ACCT 4311 - Homework Assignments: Chapter 1

ACCT4311-PRINCIPLES OF FEDERAL INCOME TAXATION

UHV Texas

Solutions to Homework Assignments: Chapter 1

2. What are some aspects of business that require knowledge of taxation? What are some aspects of personal finance that require knowledge of taxation?

Taxes play an important role in fundamental business decisions such as the following:
 What organizational form should a business use?
 Where should the business locate?
 How should business acquisitions be structured?
 How should the business compensate employees?
 What is the appropriate mix of debt and equity for the business?
 Should the business rent or own its equipment and property?
 How should the business distribute profits to its owners?

One must consider all transaction costs (including taxes) to evaluate the merits of a transaction.

Common personal financial decisions that taxes influence include: choosing investments, retirement planning, choosing to rent or buy a home, evaluating alternative job offers, saving for education expenses, and doing gift or estate planning