The first safe harbor rule states that as long as the taxpayers quarterly payments equals 90% of what is due on the tax return they can escape a penalty. The second safe harbor allows the taxpayer to avoid a penalty as long as they pay 100% of the amount from the previous year’s tax return. If the taxpayer’s AGI exceeds $150,000, they must pay 110% of the previous year’s return. Chapter 3 (5 pts) Above-the-line, or For AGI deductions, are taken out before your AGI is calculated. Above- the-line deductions include alimony, student loan interest, and moving expenses.
The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyse the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield. NPV or net present value in capital budgeting is defined as the difference between outlay and present value of expected cash inflows. A positive NPV value is acceptable where as an NPV of zero yields the internal rate of return.
Indirect taxes such as VAT, GST and sales taxes are in fact regressive taxes, placing a larger burden on those whose ability to pay is lower and a smaller burden on the higher –income earners whose ability to pay is greater. A
The graph above depicts the probability distributions for risks A and B. Based on the graph, which of the following statements is true? a. The expected value of loss for risk A is larger than the expected value of loss for risk B. b. The expected value of loss for risk B is larger than the expected value of loss for risk A. c. The standard deviation of expected losses for risk A is larger than the standard deviation of losses for risk B. d. The standard deviation of expected losses for risk B is larger than the standard deviation of losses for risk A.
But empirical literature ( See Feige and Cebula, 2011) shows that there is a positive relationship between tax rate and tax fraud. In the model of Allingham and Sandmo 1972, as well as for others models developed thereafter, it is supposed that after tax audit, tax administration has a comprehensive knowledge on the real value of the chosen taxpayer’s income. But in the reality, tax administration can't detect all the mistakes or the omissions and
Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate according to the AS/AD model a. an increase in government spending b. an increase in taxes c. a reduction in government spending d. no change in taxes or government spending. 4. What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1% to 1.25%? A.
The reason is the information support by independent documentary evidence. Historical cost accounting figures are based on actual acquisition prices, not merely possible of market values that can be revised to affect the ratio analysis which improve the performance of financial results. That is, historical costs accounting provides an objective view of an entity’s performance. Thus it consider verifiable and reduces the risk of manipulation of figures by management. In contrast, if there is not active market, market value accounting requires the use of estimation subject to uncertain assumptions, personal judgment, and subjective information about future values, such as discount rates and allowance for doubtful accounts.
Solution for Question 1.1 Definition of opportunity cost: The opportunity cost of an action is the value of the next-best alternative that must be given up in order to undertake that action. Critical comment: This statement is inaccurate. Among all the alternatives, the alternative that provides the largest benefit is the best alternative, which is the action that should be undertaken. The alternative that generates the second-largest benefit is the next-best alternative, the value of which is the opportunity cost. If another alternative is added to the alternatives, then there are three possible situations: a) If the value of the additional alternative is lower than that of the next-best alternative, then this additional alternative is forgone and the opportunity cost remains the same.
The RRR can also be called as the discount rate, hurdle rate or the opportunity cost of capital. NPV takes into account the principle in economics referred to as the “time value of money” which implies that a dollar earned today is more valuable than a dollar earned tomorrow. It is to be noted that projects with zero or positive NPV are acceptable to a company from a financial viewpoint as the return from these projects equals or exceeds the cost of capital. Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero. IRR represents the discount rate at which the present value of the expected cash inflows from a project equals the present value of the expected cash outflows.
Hence there has to be a definite relationship between debt and effective tax rate for the companies. One of the hypotheses of DeAngelo and Masulis postulates this relationship. The hypothesis states that, “ceteris paribus … firms subject to lower corporate tax rate will employ less debt in their capital structure …” The fact that the statutory tax rate does not change frequently may be a possible explanation for this relationship. However, the presence of non-debt tax shields may decrease the taxable income to zero. Hence, the relevant corporate tax rate has to be the effective tax rate and not the statutory tax rate.