US Tax System

You are the instructor of a one-day tax seminar to inform international students studying business in the United States about the current tax system.

You are preparing a background report to help you prepare for the seminar. The report will include information about programs supported by tax revenue, the type of tax structure in the United States, primary and secondary sources for tax research, and a detailed example of the cash basis for tax purposes.

You are preparing the example to explain the cash basis to your students but need to detail the information in the report to be able explain it in the presentation.

In a six- to eight-page paper, prepare a report that addresses each of the following:

• Describe at least three government programs supported by revenue from specific taxes (include specific examples).
• For each program, specify the related tax, the entities or activities on which it is levied, and the tax rate.
• Where possible, give quantitative information such as the proportion of tax revenue used for the program and the proportion of program expenses supported by the tax revenue.
• Explain how the underlying principles of taxation relate to the programs supported by the taxes.
• What type of tax rate structure does the U.S. tax system apply (include advantages and disadvantages of the current structure)?
• Discuss the primary and secondary authoritative sources, provide a description of each, and detail the differences between them.
• Based on the scenario below respond to the questions on using the cash basis.

XYZ Manufacturing, Inc., located in Centervale, uses the calendar year and the cash method of accounting.

On December 31, 2010, XYZ made the following cash payments:

• $100,000 for a two-year office lease beginning on February 1, 2011
• $58,000 of inventory items held for sale to customers
• $21,800 to purchase new manufacturing equipment, which was delivered and set up on January 15, 2011
• $10,000 compensation to the company’s auditors who spent three weeks in January 2011 analyzing XYZ’s internal control system, as a part of the annual audit
• $30,500 property tax paid to the local government for the first six months of 2011

Respond to the following:

• To what extent can XYZ deduct these payments in 2010? Explain your answer citing relevant rules and laws.
• What advantages does the cash method of accounting offer to the company? Give reasons for your answer.
• Would any other method offer an advantage? Give reasons for your answer.

Give detailed reasons for your responses and format your paper in APA. You should have at least six outside sources in addition to your textbook.