Generally, a Company Earns a Servicing Fee When It Retains

question 107

Multiple Choice

Generally, a company earns a servicing fee when it retains the servicing of a block of loans in which it has sold all or part of the block. Service fees received from sales of participations are recorded as:

• A) Gross income and not netted against interest income remitted to the acquiring party
• B) Unearned revenue and not netted against interest income remitted to the acquiring party
• C) Gross income
• D) Netted against interest income remitted to the acquiring party

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Definitions:

Lump-Sum Tax

A tax that is a fixed amount, not varying with the taxpayer’s income level or expenditure, making it independent of the taxpayer’s behavior.

Excise Tax

An excise tax is a tax charged on specific goods and services, such as gasoline, cigarettes, and alcohol, typically to discourage their use or generate revenue.

Benefits Principle

A taxation theory that suggests taxes should be levied according to the benefits received by the taxpayer from government services.

Ability-To-Pay Principle

This principle suggests that individuals should be taxed based on their ability to pay, regardless of the benefits they receive.