1. 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. What’s 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?
2. To what extent is adjusted gross income actually a net income number and why could AGI be considered a better measure of an individual’s disposable income than taxable income?
3. 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.