The Federal, state and local taxes. Conceptual Introduction: Types of tax systems -There are three types of tax systems. (1) Proportional - It is the system where regardless of the income all taxpayers pay the same percentage of their incomes as taxes. Here the marginal tax rate equals the average tax rate. (2) Progressive - In this system as the income increases the rate of tax increases. The high-income individuals pay a higher percentage of income taxes while low-income people pay lower. Here the marginal rate of tax is higher than the average tax rate. This system reduces the income inequality in the market. (3) Regressive - In this system as the income rises the rate of tax falls. The high-income group people pay less percentage of income as tax than the low-income people. Here the marginal tax rate is less than the average tax rate. The three systems are illustrated in the graph below: Capital gains - It is the return on the investment when the assets bought out of investment are sold at a higher price than the original price of purchase. These gains are taxed as capital gains tax . Dividend - These are the asset paid out of the profits of the corporation to the stockholders. Dividends are not a capital gain rather an income for the tax year. Payroll taxes - These are the employment taxes. They include the contribution to the Federal Insurance Contributions Act (FICA) and self-employment taxes. These taxes include the Social Security taxes and the Medicare taxes. Double taxation - The incidence of tax on the same income twice; once as the corporation income tax and then as the income tax on the dividends earned by the investors.

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Answer 1

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Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 6, Problem 6.2SC

To determine

The Federal, state and local taxes.

Conceptual Introduction:

Types of tax systems-There are three types of tax systems.

(1) Proportional- It is the system where regardless of the income all taxpayers pay the same percentage of their incomes as taxes. Here the marginal tax rate equals the average tax rate.

(2) Progressive- In this system as the income increases the rate of tax increases. The high-income individuals pay a higher percentage of income taxes while low-income people pay lower. Here the marginal rate of tax is higher than the average tax rate. This system reduces the income inequality in the market.

(3) Regressive- In this system as the income rises the rate of tax falls. The high-income group people pay less percentage of income as tax than the low-income people. Here the marginal tax rate is less than the average tax rate.

The three systems are illustrated in the graph below:

Capital gains - It is the return on the investment when the assets bought out of investment are sold at a higher price than the original price of purchase. These gains are taxed as capital gains tax.

Dividend- These are the asset paid out of the profits of the corporation to the stockholders. Dividends are not a capital gain rather an income for the tax year.

Payroll taxes- These are the employment taxes. They include the contribution to the Federal Insurance Contributions Act (FICA) and self-employment taxes. These taxes include the Social Security taxes and the Medicare taxes.

Double taxation- The incidence of tax on the same income twice; once as the corporation income tax and then as the income tax on the dividends earned by the investors.

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Answer 2

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 6, Problem 6.2SC

To determine

The Federal, state and local taxes.

Conceptual Introduction:

Types of tax systems-There are three types of tax systems.

(1) Proportional- It is the system where regardless of the income all taxpayers pay the same percentage of their incomes as taxes. Here the marginal tax rate equals the average tax rate.

(2) Progressive- In this system as the income increases the rate of tax increases. The high-income individuals pay a higher percentage of income taxes while low-income people pay lower. Here the marginal rate of tax is higher than the average tax rate. This system reduces the income inequality in the market.

(3) Regressive- In this system as the income rises the rate of tax falls. The high-income group people pay less percentage of income as tax than the low-income people. Here the marginal tax rate is less than the average tax rate.

The three systems are illustrated in the graph below:

Capital gains - It is the return on the investment when the assets bought out of investment are sold at a higher price than the original price of purchase. These gains are taxed as capital gains tax.

Dividend- These are the asset paid out of the profits of the corporation to the stockholders. Dividends are not a capital gain rather an income for the tax year.

Payroll taxes- These are the employment taxes. They include the contribution to the Federal Insurance Contributions Act (FICA) and self-employment taxes. These taxes include the Social Security taxes and the Medicare taxes.

Double taxation- The incidence of tax on the same income twice; once as the corporation income tax and then as the income tax on the dividends earned by the investors.

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Answer 3

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 6, Problem 6.2SC

To determine

The Federal, state and local taxes.

Conceptual Introduction:

Types of tax systems-There are three types of tax systems.

(1) Proportional- It is the system where regardless of the income all taxpayers pay the same percentage of their incomes as taxes. Here the marginal tax rate equals the average tax rate.

(2) Progressive- In this system as the income increases the rate of tax increases. The high-income individuals pay a higher percentage of income taxes while low-income people pay lower. Here the marginal rate of tax is higher than the average tax rate. This system reduces the income inequality in the market.

(3) Regressive- In this system as the income rises the rate of tax falls. The high-income group people pay less percentage of income as tax than the low-income people. Here the marginal tax rate is less than the average tax rate.

The three systems are illustrated in the graph below:

Capital gains - It is the return on the investment when the assets bought out of investment are sold at a higher price than the original price of purchase. These gains are taxed as capital gains tax.

Dividend- These are the asset paid out of the profits of the corporation to the stockholders. Dividends are not a capital gain rather an income for the tax year.

Payroll taxes- These are the employment taxes. They include the contribution to the Federal Insurance Contributions Act (FICA) and self-employment taxes. These taxes include the Social Security taxes and the Medicare taxes.

Double taxation- The incidence of tax on the same income twice; once as the corporation income tax and then as the income tax on the dividends earned by the investors.

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Check out a sample textbook solution

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Answer 4

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 6, Problem 6.2SC

To determine