This document discusses the concepts and inclusions of gross income for individual income tax purposes. It provides examples to illustrate gross income calculations for a sole proprietor dental practice using both cash and accrual accounting methods. It also summarizes the tax treatment of various income sources such as self-employment income, property income, dividends, partnership income, S corporation income, trust and estate income, and other items like imputed interest and annuity income.
Dr. Cliff Payne, a dentist, opened a sole proprietorship dental practice at the beginning of the year with a December 31 year-end. He contracted to have a building constructed for his medical practice and used extra money to purchase stock. The document discusses the calculation of gross income for Dr. Payne's dental practice and whether he correctly calculated it as the $385,000 billed to patients. It then provides an overview of the concepts of gross income, accounting periods and methods, income sources including dividends and partnerships, and other inclusions like imputed interest.
The document discusses accounting periods and methods for partnerships and S corporations. It states that a partnership's tax year must end on the tax year of the majority interest partners, or if no majority, the principal partners. If there is no majority or principal partners, the tax year that results in the least aggregate deferral of income is used. Exceptions allow other fiscal year ends if valid business purposes or section 444 elections are met. The document also discusses short tax years, accounting methods, and provisions that mitigate the effects of an arbitrary accounting period.
The document discusses itemized deductions for individuals, including medical expenses, taxes, interest expenses, and qualified residence interest. It provides examples to illustrate how these deductions are calculated and applied. It also summarizes how these deductions would apply to the specific scenario of John and Susan Williamson purchasing their first home, as presented in an earlier example.
The document provides information about budgeting and personal finances. It discusses that the average person spends money 3 times per day and common daily expenses like soft drinks can add up to hundreds per year. It emphasizes that having a budget is important to avoid money problems and control spending. The key aspects of creating a budget are to track income, categorize expenses as fixed, variable or periodic, and ensure expenses do not exceed income each month. Paying yourself first by saving 10% of income is also recommended. Implementing a budget requires monitoring spending using methods like cash envelopes or a checking register to stay on track financially.
Dr. Payne has incorrectly calculated some of the business expenses deductible on Schedule C of his tax return. Specifically, the contributions to political campaigns are not deductible, and hobby losses are only deductible up to the amount of hobby income. Dr. Payne should re-examine the expenses from his dental practice to ensure they meet the requirements of being ordinary, necessary, and substantiated to be deductible as trade or business expenses.
This document provides guidance on correctly budgeting income for Food & Nutrition Services (FNS) cases. It outlines policies for determining the appropriate base period to use for different income types, how to calculate income amounts, and when to react to changes in income. Correct income budgeting is important for accurately determining eligibility and benefit levels. The document specifies how to handle ongoing, new, terminated, and income from ineligible or disqualified persons. It also includes examples and knowledge checks to reinforce the policies.
This document discusses balance-day adjustments that firms must make at the end of an accounting period. It explains that on the balance day, firms must close revenue and expense accounts, balance asset, liability, and equity accounts, calculate net profit, and prepare financial reports. It also describes how firms make adjusting entries on the balance day to account for accrued and prepaid revenue and expenses, and depreciation, to ensure revenue and expenses are reported accurately based on the accrual method. Finally, it explains how an adjusted trial balance is prepared after all balance-day adjustments have been made.
Chapter 3: Principles and Practices of Health Care AccountingNada G.Youssef
This document discusses accounting principles for health care organizations. It explains that transactions are recorded in journals and ledgers and used to produce financial statements. External transactions occur between the organization and outside parties, while internal transactions occur within the organization. The document also describes the difference between cash basis and accrual basis accounting and outlines the steps to analyze, record, and report transactions according to accrual accounting principles.
Dr. Cliff Payne, a dentist, opened a sole proprietorship dental practice at the beginning of the year with a December 31 year-end. He contracted to have a building constructed for his medical practice and used extra money to purchase stock. The document discusses the calculation of gross income for Dr. Payne's dental practice and whether he correctly calculated it as the $385,000 billed to patients. It then provides an overview of the concepts of gross income, accounting periods and methods, income sources including dividends and partnerships, and other inclusions like imputed interest.
The document discusses accounting periods and methods for partnerships and S corporations. It states that a partnership's tax year must end on the tax year of the majority interest partners, or if no majority, the principal partners. If there is no majority or principal partners, the tax year that results in the least aggregate deferral of income is used. Exceptions allow other fiscal year ends if valid business purposes or section 444 elections are met. The document also discusses short tax years, accounting methods, and provisions that mitigate the effects of an arbitrary accounting period.
The document discusses itemized deductions for individuals, including medical expenses, taxes, interest expenses, and qualified residence interest. It provides examples to illustrate how these deductions are calculated and applied. It also summarizes how these deductions would apply to the specific scenario of John and Susan Williamson purchasing their first home, as presented in an earlier example.
The document provides information about budgeting and personal finances. It discusses that the average person spends money 3 times per day and common daily expenses like soft drinks can add up to hundreds per year. It emphasizes that having a budget is important to avoid money problems and control spending. The key aspects of creating a budget are to track income, categorize expenses as fixed, variable or periodic, and ensure expenses do not exceed income each month. Paying yourself first by saving 10% of income is also recommended. Implementing a budget requires monitoring spending using methods like cash envelopes or a checking register to stay on track financially.
Dr. Payne has incorrectly calculated some of the business expenses deductible on Schedule C of his tax return. Specifically, the contributions to political campaigns are not deductible, and hobby losses are only deductible up to the amount of hobby income. Dr. Payne should re-examine the expenses from his dental practice to ensure they meet the requirements of being ordinary, necessary, and substantiated to be deductible as trade or business expenses.
This document provides guidance on correctly budgeting income for Food & Nutrition Services (FNS) cases. It outlines policies for determining the appropriate base period to use for different income types, how to calculate income amounts, and when to react to changes in income. Correct income budgeting is important for accurately determining eligibility and benefit levels. The document specifies how to handle ongoing, new, terminated, and income from ineligible or disqualified persons. It also includes examples and knowledge checks to reinforce the policies.
This document discusses balance-day adjustments that firms must make at the end of an accounting period. It explains that on the balance day, firms must close revenue and expense accounts, balance asset, liability, and equity accounts, calculate net profit, and prepare financial reports. It also describes how firms make adjusting entries on the balance day to account for accrued and prepaid revenue and expenses, and depreciation, to ensure revenue and expenses are reported accurately based on the accrual method. Finally, it explains how an adjusted trial balance is prepared after all balance-day adjustments have been made.
Chapter 3: Principles and Practices of Health Care AccountingNada G.Youssef
This document discusses accounting principles for health care organizations. It explains that transactions are recorded in journals and ledgers and used to produce financial statements. External transactions occur between the organization and outside parties, while internal transactions occur within the organization. The document also describes the difference between cash basis and accrual basis accounting and outlines the steps to analyze, record, and report transactions according to accrual accounting principles.
SEP plans allow employers to make deductible contributions to traditional IRAs established for each eligible employee; contributions are discretionary but must be based on a written allocation formula and cannot exceed a certain percentage of compensation for each employee; SEP plans provide an easy way for small businesses to offer retirement benefits to employees.
Penalties and Prosecution under Income tax on TDS DefaultsCA. Pankaj Shah
This document discusses penalties and prosecution for defaults related to tax deducted at source (TDS) in India. It covers various types of TDS defaults like non-deduction, short deduction, late deduction, and late deposit. It describes the assessee in default's automatic liability and how interest under section 201(1A) and penalties under sections 221, 271C and 271CA are levied for such defaults. It also discusses the offenses of failing to pay deducted tax under section 276B which can lead to prosecution and imprisonment. The document provides details on reasonable causes, limitations on prosecution, standard operating procedures for prosecution, and the option for compounding offenses.
This document provides an overview of topics covered in ACCT 101 Accounting and Financial Management for weeks 1 and 2. It discusses the differences between not-for-profit and for-profit organizations, the importance and purpose of accounting, accounting terminology and language, the double-entry accounting system, the accounting equation, accrual versus cash basis accounting, and the development of financial reporting standards. Key accounting concepts such as assets, liabilities, revenues, and expenses are defined. Examples are also provided to demonstrate how to record accounting transactions and how transactions affect the accounting equation.
Provisions in Accounting & Prepaid ExpensesDeepak Soni
Accrual-basis accounting is a concept in which expenses are recorded when incurred, not when amount is paid.
1. ACCRUALS / PROVISIONS: All expenses incurred to generate revenues must be recognized in the same period as the related revenues.
A provision is an amount that you put in aside in your accounts to cover a future liability.
2. PREPAID: A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received in the near future.
The rental activity is incidental if gross rental income is less than 2% of all gross income from the trade or business of the taxpayer for the taxable year.
This document summarizes a presentation on preparing for a year-end audit. It discusses staying organized throughout the year by maintaining reliable monthly financial statements. The audit process involves a planning stage, fieldwork, reporting, and post-fieldwork. Key areas covered in the audit include internal controls, risk assessment, substantive testing, accrual vs. cash accounting, statement of financial position, and statement of activities. The presentation emphasizes properly recording revenues, expenses, assets, and liabilities and analyzing variances from budgets.
Budgeting involves creating a spending plan based on estimated income and expenses over a period of time, usually a year. It helps individuals and families save money, reduce debt, better control spending, and achieve financial goals. The key steps in budgeting are to estimate income, identify expense categories, set budget levels for each category based on past spending, implement the spending plan, and periodically evaluate it to ensure it remains effective amid changing financial circumstances. Maintaining accurate records of income and expenses is important for evaluating the budget and identifying areas where spending has exceeded allocations. Budgeting works best as a joint family effort with cooperation and commitment from all members.
The document summarizes key information about personal finance and taxes in the United States. It defines common tax terms like the IRS, filing statuses, schedules, itemized deductions, tax brackets, deficits, and forms like the W-2. It also covers tax principles such as ability to pay and voluntary compliance.
1. The document outlines the conceptual framework for financial reporting established by the FASB. The framework consists of three levels: the objective of financial reporting, fundamental qualitative characteristics and elements, and concepts for recognition, measurement, and disclosure.
2. It describes the key components of each level, including the basic objective to provide useful information to investors and creditors, qualitative characteristics like relevance and faithful representation, and defined elements like assets, liabilities, and equity.
3. Basic assumptions and principles are also discussed, such as the monetary unit and historical cost assumptions, as well as the revenue and expense recognition principles. An exception for the cost constraint is noted.
This document summarizes key deductions for adjusted gross income (AGI) and itemized deductions on individual tax returns. It discusses deductions directly and indirectly related to business activities, as well as itemized deductions for medical expenses, taxes, interest, charitable contributions, and casualty/theft losses. It also covers the standard deduction and exemptions. The learning objectives are to identify AGI deductions, describe itemized deductions, and explain the standard deduction and exemptions in calculating taxable income.
The document summarizes the key steps in the accounting cycle. It discusses how transactions are initially recorded in journals and then posted to the general ledger. An unadjusted trial balance is prepared. Adjusting entries are made for accruals and deferrals. An adjusted trial balance and financial statements are then prepared. Finally, closing entries are made to reset the nominal accounts for the next period.
This document summarizes key aspects of individual income tax calculations in the United States, including:
1) It outlines the basic formula for calculating individual tax liability, including components like gross income, deductions, exemptions, taxable income, tax rates, credits, and payments.
2) It describes the requirements for determining personal and dependency exemptions, including the definitions of a qualifying child and qualifying relative.
3) It explains the different filing statuses individuals can use, including married filing jointly, head of household, and qualifying widow. Examples are provided to illustrate how to determine the proper filing status.
This chapter discusses gross income and exclusions. It defines gross income for tax purposes and explains when taxpayers recognize income. It discusses the various sources of income, including income from services, property, annuities, and other sources. It also covers the major exclusion provisions that allow taxpayers to exclude or defer certain types of income from gross income, such as municipal bond interest, home sale gains up to $250,000, education-related exclusions, and foreign earned income up to $97,600.
1. The chapter discusses how to calculate gains and losses from property dispositions, including determining the amount realized, adjusted basis, and realized/recognized gains and losses.
2. It describes the different character types of gains and losses, such as ordinary, capital, and Section 1231 assets. Depreciation recapture rules may recharacterize some gains as ordinary.
3. Exceptions to immediate gain/loss recognition are discussed, including like-kind exchanges of business or investment property that qualify for nonrecognition treatment.
This document summarizes the key tax consequences of home ownership including:
1) Determining if a home is a principal residence, secondary residence, or non-residence for tax purposes.
2) Calculating taxable gain on the sale of a residence and exclusions for principal residences.
3) Limitations on deducting interest expenses and points paid on loans secured by homes.
4) Deductibility of real property taxes and first-time homebuyer credits.
5) Tax treatment of homes used for both personal and rental use.
This document summarizes key concepts around business income, deductions, and accounting methods for tax purposes. It describes the general requirements for deducting business expenses and identifies common deductions. It also explains the concept of accounting periods and describes the accounting methods (cash, accrual, hybrid) available to businesses for determining taxable income and expense deductions. Special business deductions are also identified and examples are provided to illustrate concepts like reasonable compensation, the 12-month rule for prepaid expenses, and accounting for advance payments under different methods.
This document provides an overview of cost recovery methods used in tax law to recover the costs of assets over time. It discusses the concepts of basis, depreciation, amortization, and depletion. Depreciation allows businesses to deduct the costs of tangible personal and real property. Amortization applies to intangible assets and is deducted over a specific period. Depletion allows natural resources to recover their capital costs. The document provides examples of calculating cost recovery for various asset types.
This document provides an overview and review of key concepts from Chapter 4 of the textbook on the income statement and related information. It discusses the purpose and limitations of the income statement, its major elements, different formats, sections, and how to report various income items such as discontinued operations, extraordinary items, and changes in accounting principles. It also covers earnings per share, the retained earnings statement, comprehensive income, and the statement of stockholders' equity.
The document discusses key issues related to inventory valuation and costing approaches. It covers topics such as inventory systems, costs included in inventory, cost flow assumptions (e.g. FIFO, LIFO), and advantages/disadvantages of different methods. Specifically, it provides details on LIFO, including the LIFO reserve, LIFO liquidation, dollar-value LIFO, and factors to consider when selecting an inventory valuation method.
This document provides learning objectives and content about individual income tax computation and tax credits. It covers determining regular and alternative minimum tax liability, computing employment and self-employment taxes, describing types of tax credits including refundable and nonrefundable personal and business credits, and explaining taxpayer filing requirements and penalties. Examples are provided to illustrate concepts like kiddie tax, education credits, and late payment penalties.
This document provides an overview of Philippine taxation. It begins with definitions of taxation and discusses principles like the necessity of taxes to fund government. It describes different types of taxes according to criteria like subject, burden, determination of amount, and purpose. Key points include taxes being compulsory, levied by the state for public purposes, and classified as direct or indirect. The document also covers tax system objectives, stages of taxation, laws, and the power and limitations of taxation. It discusses concepts like double taxation, tax exemptions, and interpreting tax laws. The last sections focus on income taxation principles and computing individual income tax.
SEP plans allow employers to make deductible contributions to traditional IRAs established for each eligible employee; contributions are discretionary but must be based on a written allocation formula and cannot exceed a certain percentage of compensation for each employee; SEP plans provide an easy way for small businesses to offer retirement benefits to employees.
Penalties and Prosecution under Income tax on TDS DefaultsCA. Pankaj Shah
This document discusses penalties and prosecution for defaults related to tax deducted at source (TDS) in India. It covers various types of TDS defaults like non-deduction, short deduction, late deduction, and late deposit. It describes the assessee in default's automatic liability and how interest under section 201(1A) and penalties under sections 221, 271C and 271CA are levied for such defaults. It also discusses the offenses of failing to pay deducted tax under section 276B which can lead to prosecution and imprisonment. The document provides details on reasonable causes, limitations on prosecution, standard operating procedures for prosecution, and the option for compounding offenses.
This document provides an overview of topics covered in ACCT 101 Accounting and Financial Management for weeks 1 and 2. It discusses the differences between not-for-profit and for-profit organizations, the importance and purpose of accounting, accounting terminology and language, the double-entry accounting system, the accounting equation, accrual versus cash basis accounting, and the development of financial reporting standards. Key accounting concepts such as assets, liabilities, revenues, and expenses are defined. Examples are also provided to demonstrate how to record accounting transactions and how transactions affect the accounting equation.
Provisions in Accounting & Prepaid ExpensesDeepak Soni
Accrual-basis accounting is a concept in which expenses are recorded when incurred, not when amount is paid.
1. ACCRUALS / PROVISIONS: All expenses incurred to generate revenues must be recognized in the same period as the related revenues.
A provision is an amount that you put in aside in your accounts to cover a future liability.
2. PREPAID: A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received in the near future.
The rental activity is incidental if gross rental income is less than 2% of all gross income from the trade or business of the taxpayer for the taxable year.
This document summarizes a presentation on preparing for a year-end audit. It discusses staying organized throughout the year by maintaining reliable monthly financial statements. The audit process involves a planning stage, fieldwork, reporting, and post-fieldwork. Key areas covered in the audit include internal controls, risk assessment, substantive testing, accrual vs. cash accounting, statement of financial position, and statement of activities. The presentation emphasizes properly recording revenues, expenses, assets, and liabilities and analyzing variances from budgets.
Budgeting involves creating a spending plan based on estimated income and expenses over a period of time, usually a year. It helps individuals and families save money, reduce debt, better control spending, and achieve financial goals. The key steps in budgeting are to estimate income, identify expense categories, set budget levels for each category based on past spending, implement the spending plan, and periodically evaluate it to ensure it remains effective amid changing financial circumstances. Maintaining accurate records of income and expenses is important for evaluating the budget and identifying areas where spending has exceeded allocations. Budgeting works best as a joint family effort with cooperation and commitment from all members.
The document summarizes key information about personal finance and taxes in the United States. It defines common tax terms like the IRS, filing statuses, schedules, itemized deductions, tax brackets, deficits, and forms like the W-2. It also covers tax principles such as ability to pay and voluntary compliance.
1. The document outlines the conceptual framework for financial reporting established by the FASB. The framework consists of three levels: the objective of financial reporting, fundamental qualitative characteristics and elements, and concepts for recognition, measurement, and disclosure.
2. It describes the key components of each level, including the basic objective to provide useful information to investors and creditors, qualitative characteristics like relevance and faithful representation, and defined elements like assets, liabilities, and equity.
3. Basic assumptions and principles are also discussed, such as the monetary unit and historical cost assumptions, as well as the revenue and expense recognition principles. An exception for the cost constraint is noted.
This document summarizes key deductions for adjusted gross income (AGI) and itemized deductions on individual tax returns. It discusses deductions directly and indirectly related to business activities, as well as itemized deductions for medical expenses, taxes, interest, charitable contributions, and casualty/theft losses. It also covers the standard deduction and exemptions. The learning objectives are to identify AGI deductions, describe itemized deductions, and explain the standard deduction and exemptions in calculating taxable income.
The document summarizes the key steps in the accounting cycle. It discusses how transactions are initially recorded in journals and then posted to the general ledger. An unadjusted trial balance is prepared. Adjusting entries are made for accruals and deferrals. An adjusted trial balance and financial statements are then prepared. Finally, closing entries are made to reset the nominal accounts for the next period.
This document summarizes key aspects of individual income tax calculations in the United States, including:
1) It outlines the basic formula for calculating individual tax liability, including components like gross income, deductions, exemptions, taxable income, tax rates, credits, and payments.
2) It describes the requirements for determining personal and dependency exemptions, including the definitions of a qualifying child and qualifying relative.
3) It explains the different filing statuses individuals can use, including married filing jointly, head of household, and qualifying widow. Examples are provided to illustrate how to determine the proper filing status.
This chapter discusses gross income and exclusions. It defines gross income for tax purposes and explains when taxpayers recognize income. It discusses the various sources of income, including income from services, property, annuities, and other sources. It also covers the major exclusion provisions that allow taxpayers to exclude or defer certain types of income from gross income, such as municipal bond interest, home sale gains up to $250,000, education-related exclusions, and foreign earned income up to $97,600.
1. The chapter discusses how to calculate gains and losses from property dispositions, including determining the amount realized, adjusted basis, and realized/recognized gains and losses.
2. It describes the different character types of gains and losses, such as ordinary, capital, and Section 1231 assets. Depreciation recapture rules may recharacterize some gains as ordinary.
3. Exceptions to immediate gain/loss recognition are discussed, including like-kind exchanges of business or investment property that qualify for nonrecognition treatment.
This document summarizes the key tax consequences of home ownership including:
1) Determining if a home is a principal residence, secondary residence, or non-residence for tax purposes.
2) Calculating taxable gain on the sale of a residence and exclusions for principal residences.
3) Limitations on deducting interest expenses and points paid on loans secured by homes.
4) Deductibility of real property taxes and first-time homebuyer credits.
5) Tax treatment of homes used for both personal and rental use.
This document summarizes key concepts around business income, deductions, and accounting methods for tax purposes. It describes the general requirements for deducting business expenses and identifies common deductions. It also explains the concept of accounting periods and describes the accounting methods (cash, accrual, hybrid) available to businesses for determining taxable income and expense deductions. Special business deductions are also identified and examples are provided to illustrate concepts like reasonable compensation, the 12-month rule for prepaid expenses, and accounting for advance payments under different methods.
This document provides an overview of cost recovery methods used in tax law to recover the costs of assets over time. It discusses the concepts of basis, depreciation, amortization, and depletion. Depreciation allows businesses to deduct the costs of tangible personal and real property. Amortization applies to intangible assets and is deducted over a specific period. Depletion allows natural resources to recover their capital costs. The document provides examples of calculating cost recovery for various asset types.
This document provides an overview and review of key concepts from Chapter 4 of the textbook on the income statement and related information. It discusses the purpose and limitations of the income statement, its major elements, different formats, sections, and how to report various income items such as discontinued operations, extraordinary items, and changes in accounting principles. It also covers earnings per share, the retained earnings statement, comprehensive income, and the statement of stockholders' equity.
The document discusses key issues related to inventory valuation and costing approaches. It covers topics such as inventory systems, costs included in inventory, cost flow assumptions (e.g. FIFO, LIFO), and advantages/disadvantages of different methods. Specifically, it provides details on LIFO, including the LIFO reserve, LIFO liquidation, dollar-value LIFO, and factors to consider when selecting an inventory valuation method.
This document provides learning objectives and content about individual income tax computation and tax credits. It covers determining regular and alternative minimum tax liability, computing employment and self-employment taxes, describing types of tax credits including refundable and nonrefundable personal and business credits, and explaining taxpayer filing requirements and penalties. Examples are provided to illustrate concepts like kiddie tax, education credits, and late payment penalties.
This document provides an overview of Philippine taxation. It begins with definitions of taxation and discusses principles like the necessity of taxes to fund government. It describes different types of taxes according to criteria like subject, burden, determination of amount, and purpose. Key points include taxes being compulsory, levied by the state for public purposes, and classified as direct or indirect. The document also covers tax system objectives, stages of taxation, laws, and the power and limitations of taxation. It discusses concepts like double taxation, tax exemptions, and interpreting tax laws. The last sections focus on income taxation principles and computing individual income tax.
The document discusses the classification and taxation of individuals in the Philippines. It classifies individuals as citizens or aliens, and further classifies citizens and aliens as resident or non-resident. It provides details on what makes someone a citizen or resident. The document also discusses the taxation of different types of individuals based on their citizenship and residency status, and the sources of their income. Income is taxed at graduated rates depending on the type of income and the amount.
This document discusses organizational commitment and withdrawal. It defines three forms of organizational commitment - affective, continuance, and normative commitment. It also discusses the exit-voice-loyalty-neglect framework for responses to negative events. Withdrawal is defined as actions employees take to avoid work, and the forms of withdrawal are often correlated and can progress from lateness to absenteeism to quitting. The document concludes that employee commitment is higher when employers are also committed to employees through support, job security, rewards, work conditions, and minimizing politics.
This document provides exhibits summarizing various exclusions from gross income under Chapter 5 of the CCH Federal Taxation Basic Principles textbook. The exhibits cover topics such as Social Security benefits, interest on U.S. savings bonds, fringe benefits, group life insurance, annuities, damage awards, cafeteria plans, adoption assistance, tuition reduction plans, and dependent care assistance programs. The exhibits include definitions, examples, thresholds, and calculations for determining the tax treatment of these various income items.
Taxation 101 basic rules and principles in philippine taxation by jr lopez go...JR Lopez Gonzales
The document discusses taxation in the Philippines, including:
1. It defines taxation as the imposition of financial charges by the government to raise revenues and fund government expenses.
2. It outlines the history of taxation from ancient times to its development under Spanish colonial rule and the establishment of taxes like the cedula.
3. It describes the main purposes of taxation as raising revenues, redistribution of wealth, repricing goods/services, and representation of citizens in government.
This document outlines various national taxes imposed in the Philippines, including income tax, estate tax, value-added tax, excise taxes, customs duties, and other taxes. It provides details on income tax rates and calculations, defining terms like gross income, taxable income, deductions, exemptions, and who is required to file an income tax return.
What does the coronavirus stimulus package mean for you and your clientsnetwealthInvest
Keat Chew, Netwealth Head of Technical Services, examines the Federal Government's stimulus package to simplify what matters most for you and your clients.
The document discusses the importance of accounting and provides an overview of accounting principles. It notes several major corporate accounting scandals that resulted in billions of losses and thousands of job losses. These scandals led to new regulations and oversight. The document then defines accounting as identifying, recording, and communicating economic events of an entity. It discusses the accounting process and who uses accounting information, such as internal managers and external investors and creditors. Finally, it provides an overview of accounting principles and concepts such as the basic accounting equation, types of assets and liabilities, and business entities.
This document summarizes various small business tax strategies and planning tips presented by Laura Gannon, CPA of Sullivan and Gannon, LLC. It discusses opportunities for increased deductions and credits including Section 179 expensing, bonus depreciation, retirement plans, and startup costs. It also reviews reporting requirements and penalties as well as planning considerations for 2012 such as the additional Medicare taxes. Business owners are advised to have a succession plan and avoid draining their company of capital or ignoring their financials.
- Paul received a $1,500 bonus from his internship employer that must be included in his gross income as it was compensation for services.
- Paul was in an accident and received a settlement. Compensatory damages for his physical injuries are excluded from income, including lost wages. Punitive damages must be included.
- You will advise Paul on the tax treatment of the different elements of his settlement based on the rules around exclusions for damages from physical injuries or sickness.
Understanding Balance Sheets, Cash Flow, Income Statements Farm EconomicseAfghanAg
1. The document discusses key financial statements - balance sheets, income statements, and cash flow statements - that are used to understand the financial health and performance of agribusinesses.
2. Balance sheets summarize assets, liabilities, and net worth on a given date. Income statements show profits and losses over a period of time. Cash flow statements indicate cash inflows and outflows.
3. The financial statements are used to analyze the feasibility, risk, and profitability of agribusinesses through liquidity ratios (like current ratio), solvency ratios (like debt-to-asset ratio), and profitability ratios (like return on assets). High liquidity, solvency, and profit
Accounting chapter 1: Introduction to accounting and financial statements: knowledge of financial statements including a balance sheet, income statements, retained earning
2013 Mortgage Loan Originator Income Tax AnalysisSteve Lines
This document provides guidance on documenting and analyzing income for self-employed borrowers. It discusses using tax returns to verify self-employment income as tax returns are the most credible source. A cash flow analysis is required to examine personal income from tax returns by increasing non-cash expenses and decreasing real losses. Business tax returns are analyzed to evaluate profitability trends. The document outlines specific income types that require tax returns like self-employment, partnership, commission, capital gains, and contract work.
This document provides information about calculating income taxes, including how to determine marginal tax brackets and rates, ways to reduce taxable income through deductions and credits, and tips for tax planning. The key points covered are:
1) Marginal tax brackets determine the tax rate applied to portions of income, with rates ranging from 10-35% depending on taxable income.
2) Standard deductions and personal exemptions can be claimed to reduce taxable income. Itemized deductions may also lower taxes.
3) Various tax credits can further reduce tax liability, such as credits for retirement savings, education, child care, and adoption. Filing status also impacts tax rates.
4) Proper tax planning includes legal strategies to
This document provides an overview of topics covered in Week 1 of an introductory accounting course (ACCT101). It discusses:
1. The differences between not-for-profit and for-profit organizations
2. The importance and purpose of accounting
3. Key accounting terminology like assets, liabilities, revenues, and expenses
It also explains accounting concepts like the double-entry system, the accounting equation, and provides examples of recording basic transactions.
This chapter discusses the fundamentals of accounting including its nature, functions, users, principles, and key concepts. Accounting identifies, records, and communicates the financial events of a business. It provides information to internal users like managers and external users like investors and creditors. Companies follow generally accepted accounting principles to prepare four main financial statements - the income statement, balance sheet, statement of owner's equity, and statement of cash flows. The accounting equation forms the basis of recording transactions and showing a company's assets, liabilities, and owner's equity.
The document discusses various education tax credits and deductions available to Tom and Jennifer Snyder. It provides details on their dependent children attending college, including tuition amounts paid. The Snyders' adjusted gross income is $158,000. They are likely eligible for the American Opportunity Tax Credit, which is up to $2,500 per eligible student for qualified education expenses for the first 4 years of college. Their income is below the phase-out threshold for this credit. The document reviews the eligibility requirements and calculation of this and other education-related tax benefits to help the Snyders determine what tax options they have related to their children's college educational expenses.
The document discusses accounting periods and methods for partnerships and partners. It addresses the following key points:
- For the Silver Partnership example, the partnership tax year would end on November 30, as this results in the least aggregate deferral of income for the partners.
- The partners would report their share of Silver's net income/loss on their tax returns for the year in which the partnership's tax year ends.
- Belinda, as a cash-basis taxpayer, would report her share of partnership income using the cash method of accounting.
- In general, a partnership tax year is determined based on the tax year of majority interest partners, then principal partners, and finally the method that results
How to-solve-difficult-adjustments-and-journal-entries-in-financial-accounts-...Kunal Singh
This document provides explanations and examples of accounting journal entries for various financial transactions including adjustments. It discusses entries for bad debts, provision for doubtful debts, rent and rent outstanding, income tax payments, indirect taxes, cash withdrawals, asset purchases and sales, expenses, revenues, and other common accounting topics. The document emphasizes applying the rules of double-entry accounting and selecting the appropriate debit and credit accounts based on whether an item is related to a personal, real, or nominal account.
The document discusses medical expense deductions for individual income taxes. It provides examples to illustrate how medical expenses are deductible to the extent they exceed a certain percentage of adjusted gross income. It discusses what types of expenses qualify as medical expenses and provides guidance on insurance premiums and reimbursements. The examples show how married couples purchasing their first home may be able to itemize deductions for the first time, including medical expenses, home mortgage interest, and property taxes.
Part 3-4 Posting and Trial Balance PreparationMichael Alonzo
The document discusses ledgers, which are used by companies to maintain account balances and track changes. It explains that the general ledger contains all asset, liability, and equity accounts. Journal entries are posted to the ledger accounts to update them. Ledgers use a three-column format with debit, credit, and balance columns to track transactions for each account.
The document discusses key concepts in financial accounting, including the accounting equation (Assets = Liabilities + Owners' Equity), transaction analysis, revenues, expenses, and adjustments. It explains that the accounting equation must always balance, and transactions may affect asset, liability, or owners' equity accounts. Revenues increase owners' equity while expenses decrease it. Interest is computed based on principal, interest rate, and time period.
Accounting and management unit one and basicsmbadepartment5
The document discusses key concepts in financial accounting including the accounting equation, assets, liabilities, owners' equity, revenues, expenses, and transactions. It explains that the accounting equation is Assets = Liabilities + Owners' Equity and must always balance. Transactions are analyzed to determine their impact on accounts to maintain the balance of the equation. Revenues increase owners' equity while expenses decrease owners' equity.
This document discusses key information reporting requirements and changes for 2016, including:
- Form 1098 reporting now requires property address, outstanding mortgage principal, and origination date.
- Form 1099-MISC due date for non-employee compensation in Box 7 changed to January 31, 2017.
- Mergers and acquisitions information reporting must be addressed in agreements, and successor entities may combine predecessor reporting in some cases.
- Substantial penalties apply for failure to file correct and timely information returns. Reasonable cause can sometimes waive penalties.
Lec 3 Debit Credit Rules General Journal.pptxpal83111
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This webinar will provide a summary of key points of the new revenue standard, including updates from the AICPA’s revenue recognition task force. This presentation will include a discussion of the five steps of the new revenue model and application to various industries including construction, manufacturing, nonprofits and healthcare.
The document summarizes key aspects of the development of financial accounting standards and principles in the United States. It discusses the roles of organizations like the SEC, FASB, AICPA and others in establishing GAAP. It also outlines challenges to financial reporting like providing nonfinancial metrics, forward-looking information and reconciling US GAAP with IFRS. Ethical considerations are an important part of the accounting profession.
This document provides an overview and key points about cash, receivables, and notes receivable covered in Chapter 7. It discusses the nature and reporting of cash, accounting for accounts receivable using direct write-off and allowance methods, and differences between accounts and notes receivable such as interest elements for notes. The document also covers topics like discounts, estimating uncollectible accounts, short and long-term notes receivable, and imputing interest rates for zero-interest notes.
This document discusses the time value of money concepts of compound interest, annuities, and present value. It explains that these concepts can be applied to items in financial statements like notes receivable/payable, leases, and pensions. The key concepts covered include compound interest, simple interest, compound interest tables, future and present value of single sums and annuities. Financial calculators are often used to solve time value of money problems using keys for number of periods, interest rate, present value, payment, and future value.
This document provides an overview and review of key concepts from Chapter 5 of Kieso's Intermediate Accounting textbook, which discusses the balance sheet and statement of cash flows. The chapter presents the mechanics of preparing the balance sheet and cash flow statement, including classifying assets, liabilities, equity, and disclosing relevant information. It also explains the usefulness and limitations of the balance sheet and cash flow statement for assessing a company's liquidity, solvency, and financial flexibility. The document concludes with a discussion of supplemental disclosures, techniques for disclosure, and terminology used in financial statements.
- The iDrive combines the functions of many switches into a central system that can be operated from one location.
- The main components are the Control Display screen and controller knob that allows you to navigate menus and make selections.
- For safety, only use iDrive when traffic conditions allow and avoid becoming distracted while driving. The system helps keep your focus on the road.
Dr. Sanchez has multiple retirement plans available to her, including qualified pension plans, profit sharing plans, 401(k) plans, and 403(b) tax-deferred annuity plans. Joyce is interested in learning more about the types of plans Dr. Sanchez could have and how to establish multiple retirement plans. Qualified retirement plans offer tax benefits to both employees and employers, including immediate tax deductions for employer contributions and tax-deferred earnings and growth until funds are withdrawn after retirement. Contribution limits vary by plan type but are designed to maximize long-term retirement savings over a career.
Hazel Brown owns an arts and crafts store and is planning to replace the store equipment. She had previously taken $375,040 in depreciation deductions for the equipment. If she sells the existing equipment for $128,000, the entire $53,040 gain would be treated as ordinary income under §1245 depreciation recapture rules, rather than potentially favorable §1231 capital gain treatment. If she sells the equipment for more than its original cost, the gain up to the depreciation amount would be ordinary income, with any excess treated as capital gain.
Maurice inherited $500,000 and invested it in various assets on the advice of a financial advisor. He is now considering selling some investments and wants tax advice. The investments include stock, patents, franchises, bonds, partnerships, and real estate. Maurice does not understand the tax benefits of capital gains and wants an explanation. The chapter on capital gains and losses must be reviewed to formulate a response.
Alice inherited a house from her mother 7 months ago and is considering selling it to her nephew Dan for $275,000. As Alice's tax advisor, you need to determine the tax consequences of the sale, including whether Alice inherited or received the house as a gift, the property's basis, and whether any gain or loss will be recognized. Alice also wants to know the tax consequences of selling her personal car that she has owned for 4 months, as well as transactions involving the sale and repurchase of some stock. You will need to gather more information from Alice to advise her properly.
Bob and Carol paid different amounts of federal income tax even though they had identical incomes and deductions. Carol paid $15,000 more than Bob. Adam discovered that the difference was due to Carol's accountant incorrectly treating interest from private activity bonds issued in 2010 as an AMT preference. Since this interest is not a tax preference in 2010, Carol overpaid her taxes and is eligible for a refund.
Trudy and Jim Reswick want to make an investment to enhance their financial security. They are considering investing $100,000 that they would borrow at 8% interest in one of three options: a portfolio of securities, an orange grove partnership with expected tax losses for 5 years then profits, or an apartment rental partnership also with 5 years of losses then profits. They want to choose the best after-tax return over 10 years. The chapter discusses how the passive activity loss rules and at-risk limitations may impact the tax benefits of each option.
Dr. Payne, a dentist, purchased various fixed assets for his dental practice and residential properties. He calculated $91,298 in depreciation expense for the dental practice assets using percentages and lives from his financial reporting system. However, the chapter will discuss whether he correctly calculated this amount and if he can claim depreciation for the residential rental properties. It will also cover the general rules and considerations for depreciation, cost recovery, amortization and depletion of business and income-producing assets according to the Internal Revenue Code.
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Martha had a difficult year financially. She loaned a friend money to start a business, but the friend died owing Martha money. Martha also lost money investing in a pharmaceutical company that declared bankruptcy. Martha's bookstore business had a loss this year due to increased competition. Martha's home was damaged in a hurricane. Martha is hoping to claim some of these losses on her taxes. The presentation reviews various tax deductions and losses Martha may be able to claim, such as business bad debts, worthless securities losses, casualty losses, and section 1244 stock losses.
The 10 Most Influential Leaders Guiding Corporate Evolution, 2024.pdfthesiliconleaders
In the recent edition, The 10 Most Influential Leaders Guiding Corporate Evolution, 2024, The Silicon Leaders magazine gladly features Dejan Štancer, President of the Global Chamber of Business Leaders (GCBL), along with other leaders.
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At Techbox Square, in Singapore, we're not just creative web designers and developers, we're the driving force behind your brand identity. Contact us today.
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HOW TO START UP A COMPANY A STEP-BY-STEP GUIDE.pdf46adnanshahzad
How to Start Up a Company: A Step-by-Step Guide Starting a company is an exciting adventure that combines creativity, strategy, and hard work. It can seem overwhelming at first, but with the right guidance, anyone can transform a great idea into a successful business. Let's dive into how to start up a company, from the initial spark of an idea to securing funding and launching your startup.
Introduction
Have you ever dreamed of turning your innovative idea into a thriving business? Starting a company involves numerous steps and decisions, but don't worry—we're here to help. Whether you're exploring how to start a startup company or wondering how to start up a small business, this guide will walk you through the process, step by step.
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https://www.productmanagementtoday.com/frs/26903918/understanding-user-needs-and-satisfying-them
We know we want to create products which our customers find to be valuable. Whether we label it as customer-centric or product-led depends on how long we've been doing product management. There are three challenges we face when doing this. The obvious challenge is figuring out what our users need; the non-obvious challenges are in creating a shared understanding of those needs and in sensing if what we're doing is meeting those needs.
In this webinar, we won't focus on the research methods for discovering user-needs. We will focus on synthesis of the needs we discover, communication and alignment tools, and how we operationalize addressing those needs.
Industry expert Scott Sehlhorst will:
• Introduce a taxonomy for user goals with real world examples
• Present the Onion Diagram, a tool for contextualizing task-level goals
• Illustrate how customer journey maps capture activity-level and task-level goals
• Demonstrate the best approach to selection and prioritization of user-goals to address
• Highlight the crucial benchmarks, observable changes, in ensuring fulfillment of customer needs
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Storytelling is an incredibly valuable tool to share data and information. To get the most impact from stories there are a number of key ingredients. These are based on science and human nature. Using these elements in a story you can deliver information impactfully, ensure action and drive change.
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Taurus Zodiac Sign: Unveiling the Traits, Dates, and Horoscope Insights of th...my Pandit
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2. 2
The Big Picture
Calculation Of Gross Income (slide 1 of 3)
• At the beginning of the year, Dr. Cliff Payne opened
his dental practice as a sole proprietorship.
• For his new business, he selected a December 31
year-end.
• He also entered into a contract to have a building
constructed for his medical practice.
• He used $12,000 of extra money to purchase some
stock.
3. 3
The Big Picture
Calculation Of Gross Income (slide 2 of 3)
• The following financial information shows the results of Dr.
Payne’s first year of operation.
Revenues (amounts billed patients for dental services) $385,000
Accounts receivable: January 1 –0–
Accounts receivable: December 31 52,000
• The accounts receivable represent amounts billed patients.
• During the year, Sam Jones, a contractor who owed Dr. Payne
$4,000 for dental services, satisfied the account by installing
solar panels on the roof of Dr. Payne’s new medical building.
4. 4
The Big Picture
Calculation Of Gross Income (slide 3 of 3)
• Based on his accounting records he concludes
that gross income for Federal income tax
purposes is the $385,000 he billed his patients
for dental services rendered.
• Has Dr. Payne correctly calculated the gross
income of this dental practice?
– Read the chapter and formulate your response.
5. 5
Gross Income (slide 1 of 3)
• Definition: Gross income includes all income
from whatever source derived, unless
specifically excluded under the Code
• Concept is interpreted broadly by the courts
6. 6
Gross Income (slide 2 of 3)
• Taxability of income follows the realization
principle from accounting
– Income is recognized (taxed) when realized
• Mere appreciation in wealth (economic
income) is not considered realized income
7. 7
Gross Income (slide 3 of 3)
• Income is recognized whether it is in the form
of cash, or “in-kind” cash equivalents (i.e.,
property or services)
– The amount of income from “in-kind” receipts is
equal to the FMV of the property or services
• Income does not include recovery of the
taxpayer’s capital investment
8. 8
The Big Picture - Example 1
Recovery Of Capital Doctrine
• Return to the facts of The Big Picture on p. 4-1.
– Dr. Payne sells common stock for $15,000.
• He had purchased the stock for $12,000.
– Dr. Payne’s gross receipts are $15,000.
• This amount consists of a $12,000 recovery of capital
and $3,000 of gross income.
9. 9
Accounting Periods
• Taxable year is generally a 12-month period
– Taxable year for most individual taxpayers is the
calendar year
– A fiscal year can be elected if taxpayer maintains
adequate records
• A fiscal year is a 12-month period ending on the last
day of a month other than December
– Example: July 1 to June 30
10. 10
Accounting Methods (slide 1 of 2)
• There are 3 primary methods of accounting for
tax purposes:
– Cash receipts and disbursements method
– Accrual method
– Hybrid method
11. 11
Accounting Methods (slide 2 of 2)
• In addition to overall accounting methods,
taxpayers may choose (elect) tax treatment for
various transactions, for example
– Taxpayers can elect to use the installment method
– Certain contractors may elect to use either the
percentage of completion method or the completed
contract method
12. 12
Cash Receipts Method
• Income is recognized in the year it is actually
or constructively received in cash or cash
equivalent
• An amount is constructively received when it
is set aside and made available to taxpayer
without substantial restrictions
13. 13
The Big Picture - Example 10
Constructive Receipt (slide 1 of 2)
• Return to the facts of The Big Picture on p. 4-1.
– On December 31, Dr. Payne has $10,000 in
patients' checks that have not been deposited.
• One check for $3,000 is from a patient who asked him
not to deposit it until after January 4th
, because her
account did not contain sufficient funds to pay the debt.
14. 14
The Big Picture - Example 10
Constructive Receipt (slide 2 of 2)
• Under the cash method, Dr. Payne must recognize
$7,000 income from the checks on hand
– The checks are a cash equivalent that is actually received.
• The income from the $3,000 check is neither actually
nor constructively received
– An insufficient account means the funds are not available.
15. 15
The Big Picture - Example 12
Constructive Receipt (slide 1 of 2)
• Return to the facts of The Big Picture on p. 4-1.
• Assume Dr. Payne elected to use the cash basis of
accounting.
– If he accepted credit cards, Dr. Payne would receive
immediate credit in his bank account for 96% of the
charge.
• The other 4% would be retained by the credit card issuer.
– To avoid the 4% charge, Dr. Payne chose not to accept
credit cards.
• Instead, his policy required all bills to be paid within 30 days after
dental services were provided.
16. 16
The Big Picture - Example 12
Constructive Receipt (slide 2 of 2)
• At year end, several patients owed a combined
$2,000.
– They offered to pay with credit cards, but his
office rejected their offers.
– The $2,000 was not constructively received at the
end of the year.
• Dr. Payne could have received payment by credit card,
he contracted to receive payment at a later date before
the dental services were performed.
• Moreover, the 4% charge by the credit card company
would be a ‘‘substantial limitation.’’
17. 17
Exceptions To Cash
Receipts Method
• Original Issue Discount (OID) interest is
taxable when earned rather than when interest
is received
• Series E and EE bonds are not subject to the
OID rules
– However, a cash basis taxpayer may elect to
recognize the interest when earned
18. 18
Accrual Method (slide 1 of 2)
• Income is recognized in the year that it is earned
regardless of when it is collected
• Income is earned when:
– All events have occurred that fix taxpayer’s right to the
income, and
– The amount can be determined with reasonable accuracy
• The accrual method is required for determining
purchases and sales when inventory is an income-
producing factor
19. 19
Accrual Method (slide 2 of 2)
• Claim of right doctrine
– Requires amounts received to be included in
income even though the amount is in dispute and
might be returned to the payor at a later date
– If payment has not been received, no income is
recognized until the claim is settled
20. 20
The Big Picture - Example 7
Claim Of Right Doctrine
• Return to the facts of The Big Picture on p. 4-1.
• On completing construction of the medical office
building in 2014, the contractor submitted a bill.
– Dr. Payne refused to pay the bill, claiming the contractor
had not met specifications.
– The contractor did not reach a settlement with Dr. Payne
until 2015.
• No income accrues to the contractor until 2015.
– If Dr. Payne had paid for the work, then filed suit, the
contractor could not defer the income
• The income would be taxable in 2014.
21. 21
Exceptions to Accrual Method
(slide 1 of 2)
• Taxpayer can elect to defer recognition of
income from advance payment for goods if
same method of accounting is used for tax and
financial reporting purposes
22. 22
Exceptions to Accrual Method
(slide 2 of 2)
• Advance payment for services to be performed
after year-end is included in income in the year
following receipt
– The portion of the advance payment that is earned
in the current year is included in income in the
year of receipt
• Prepaid rents or interest income are always
recognized in the year received rather than
when earned
23. 23
Hybrid Method
• A combination of cash and accrual methods
• Generally, used when inventory is a material
income-producing factor, for example
– Use accrual method to account for inventory
– Use cash method for other income and expenses
24. 24
Income Sources (slide 1 of 2)
• Income from personal services is taxable to the
person who performs the services
– Fruit and tree metaphor
• Income from property is taxable to the owner
of the property
– Assignment of income is not permitted
25. 25
Income Sources (slide 2 of 2)
• Interest income accrues daily
– If interest bearing instrument (e.g., bonds) is
transferred, must allocate interest income between
transferor and transferee based on the number of
days during the period that each owned the
property
26. • Return to the facts of The Big Picture on p. 4-1.
– Assume that instead of operating as a sole
proprietorship, Dr. Payne incorporated his dental
practice to limit his liability.
• He entered into an employment contract with his
corporation and was to receive a salary.
• All patients contract to receive their services from the
corporation.
– Those services are provided by the corporation’s employee,
Dr. Payne.
26
The Big Picture - Example 20
Services of an Employee
(slide 1 of 2)
27. The Big Picture - Example 20
Services of an Employee
(slide 2 of 2)
• Return to the facts of The Big Picture on p. 4-1.
– Thus, the corporation earned the income from
patients’ services and must include the patients’
fees in its gross income.
– Dr. Payne must include his salary in his gross
income.
• The corporation is allowed a deduction for the
reasonable salary paid to Dr. Payne.
27
28. 28
Dividends (slide 1 of 4)
• Unlike interest, dividends do not accrue on a
daily basis
• Dividends are generally taxed to the party who
is entitled to receive them
– The shareholder of record as of the corporation’s
record date
• Dividends on stock transferred by gift after
declaration date but before record date are
generally taxed to the donor
29. 29
Dividends (slide 2 of 4)
• Recent legislation has provided partial relief from
double taxation of corporate dividends
– Generally, dividends received are taxed at the same
marginal rate that is applicable to a net capital gain
• Thus, individuals otherwise subject to the 10% or 15% marginal
tax rates in 2014 pay 0% tax on qualified dividends received
• Individuals subject to the 25, 28, 33, or 35 percent marginal tax
rates pay a 15% tax on qualified dividends
• Individuals subject to the 39.6% marginal tax rate pay a 20% tax
on qualified dividends
30. 30
Dividends (slide 3 of 4)
• The following dividends are not eligible for
the reduced tax rates
– Dividends from certain foreign corporations,
– Dividends from tax-exempt entities, and
– Dividends that do not satisfy the holding period
requirement
• Stock on which the dividend is paid must have been
held for more than 60 days during the 121-day period
beginning 60 days before the ex-dividend date to
qualify for the reduced tax rates
31. 31
Dividends (slide 4 of 4)
• Dividends from foreign corporations are
eligible for qualified dividend status only if:
– The foreign corporation’s stock is traded on an
established U.S. securities market, or
– The foreign corporation is eligible for the benefits
of a comprehensive income tax treaty between its
country of incorporation and the United States
32. 32
Income Received By An Agent
• Income received by the taxpayer’s agent is
considered to be received by the taxpayer
– A cash basis principal must recognize the income
at the time it is received by the agent
33. 33
Income From Partnerships
• A partnership is not a separate taxable entity
– Files an information return (Form 1065)
• Provides data necessary for determining each partner’s
distributive share of partnership’s income and
deductions
• Each partner reports distributive share of partnership
income and deductions
– Reported in year earned, even if not actually distributed
• Because a partner pays tax on income as the partnership
earns it, distributions are treated under the recovery of
capital rules
34. 34
Income From S Corporations
• A small business corporation may elect to be
taxed similarly to a partnership
– Referred to as an S corporation
• The shareholders, rather than the corporation, pay the
tax on the corporation’s income
• Generally, shareholders report their share of the corp’s
income and deductions for the year, even if not actually
distributed
35. 35
Income From Estates And Trusts
• Beneficiaries of estates and trusts
– Generally, taxed on the income earned by the
estates or trusts that is actually distributed or
required to be distributed to them
– Any income not taxed to the beneficiaries is
taxable to the estate or trust
36. 36
Income In Community
Property States
• All property is deemed either to be separately owned
by the spouse or to belong to the marital community
– Community income is allocable equally to each spouse
– Separate income may be allocable to owner-spouse
• Separate property may produce community income
(e.g., TX, LA)
• No allocation of community income for some spouses
living apart for entire year and filing separately
37. 37
Alimony and Separate Maintenance
Payments (slide 1 of 4)
• Alimony is:
– Deductible by payor
– Includible in gross income of recipient
38. 38
Alimony and Separate Maintenance
Payments (slide 2 of 4)
• Payments may qualify as alimony if:
– Payments are in cash
– Agreement or decree does not specify that the
payments are not alimony
– Payor and payee are not members of the same
household at the time the payments are made
– There is no liability to make the payments for any
period after the death of the payee
39. 39
Alimony and Separate Maintenance
Payments (slide 3 of 4)
• Property settlements
– Transfer of property to former spouse
– No deduction or recognized gain or loss for
transferor
– No gross income and carryover of transferor’s
basis for transferee
– Front-loading of alimony payments
• Alimony recapture (gross income) for payor
• Deduction from gross income for recipient
40. 40
Alimony and Separate Maintenance
Payments (slide 4 of 4)
• Child support payments
– Payments made to satisfy legal obligation to support child
of taxpayer
– Nondeductible by payor and not taxed to recipient (or
child)
• May be difficult to determine whether an amount
received is alimony or child support
– If amount of payment would be reduced due to some future
event related to the child (e.g., child reaches age 21), such
reduction is deemed child support
41. 41
Imputed Interest on Below-Market
Loans (slide 1 of 4)
• Interest is imputed, using Federal government rates,
when a loan does not carry a market rate of interest
– Imputed interest = the difference between the amount that
would have been charged at the Federal rate and the
amount actually charged
• Applies to:
• Gift loans
• Compensation-related loans
• Corporate-shareholder loans
• Tax avoidance loans
42. 42
Imputed Interest on Below-Market
Loans (slide 2 of 4)
Concept Summary 4.2
The table below presents the effect of certain below-market loans on the
lender and borrower
43. 43
Imputed Interest on Below-Market
Loans (slide 3 of 4)
• Gift loans
– Exemption for loans of ≤ $10,000 between
individuals
• If loan proceeds are used to purchase income-producing
property, the following limitation applies
– On loans of $100,000 or less between individuals
• Imputed interest is limited to borrower’s net investment
income for year
• No imputed interest if net investment income is $1,000
or less
44. 44
Imputed Interest on Below-Market
Loans (slide 4 of 4)
• $10,000 exemption also applies to
compensation-related and corporation-
shareholder loans
– No exemption if principal purpose of loan is tax
avoidance
• Makes practically all loans of this type suspect
• Interest expense imputed to borrower may be
deductible
45. 45
Annuity Income
(slide 1 of 6)
• Purchaser pays fixed amount for the right to
receive a future stream of payments
– Generally, early collections and loans against
annuity ≤ increases in cash value are included in
gross income
• Amounts > increases in cash value are treated as a
recovery of capital until cost recovered; additional
amounts are included in income
– Early distributions may also be subject to a 10%
penalty
46. 46
Annuity Income
(slide 2 of 6)
• For collections on and after the annuity
starting date
– The exclusion ratio is applied to annuity
payments received under contract to determine
amount excludable:
Exclusion ratio = Investment in contract
Expected return under contract
– Once investment is recovered, remaining
payments are taxable in full
47. 47
Annuity Income
(slide 3 of 6)
• Examples:
– Taxpayer pays $10,000 for annuity that will pay
$1,000 a year
• A: For a term of 15 years
• B: For lifetime (life expectancy = 15 years)
– Exclusion ratio for A & B =
$10,000 = .667
$15,000
48. 48
Annuity Income
(slide 4 of 6)
• Example (cont’d)
– A: 15 years of annuity payments
• Years 1-15: $333 taxable and $667 excludable
49. 49
Annuity Income
(slide 5 of 6)
• Example (cont’d)
– B: Lifetime payments and taxpayer lives 18 years
• Years 1-15: $333 taxable and $667 excludable
• Years 16-18: $1,000 taxable each year
– B: Lifetime payments and taxpayer lives 10 years
• Years 1-10: $333 taxable and $667 excludable, and
$3,330 deduction on final return
50. 50
Annuity Income
(slide 6 of 6)
• The simplified method is required for annuity
distributions from a qualified retirement plan
– Exclusion amount is investment in contract
divided by number of anticipated monthly
payments (table amount based on age)
51. 51
Prizes and Awards
• General rule: FMV of item is included in
income
• Exceptions:
• Taxpayer designates qualified organization to receive
prize or award (subject to other requirements)
• Employee achievement awards of tangible personal
property made in recognition of length of service or
safety achievement (limits apply)
52. 52
Group Term Life Insurance
• Exclude premiums paid by employer on first $50,000
of coverage
– Premiums on excess coverage are included in gross income
• Inclusion amount based on IRS provided tables
• If plan discriminates in favor of key employees (e.g.,
officers), key employees are not eligible for exclusion
– In such a case, the key employees must include in gross
income the greater of:
• The actual premiums paid by the employer, or
• The amount calculated from the Uniform Premiums table
54. 54
Social Security Benefits
(slide 1 of 6)
• Up to 85% of benefits may be taxable
• Taxability based on taxpayer’s modified
adjusted gross income (MAGI)
– MAGI = AGI (excluding Social Security) +
foreign earned income exclusion + tax exempt
interest
• Two formulas for computing taxable benefits
55. 55
Social Security Benefits
(slide 2 of 6)
• Formula 1 - If MAGI plus ½ of Social Security
benefits exceeds the base amounts below, but not the
second set of base amounts,
– Include in income the lesser of:
• .50 (Social Security Benefits), or
• .50 [MAGI + .50 (SSB) - base amount]
– Base amounts:
– $32,000 MFJ,
– $0 MFS and not living apart,
– $25,000 for all other taxpayers
56. 56
Social Security Benefits
(slide 3 of 6)
• Formula 2 - If MAGI plus ½ of Social Security
benefits exceeds the base amounts below
– Include in income the lesser of:
• .85(Social Security benefits), or
• Sum of: .85[MAGI + .50(Social Security benefits) - second base
amount], and the lesser of:
– Amount included through application of the first formula
– $4,500 ($6,000 for married filing jointly).
• Base amounts:
– $44,000 MFJ,
– $0 MFS and not living apart
– $34,000 for all other taxpayers
57. 57
Social Security Benefits
(slide 4 of 6)
• Example of Social Security income:
– A: Married with AGI = $30,000; tax exempt
interest income = $3,000; Social Security benefits
= $10,000
– B: Married with AGI = $40,000; tax exempt
interest income = $6,000; Social Security benefits
= $10,000
58. 58
Social Security Benefits
(slide 5 of 6)
• Example (cont’d)
– A: Formula 1: Lesser of:
• .50 ($10,000) = $5,000, or
• .50 [($30,000 + $3,000) + .50 ($10,000) - $32,000)] =
$3,000
• Therefore, $3,000 of Social Security benefits included
in gross income
59. 59
Social Security Benefits
(slide 6 of 6)
• Example (cont’d)
– B: Formula 2: Lesser of:
• .85 ($10,000) = $8,500, or
• Sum of
– .85[($40,000 + $6,000) + .50 ($10,000) - $44,000] = $5,950,
and
– Lesser of:
– .50 ($10,000) = $5,000, or
– $6,000
• Therefore, $8,500 of Social Security benefits included
in gross income
60. 60
Refocus On The Big Picture
• Using the accrual method of accounting, Dr. Cliff
Payne has correctly calculated the gross income of his
sole proprietorship.
– He will report the $385,000 amount on Schedule C of Form
1040.
• What if Dr. Payne elects the cash method of
accounting? He will only report the following:
Revenues $385,000
Plus: Accounts receivable: January 1 –0–
Less: Accounts receivable: December 31 (52,000)
Gross income $333,000
61. 61
If you have any comments or suggestions concerning this
PowerPoint Presentation for South-Western Federal
Taxation, please contact:
Dr. Donald R. Trippeer, CPA
trippedr@oneonta.edu
SUNY Oneonta