Income Taxation Chap 1 Part 1
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Questions and Answers

What is the general rule for construing tax laws when they are clear?

  • Applied in their literal import (correct)
  • Applied strictly against the taxpayer
  • Applied ambiguously
  • Applied liberally in favor of the taxpayer

When there is doubt or ambiguity in a tax law, who is it construed strictly against?

  • The taxpayer
  • The tax authority
  • The judiciary
  • The Government (correct)

Under what circumstances can a tax law be construed strictly against the taxpayer and liberally in favor of the government?

  • When the law grants exemption expressly (correct)
  • When there is clear legislative intent
  • When there are special taxes affecting specific classes
  • When a property is held in private ownership

What must a taxpayer do in relation to tax exemptions according to the text?

<p>Establish and prove the exemptions (B)</p> Signup and view all the answers

Which entities are traditional exemptees for tax purposes?

<p>Religious and charitable institutions (A)</p> Signup and view all the answers

In case of ambiguity, what is the general rule for construing tax laws relating to special taxes affecting specific classes?

<p>Liberally in favor of those affected (C)</p> Signup and view all the answers

When can a tax law be construed strictly against the taxpayer in favor of government entities?

<p>In favor of political subdivisions (B)</p> Signup and view all the answers

Who benefits from a liberal interpretation of tax exemption laws?

<p>The government entities (B)</p> Signup and view all the answers

What is the key difference when construing tax laws involving religious institutions?

<p>Liberal interpretation applied to religious institutions (B)</p> Signup and view all the answers

How should taxpayers approach tax exemptions based on personal ownership?

<p>Prove eligibility as per legal requirements (C)</p> Signup and view all the answers

What is the main purpose of taxation?

<p>Raise revenue (C)</p> Signup and view all the answers

What is the limit on the amount of exaction in police power?

<p>Limited to the cost of regulations and issuance of license or surveillance fees (D)</p> Signup and view all the answers

What benefit does a property owner receive in eminent domain cases?

<p>Direct monetary benefit equivalent to the fair market value (A)</p> Signup and view all the answers

How are contracts treated concerning impairment by taxation and other inherent powers?

<p>Contracts MAY be impaired depending on the situation (D)</p> Signup and view all the answers

Who exercises the power of police power according to the text?

<p>Only by the government (D)</p> Signup and view all the answers

What happens to taxes collected in relation to transfer of property rights?

<p>Taxes become part of the public funds (A)</p> Signup and view all the answers

What is the scope of taxation according to the text?

<p>All persons, property and excises (B)</p> Signup and view all the answers

Who can exercise eminent domain powers as per the text?

<p>(1) Government or its subdivisions OR (2) Public service companies or public utilities granted with such power. (B)</p> Signup and view all the answers

What distinguishes police power from eminent domain in terms of benefits received?

<p>No direct benefit; only general benefit of protection for police power while eminent domain provides direct benefit. (B)</p> Signup and view all the answers

What is a significant difference between taxation and police power concerning their impact on individuals?

<p>Taxation raises funds for general welfare, while police power enforces laws for societal regulations. (D)</p> Signup and view all the answers

Flashcards

Literal Interpretation of Tax Laws

When a tax law is clear, it should be applied as written, without trying to interpret it differently.

Strict Construction Against the Government

When there is ambiguity in a tax law, the interpretation that favors the taxpayer is usually preferred.

Tax Exemptions and Burden of Proof

Tax exemptions are exceptions to general rules, and the burden of proof lies with the taxpayer to demonstrate eligibility.

Traditional Tax Exemptees

Religious and charitable institutions are often exempt from taxes because they serve the public good.

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Liberal Interpretation for Specific Groups

When a tax law affects specific groups (like businesses), it is generally interpreted in a way that benefits them.

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Strict Construction Against the Taxpayer

Tax laws can be interpreted strictly AGAINST a taxpayer and liberally in favor of the government when the exemption is explicitly granted by law.

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Purpose of Taxation

The main purpose of taxation is to generate revenue for the government to fund public services.

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Limit on Exaction in Police Power

The government can only charge fees for licenses, surveillance, etc., that are linked to the actual cost of regulation, not for general revenue.

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Benefit in Eminent Domain

In eminent domain cases, the property owner receives fair market value as compensation for their land taken by the government.

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Contract Impairment by Taxation

Contracts may be affected by taxation and other government powers, but the degree of impairment depends on the specific situation.

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Exercise of Police Power

Only the government (federal, state, or local) can exercise police power, which is the authority to regulate for the public good.

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Taxes as Public Funds

Taxes collected by the government become part of the public funds, which are then used to finance various government programs and operations.

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Scope of Taxation

The scope of taxation is incredibly broad, encompassing all individuals, property, and excises (taxes on specific transactions).

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Exercise of Eminent Domain

Both the government and specific entities (like public service companies) granted the power by the government can exercise eminent domain.

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Police Power vs. Eminent Domain: Benefit

Police power is about general benefit, like safety and health, while eminent domain provides direct benefit by transferring ownership to the government.

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Taxation vs. Police Power: Purpose

Taxation raises funds for general public welfare, while police power regulates for societal order and safety.

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Liberal Interpretation for Religious Institutions

Religious institutions often receive a more liberal interpretation of tax exemption laws compared to other organizations.

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