverage tax proposal is H.R. 7341 (115th Congress), the SWEET Act. It
would impose a Federal excise tax of 1% per 4.2 grams of sweetener in specified beverages.
Proposals also exist in several states and cities. Some cities, including Berkeley, California,
Philadelphia, Pennsylvania, and Boulder, Colorado, have already enacted soda taxes. Considerations
in analyzing these proposals include issues of regressivity (an equity and fairness issue), complexity
of definitions, burden of enforcement, and neutrality in affecting decision making.
4.  Each of the Big Four firms has information on data analytics and how it can be used for tax purposes:
•  pwc.com/us/en/services/tax/tax-innovation.html
•  home.kpmg.com/xx/en/home/services/tax/global-indirect-tax/data-and-analytics.html
•  ey.com/en_gl/tax/how-data-analytics-is-transforming-tax-administration
•  www2.deloitte.com/global/en/pages/technology/articles/making-data-and-analysis-a-
priority.html
Students should also find how the IRS and state tax agencies are using big data to improve
audit selection and enforcement. For example, see IRS, Advance Data & Analytics at:
•  irs.gov/about-irs/strategic-goals/advance-data-analytics
SOLUTION TO ETHICS & EQUITY FEATURE
Making Good Use of Out-of-State Relatives (p. 1-12). Who is the true purchaser of the bracelet? If the aunt
really made the purchase with her funds and then gave the bracelet to Marcus, no sales or use tax evasion has
occurred. More likely, the purchase was made by Marcus indirectly through his aunt—the aunt being
reimbursed by Marcus or using funds provided by him. If that is the case, Marcus owes a sales tax on the
purchase. Presuming the matter comes to light—the jewelry store might be the weak link—Marcus could be
subject to prosecution for tax evasion.