Solutions Manual with Instructor

Solutions Manual with Instructor Manual for Pearson's Federal Taxation 2025 Comprehensive 38 th Edition By Mitchell Franklin, Luke Richardson (All Chapters 100% Original Verified, A+ Grade) All Chapters are Reverse Arranged by Part.

Part 1: Individual Chapters 18-1

Part 2: Corporate Chapters 15-1

Comprehensive Edition Includes

Part 1: Individual

Part 2: Corporate

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Pearson’s Federal Taxation 2025 Individuals Mitchell Franklin Luke E. Richardson Thomas R. Pope Timothy J. Rupert David S. Hulse

• Allen Ford

LeAnn Luna Charlene Henderson William D. Brink Susan Albring Solutions Manual Solutions Manual Part 1 Reverse Arranged: Chapter 18 to 1 2 / 4

Copyright © 2025 Pearson Education, Inc.ii

TABLE OF CONTENTS

Chapter No. Chapter Title Page No.

I:1 I:1-1

I:2 I:2-1

I:3 I:3-1

I:4 I:4-1

I:5 I:5-1

I:6 I:6-1

I:7 I:7-1

I:8 I:8-1

I:9 I:9-1

I:10 I:10-1

I:11 I:11-1

I:12 I:12-1

I:13 I:13-1

I:14 I:14-1

I:15 I:15-1

I:16 I:16-1

I:17 I:17-1

I:18 I:18-1

An Introduction to Taxation Determination of Tax

Gross Income:

Inclusions

Gross Income: Exclusions

Property Transactions: C

apital Gains and Losses Deductions and Losses Business Expenses and Deferred Compensation Itemized Deductions Losses and Bad Debts Depreciation, Cost Recovery, Amortization, and Depletion Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Section 1231 and Recapture

Special Tax Computation Methods, Tax Credits, and Payment of Tax Tax Research Corporations Partnerships and S Corporations Taxes and Investment Planning Summary of Question and Problem Revisions

I:SQR-1 3 / 4

Copyright © 2025 Pearson Education, Inc.

I:18-1

Chapter I:18

Taxes and Investment Planning Discussion Questions I:18-1 The primary distinguishing feature that causes the Current, Deferred, and Pension Models to differ is the timing of taxation. With the Current Model, after-tax dollars are invested, and the investment earnings are taxed currently. With the Deferred Model, after-tax dollars are invested, but the investment earnings are taxed at the end of the investment horizon. With the Pension Model, before-tax dollars are invested, and both the contributed dollars and the investment earnings are taxed at the end of the investment horizon. Thus, the Current Model provides no deferred taxation, the Deferred Model provides one level of deferred taxation (on earnings), and the Pension Model provides two levels of deferred taxation (on contributed- dollars and earnings). pp. I:18-2, I:18-5, and I:18-10 (page numbers where discussion of each model begins).I:18-2 The annualized ATROR is the rate of return that would cause an investment conforming to the Current Model to yield the same accumulation per after-tax dollar invested as the investment under consideration. It is similar to the internal rate of return of the investment. The annualized ATROR is useful because it allows the planner to compare various kinds of investments without knowing the exact amount that he or she will invest. That is, it allows comparison of rates of returns rather than accumulated dollars. pp. I:18-7 and I:18-8.I:18-3 First, the BTROR of the capital asset may be lower than the BTROR on a fully-taxable investment because the capital asset’s return may reflect implicit taxes. Nevertheless, the capital asset may be preferable because the benefit of deferred taxation will outweigh the reduced rate of return if the investment horizon is long enough. pp. I:18-8, I:18-24, and I:18-25.I:18-4 A taxpayer trying to decide between saving outside an IRA or through an IRA should not necessarily avoid the IRA even if the withdrawal from the IRA would trigger the 10% early withdrawal penalty. The benefit of deferred taxation of the IRA will outweigh the penalty if the investment horizon is long enough. On the other hand, a taxpayer who plans to make an early withdrawal may want to consider the Roth IRA because withdrawals from a Roth IRA are deemed first from contributions (Chapter I:7). Thus, Roth IRA withdrawals that do not exceed prior contributions are exempt from taxation and are not subject to the 10% early withdrawal penalty even though the withdrawals are not qualified distributions. pp. I:18-8 through I:18-14.I:18-5 It increases over time. Unlike the Current Model, which has a constant annualized ATROR regardless of the investment horizon, the Deferred Model’s annualized ATROR increases as the investment horizon increases. That is, rann increases as n increases, assuming a constant BTROR. This result occurs because the tax deferral benefit increases as the investment horizon increases. pp. I:18-7 and I:18-8.

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