Two Families Who Live in Plains, GA Have Identical Incomes

question 51

Multiple Choice

Two families who live in Plains, GA have identical incomes. The DeWitts deduct $5,000 from their taxable income for mortgage interest paid during the year. The DeMotts family lives in an apartment and is not eligible for a mortgage-interest deduction. This situation exemplifies

• A)an application of the benefits principle of taxation.
• B)a violation of horizontal equity.
• C)a violation of vertical equity.
• D)an application of egalitarian tax rules.

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Definitions:

Custom Machinery

Specialized equipment designed and built to meet unique production or operational requirements of a business.

Job Order Costing

An accounting method used to track costs and evaluate the profitability of individual jobs, suitable for companies that produce custom products or jobs.

Large Aircraft Manufacturers

Companies that specialize in the development, assembly, and selling of aircrafts that have a high passenger or cargo capacity.

Process Costing

An accounting methodology applied where production is continuous, assigning costs to units of product on the basis of process they go through.