Chapter 4

Practice Quiz: 60
SmartBook: 69
Chapter Problems: 100

I have no questions for Chapter 4.

My post

Chapter 4 began to lay out a variety of subjects related to how income taxes for the
individual are calculated and what goes into the calculation of income as well as
expenses and deductions and further details the concepts behind filing statuses
independence. Overall our tax structure is set up to encourage or dissuade certain
behaviors and our legislators create a variety of incentives to encourage certain socially
accepted behaviors. For example, it is more advantageous to the individual to get
married and file a tax return that is married filing jointly. Additionally, whereas the
standard deduction used to be lower and encourage itemized deductions (which could
also encourage tax noncompliance) the new standard has increased resulting in a larger
share of American taxpayers utilizing the standard deduction. Lastly, the legislature has
written tax law to generally favor taxpayers who have children over taxpayers who do
not have children and wants to provide some minimal support for those children (as well
as elderly dependence) so they do not find themselves in extreme poverty. One could
argue that it is not the government's job to encourage a certain viewpoint on morality or
social behaviors, but this negates the fact many feel a governments primary
responsibility is to provide collective services (roads, bridges, sewer, defense, etc) to its
citizenry and do what it can to minimize negative financial impact due to changing
demographic, economic, or social conditions (senior citizens are living longer and "out
living" their Social Security and the cost to raise a child has become more expensive. As
a result, in many situations, the government is merely fulfilling its duty and trying to
respond to changing situations when they create tax policy.

My response
This is a great summary of the chapter. I see our tax policy as a method of conveying
priorities from our elected officials to the electorate by encouraging certain behaviors,
rewarding certain activities, and discouraging things that may not be ultimately
beneficial to the whole of the country. Like you, I find the dependent and qualifying
relative portions of the tax code to be curious. I'd love to learn more from the authors of
this tax policy or the philosophy to see if the purpose of different guidelines and support
tests are to discourage qualifying relatives from exiting the workforce and thus stop
paying taxes sooner than would be otherwise occurring.

Chapter 5

Practice Quiz: 50
SmartBook: 67%
Chapter Problems: 100

I have no questions for Chapter 5.

Chapter 5 is all about how our tax policies thinks about recognizing and realizing income
and how do we view (more importantly how does the legislature) view exclusions from
that income. The tax policy created by the legislature is ultimately designed to
encourage or discourage certain behaviors. If we assume that it is not influenced via
lobbying activities, but instead objectively created and constructed, we can see that
certain situation's are more advantageous to the taxpayer and perhaps less
advantageous to the tax in authorities than others and some of these philosophies can
and do change over time. Whether good or bad may depend on the seat from which you
sit.

Take for example the concept of alimony. Prior to 2019, one might argue there were
loopholes in the tax law which provided for unfair deductions to the person paying
alimony. Now, it is no longer deductible by the pay or nor is it included in the income of
the payee. This is perhaps a recognition that in a divorce, these alimony payments
could be significant sources of income for the person receiving alimony and to tax them
could negatively impact their ability to provide care for themselves and their
dependence. At the same time, it could also be the recognition that the person paying
the alimony was able to have a "free rider" advantage because they were previously
able to deduct alimony. Change in tax policy not only illuminates a loophole, but also
increases taxes to be collected from alimony payments as it is no longer eliminated
from adjusted gross income.

No response post since I was the first.

Practice Quiz: 70
SmartBook: 67
Chapter Problems: 90

I have no questions for Chapter 6.

My response

Chapter 6 begins to talk about deductions as a relates to adjusted gross income. This
brings up the concept of deductions for AGI and from AGI.

When I think about deductions for adjusted gross income, I tend to think about all things
related to the business expenses and things that would occur in the necessary course of
business. When I think of deductions from AGI, I tend to think of medical expenses,
interest, local taxes paid, home mortgage interest, and charitable deductions. When I
think of the tax cut act of 2017, I tend to think of most of the changes in that part of the
tax code affecting the deductions from adjusted gross income.

These previously described deductions would have historically been itemized on a more
frequent basis by individual taxpayers.

However with the tax law changed in 2017, they became more of an incentive for
individuals to take the standard deduction since more often than not, the increase in
the standard deduction (especially with the married filing jointly) diminished the need
for the average taxpayer to itemize and instead to take the standard deduction. This is
especially true for taxpayers that tended to not live in high tax states.

With this change, the tax code also put a limitation on the state and local taxes and
capped it out at a certain amount. While this Impacts a number of taxpayers on the east
and West Coast, the overall change in deductions from AGI should make it easier for the
average taxpayer to calculate their annual tax liability and comply with tax law by
taking advantage of a more generous standard deduction

No response post since I was the first.

Practice Quiz: 60
SmartBook: 59
Chapter Problems: 95

The questions I did have appeared to be related to the quizzes. It seems there are some
duplicate answers in a few of the quizzes. I submitted this to Dr. G.

My response

Chapter 7 begins to talk about the concept of investments. It's been my experience in
my time in banking that this is one area of the tax code where sophisticated taxpayers
begin to enjoy the advantages of good tax planning and favorable tax policy.

One often hears billionaires talking about how it's unfair for their secretary to pay more
in taxes proportionally than they do but the reality is that many of these high net worth
individuals and families utilize dividends, capital gains, and investment income which
are highly tax favored as opposed to traditional W-2 income.

Many of these strategies for higher net worth individuals employ delaying dividends and
interest and utilizing losses to offset gains. Further, there is an incentive for investors to
hold onto their investments in excess of a year so they can take advantage of long-term
capital gains.

Other little tax advantages exist related to investment interest expense which could be
the interest expense that occurs when a tax pair with borrow money to purchase
investments.

This chapter also discusses how rental real estate is tax advantaged for tax payers and
can help them efficiently make investments with a long-term horizon and minimize near
term and short term tax expense.

While there are reductions related to income phaseouts, this is still a very tax
advantage strategy for mini small Time investors who also on real estate
No response post since I was the first.