Your SlideShare is downloading. ×
0
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Concepts in Federal Income Taxation
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Concepts in Federal Income Taxation

759

Published on

This is the first half of a presentation I gave at Pace University Law School's Program: New Directions: Practical Skills for Returning to Law Practice …

This is the first half of a presentation I gave at Pace University Law School's Program: New Directions: Practical Skills for Returning to Law Practice
http://web.pace.edu/page.cfm?doc_id=29130

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
759
On Slideshare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. <ul><li>Concepts in Federal Taxation: Individuals </li></ul>
  • 2. Basic tax structure <ul><li>Gross Income </li></ul><ul><li>- Deduction (Adjustments to Income) </li></ul><ul><li>Adjusted Gross Income </li></ul><ul><li>-Itemized Deductions or Standard Deduction </li></ul><ul><li>-Exemptions </li></ul><ul><li>Taxable Income—apply rates for dollar amount of tax </li></ul>
  • 3. Gross Income <ul><li>Gross income means all income from whatever source derived . </li></ul><ul><li>IRC Sec 61 </li></ul><ul><li>Glenshaw Glass </li></ul><ul><li>Cesarini </li></ul>
  • 4. <ul><li>Who is subject to taxation? </li></ul><ul><li>Can you give or assign away income? </li></ul><ul><li>Who is taxed if TP sets up a Grantor Trust? </li></ul>Gross Income
  • 5. Exclusions from Income <ul><li>Gifts </li></ul><ul><li>Life Insurance Proceeds </li></ul><ul><li>(Some) Fringe Benefits </li></ul><ul><li>Personal Injury Awards </li></ul>
  • 6.  
  • 7. What is income here?
  • 8. Basis <ul><li>How did the TP acquire the property? </li></ul><ul><li>Purchase-cost </li></ul><ul><li>Exchange-FMV of property received </li></ul><ul><li>Gift-Carryover basis </li></ul><ul><li>Inheritance-Stepped up (DOD) </li></ul>
  • 9. <ul><li>Joint tenancy with Right of Survivorship and T in C </li></ul><ul><li>assume husband and wife buy property for $1,000. </li></ul><ul><li>A year later, wife dies and </li></ul><ul><li>property is now worth $3,000. One year later, husband sells </li></ul><ul><li>property for $6,000. </li></ul><ul><li>Husband has initial basis of $500 at time of purchase. </li></ul><ul><li>Then, when wife dies, he inherits by law, her half (VALUATION?) and </li></ul><ul><li>now has to add $1,500 to basis of $500 for total new basis of </li></ul><ul><li>$2,000. When he sells the land for $6,000, he realizes a </li></ul><ul><li>gain of $4,000. </li></ul>Basis
  • 10. Deductions <ul><li>(Selected—there are more!) </li></ul><ul><li>Trade or business expenses </li></ul><ul><li>Capital Assets—Depreciation </li></ul><ul><li>Losses from Sale or Exchanges </li></ul>
  • 11. Passive Losses <ul><li>Code sec 465 generally limits loss deductions to amount that TP has at risk. This keeps TPs from offsetting trade, business or professional income by losses from investments. </li></ul>
  • 12. Capital Gains & Losses <ul><li>A capital gain is the profit when you sell a capital asset, which is property such as stocks, bonds, mutual fund shares, and real estate. </li></ul><ul><li>(not Capital Assets: inventory, depreciable business property, and real property used in trade or business. </li></ul>
  • 13. <ul><li>You invest in a capital asset for $20,000 and then sell it for $100,000 twenty years later and your capital gain is $80,000 with no discount for how inflation has eroded the value of money during the period of ownership. </li></ul>Capital Gains & Losses
  • 14. <ul><li>Capital Losses Are Limited to $3,000- annually as offsets against other ordinary income. </li></ul><ul><li>EXAMPLE: TP bought stock for $10,000 and then sells it for $2,000. </li></ul><ul><li>This $8,000 loss on the stock asset cannot be taken in full but only $3,000 of it may be deducted against other income (sec 1211). </li></ul><ul><li>The difference of $5,000 isn't lost forever, rather it carries over. It carries over in the subsequent year until it is used up. </li></ul>Capital Gains & Losses
  • 15. Alternative Minimum Tax <ul><li>In addition to the normal tax code calculations, the AMT system uses a different set of rules for determining taxable income and allowable deductions. </li></ul>
  • 16. <ul><li>The &quot;tax preference items&quot; are added back, then an AMT Exemption is subtracted to compute AMT Taxable Income (AMTI). The AMT Exemption is phased out at 25 cents per dollar of AMTI above $150,000 on joint returns. Criticism often focuses on the fact that the $150,000 phase-out threshold has never been adjusted for inflation since its enactment in 1986. </li></ul>Alternative Minimum Tax
  • 17. Domestic Relations Applications of Federal Taxation <ul><li>Alimony is income to recipient spouse and deductible by payor spouse. </li></ul>
  • 18. <ul><ul><li>says that custodial parent (parent </li></ul></ul><ul><li>who has child for more than 1/2 year) is entitled to the dependency deduction. There is no deduction for payments to child support from paying parent. (Specify in decree) </li></ul>Domestic Relations Applications of Federal Taxation
  • 19. <ul><li>No gain or loss is recognized in property conveyed spouse to spouse in a divorce. Code Sec 1041 (a), nor is the gain on property included in gross income. </li></ul>Domestic Relations Applications of Federal Taxation
  • 20.  

×