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L6256y
Professor Chirelstein
INSTRUCTIONS;
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QUESTION I
QUESTION II
Henchard and Farfrae both ask you where they stand, federal
income tax-wise. Advise them (both).
QUESTION III
QUESTION IV
"The income tax is a tax system that has two parts. First,
it taxes personal service income (wages, salaries, fees, etc.)
when such income is earned. Second, it taxes wealth by including
dividends, interest, rents and capital gains in gross income. If
we wished to eliminate the wealth-tax element, we could do so in
either of two ways. We could simply treat all income from
capital investment as tax exempt, and tax personal service income
only. In the alternative, we could allow all investments to be
deducted currently, and tax spending only. Either technique
would place consumers and savers on an equal footing from a tax
standpoint in the sense that the relationship between the two
would be the same as it was, or would have been, in a world
without any taxes whatever."
An uncle of yours who has read the quoted paragraph tells
you that he doesn't quite understand it...in fact, doesn't
understand it at all. Aware that you have just completed an
excellent tax course, your uncle asks you to explain the writer's
point. "But please don't paraphrase or repeat the same words to
me," says Uncle in a hardy yet irritable tone. "Instead, give me
a simple arithmetical illustration of the writer's idea, one that
I can grasp without a lot of mental effort. I don't care what
numbers you use or even whether they're perfectly accurate. Make
your example clear and simple, and above all be brief!"
Respond as requested.
END OF EXAMINATION