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Wrap-Up Questions for Chapter 6

29 July, 2015 - 16:31
  1. What is the relationship between depreciation and basis? Why does the relationship have to be what it is? Feel free to state your answer in Haig-Simons terms.
  2. This chapter has offered three different tax treatments of expenses. What are they? What are the rationales for adopting any one of them in a given case?
  3. We tax net income? What economic distortions would occur if we taxed gross receipts?
  4. What economic distortions occur if we accelerate depreciation allowances? – if we give deductions to certain activities when they are profitable, for example § 199?
  5. Do depletion allowances encourage (too much) exploitation of natural resources?