13. (TCO 10) What is the difference between a recognized gain or loss and a realized gain or loss? Would you rather have a realized gain or loss or a recognized gain or loss? (Points : 30)

Question 14.14. (TCO 9) Explain how a company chooses a taxable year. What do you think the taxable year for the following businesses would be? i. A major league football team ii. A moving company iii. A tax preparation business (Points : 30)

Question 15.15. (TCO 8) Matthew and Mia have been house hunting. The real estate agent is trying to convince them that they should buy as much of the house as they can possibly afford. They are in a 33% tax bracket, so he has assured them that spending $28,000 a year on mortgage payments will reduce their taxes by $9,240. They may be even more reduced in the future as they continue to rack up the big raises over the next few years. The couple has always used the standard deduction and isn't really sure how the itemizing thing really works. Mia vaguely remembers her tax professor in college warning the class that some real estate agents tend to oversell the tax benefits of home ownership. What factors would cause the actual tax savings of a $28,000 mortgage payment to be less than the payment times the couple's highest ETR (estimated tax rate)? (Points : 30)

Question 16.16. (TCO 6) Mr. and Mrs. Jones have never made a taxable gift. They have three children and 12 grandchildren. Mr. and Mrs. Jones both have wills that leave their entire property to the other when one dies. They figure that there will be no estate taxes when the first spouse dies. Whats wrong with this strategy if they want their kids to enjoy their wealth after they are gone? What other things can you suggest to them to minimize their gift taxes? (Points : 30)

Question 17.17. (TCO 3) To what extent is adjusted gross income actually a net income number and why could AGI be considered a better measure of an individuals disposable income than taxable income? (Points : 30)

Question 18.18. (TCO 1) What is the relationship between tax base and tax rate in determining the revenue collected by the government? Give an example of how a particular tax would fit into the various components of the equation. (Points : 30)