...I.GENERAL PRINCIPLES ( THE POWER OF TAXATION ( Definitions: 1. Taxation: Power by which the sovereign raises revenue to defray the necessary expenses of the government from among those who in some measure are privileged to enjoy its benefits and must bear its burden. 2. Taxes: Enforced proportional contribution from properties and persons levied by the State by virtue of its sovereignty for the support of government and for public needs. ( Characteristics of Taxes: 1. forced charge; 2. generally payable in money; 3. levied by the legislature; 4. assessed with some reasonable rule of apportionment; 5. imposed by the State within its jurisdiction; 6. levied for public purpose. ( Theories or bases of taxation: 1. Lifeblood Theory Taxes are the lifeblood of the nation. Without revenue raised from taxation, the government will not survive, resulting in detriment to society. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it. (CIR vs Algue, Inc., et. al.) Illustrations of Lifeblood Theory: a. Collection of taxes may not be enjoined by injunction. b. Taxes could not be the subject of compensation and set-off. c. A valid tax may result in destruction of the taxpayer's property. 2. Necessity Theory Existence of a government is a necessity and cannot continue without any means to pay for expenses. a. Marshall Dictum “ Power to tax is the power to destroy” – describes the unlimitedness of the power...
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...Corporate Tax Planning IRS Code has 3 forms of business: 1) Sole Proprietorship (pass through entity): the business is a mere continuation of the individual. There is no creation of a new legal entity. You use 1044 to file your private money with business income. Code Sec 61 (definition of income) states there is only one level of taxation. 2) Corporation (C or S): create a distinct legal entity. 3) Partnership (pass through entity): create a distinct legal entity. Corporate law states partnerships must be registered with the state. Tax law says the partnership is a reporting entity, but not a taxable entity because there is no taxation at the level of the partnership. The profits are taxed at the end of the partners’ fiscal year. The report file sent to the IRS is to ensure the IRS knows how much income each partner will file with the IRS. It just tells the IRS how the income generated from the partnership was distributed to each partner. Types of Partnerships General: all partners are general partners and have unlimited liabilities. It does not matter if one of the partners did not commit the business transaction, tort, or malpractice. Ex: acquires loan and the loan and cannot the paid back. The creditor has the right to go after any or all the partners. As a partner, one must make sure who is taking out loans for the GP and if it can be repaid because anyone is liable for the loan. However, one partner can go after the other partner for reimbursement...
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...OVERVIEW OF FEDERAL TAX PROVISIONS AND ANALYSIS OF SELECTED ISSUES RELATING TO NATIVE AMERICAN TRIBES AND THEIR MEMBERS Scheduled for a Public Hearing Before the SENATE COMMITTEE ON FINANCE on May 15, 2012 Prepared by the Staff of the JOINT COMMITTEE ON TAXATION May 14, 2012 JCX-40-12 CONTENTS Page INTRODUCTION AND SUMMARY I. 1 GENERAL RULES REGARDING THE TAXATION OF INDIAN TRIBES AND TRIBAL MEMBERS AND THE TAXING POWERS OF INDIAN TRIBES ................. 3 A. Income Taxation of Indian Tribes and Wholly Owned Tribal Corporations................ 3 1. Federal income taxation of Indian tribes and wholly owned tribal corporations ... 3 2. State taxation of Indian tribes ................................................................................. 4 B. Tax Treatment of Enrolled Members of Indian Tribes ................................................. 7 1. Federal tax............................................................................................................... 7 2. State tax................................................................................................................... 7 C. Taxing Powers of Indian Tribes .................................................................................... 9 D. Alaska Native Settlement Trusts................................................................................. 10 II. SELECTED FEDERAL TAX RULES AND ISSUES RELATING TO INDIAN TRIBES AND THEIR MEMBERS ............
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...TAXATION LAW I. General Principles POWER OF TAXATION TAXATION – power by which the sovereign through its law-making body raises revenue to defray the necessary expenses of government from among those who in some measure are privileged to enjoy its benefits and must bear its burdens. Two Fold Nature of the Power of Taxation 1. It is an inherent attribute of sovereignty 2. It is legislative in character Extent of Taxing Power Subject to constitutional and inherent restrictions, the power of taxation is regarded as comprehensive, unlimited, plenary and supreme. Scope of Legislative Taxing Power 1. Amount or rate of tax 2. Apportionment of the tax 3. Kind of tax 4. Method of collection 5. Purpose/s of its levy, provided it is for public purpose 6. Subject to be taxed, provided it is within its jurisdiction 7. Situs of taxation TAXES – enforced proportional contributions from the persons and property levied by the law-making body of the State by virtue of its sovereignty in support of government and for public needs. Characteristics of Taxes 1. forced charge; 2. pecuniary burden payable in money; 3. levied by the legislature; 4. assessed with some reasonable rule of apportionment; (see theoretical justice) 5. imposed by the State within its jurisdiction; 6. levied for a public purpose. Requisites of A Valid Tax 1. should be for a public purpose 2. the rule of taxation shall be uniform 3. that either the person...
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...ATENEO CENTRAL BAR OPERATIONS 2007 Taxation Law SUMMER REVIEWER PART I – GENERAL PRINCIPLES TAXATION – power inherent in every sovereign State to impose a charge or burden upon persons, properties, or rights to raise revenues for the use and support of the government to enable it to discharge its appropriate functions SCOPE OF TAXATION TAXATION IS: Unlimited, Far-reaching, Plenary Comprehensive Supreme STAGES OF TAXATION: (LAP) 1. Levy 2. Assessment 3. Payment Basic Principles of a Sound Tax System 1. Fiscal Adequacy 2. Theoretical Justice 3. Administrative Feasibility INHERENT LIMITATIONS (SPING) 1) Situs or territoriality of taxation 2) Must be for a Public purpose • Test is whether proceeds will be used for something which is the duty of the State to provide. • Legislature is not required to adopt a policy of “all or none.” • Incidental benefit to individual does not defeat exemption 3) International comity • Property of a foreign State of government may not be taxed by another 4) Non-delegability of the taxing power • Contemplates power to QuickTime™ and a TIFF (Uncompressed) decompressor determine kind,thisobject, extent, are needed to see picture. amount, coverage, and situs of tax; • Distinguish from power to assess and collect • Exemptions: (a) presidential taxing powers; (b) local governments 5) Exemptions of Government agencies • Taking money from one pocket • to the other Applies only to entities exercising government functions (acta jure imperii) CONSTITUTIONAL...
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...SUBJECT: Taxation of Award FACTS: Murray, a working U.S. citizen reported to the Environmental Protection Agency that his employer was illegally dumping chemicals into a river. Upon further review of the matter, Murray’s statements were conducted to be true and a penalty was given to his employer. After getting news about the penalty, Murray’s employer dismissed him from the organization and made an effort to prevent Murray from being able to work for any other employer. He later sued the company, and was compensated an award for “damages to his personal and professional reputation and for his mental suffering.” Murray defines his awarded damages as a recovery of his human capital and not part of his adjusted gross income. Murray is now concerned whether the Internal Revenue Service has the power to tax the award. In addition to receiving his award, Murray’s award categorizes as a “whistleblower award” according to Code Sec. 7624 under IRS: 63,060.05, “Informants provide leads upon which the Criminal Investigation Division (CID) may base a criminal investigation. The most common informants are former spouses and fired employees.” (Fed. Cl. 2006). ISSUES: Whether Murray, who was fired by his employer due to retaliation of him reporting illegal chemical dumping, and later was compensated for damages to his personal and professional reputation and for his mental suffering, would need to pay taxes for his compensation? Can Murray avoid reporting his award as Adjusted...
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...COMPILED NOTES: SABABAN, MAMALATEO & CHAVEZ MARIVIC B. DE GRACIA TAXATION 2 MARIVIC DE GRACIA TRANSFER TAX -refers to the burden imposed upon the right to gratuitously transfer or transmit property, tangible or intangible from one person to another. Filing: within 6 months from the date of death 15%-relative 30%-stranger Filing: within 30 days from the date of donation -are taxes imposed upon the gratuitous disposition of private property. ESTATE TAX FORMULA: KINDS OF TRANSFER TAXES: ESTATE TAX NIRC Donation mortis causa Tax levied on the transmission of properties from decedent to his heirs Tax on the privilege to transmit property at death Excise tax or privilege tax Effective upon death Tax base is the net estate Net estate amounting to P200,000 is exempted 20% highest rate DONOR’S TAX NIRC Donation inter vivos Tax levied on the transmission of properties from a living person to another living person. Gross Estate (Sec. 85) TAX ON THE TRANSFER OF REAL PROPERTY LGC Less: Ordinary Deductions (Sec. 86)_____________ Equals: Net Estate before share of surviving spouse Less: Share of surviving spouse________________ Equals: Net estate before special deductions Less: Special deductions______________________ Equals: Net taxable estate Multiply:Tax Rate (Sec 84)______________________ Equals: Estate Tax Payable If there’s tax credit available: Excise tax or privilege tax Effective during the life time of the donor Tax base is the net gift within the calendar year...
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...14-4 Section 351 allows certain transfers of property to a corporation to escape taxation, thus allowing the business to incorporated tax free. This allows taxpayers to postpone any gain or loss until there is a substantive change in the taxpayer's investment, which encourages investment in start-up enterprises. 14-20 C corporations may select any fiscal or calendar tax year. Other forms of organization are required to adopt the tax year of their owners unless a business purpose can be established. 14-22 Corporate taxpayers can claim capital losses only against capital gains. Individuals may claim up to $3,000 in capital losses against other forms of income. Corporate capital loss carryovers become short-term losses regardless of their original status, and they are carried back three years and carried forward five years. 14-55 a. Susan has no gain or loss and her stock basis does not increase. Code Sec. 358. b. The corporation has no income from the capital contribution. Code Sec. 118. Its basis is zero since basis carries over. Code Sec. 362. c. If Susan receives 10 percent more stock, she will have to recognize her $2,000 of realized gain since she does not meet the 80 percent control requirement. Her basis in the stock equals $2,000, her cost basis. Code Sec. 1012. 14-62 The taxable income for the year is $62,000. Capital losses are deductible only against capital gains. The $5,000 long-term capital loss is carried back three years and forward five...
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...the available accounting methods. 4. Understand the rules for accounting method changes. 5. Account for the capitalization of inventory costs. 6. Describe long-term contract reporting. 7. Defi ne the installment method of accounting. 13–2 CCH FEDERAL TAXATION—COMPREHENSIVE TOPICS OVERVIEW The fi rst 12 chapters are presented primarily from the individual taxpayer’s point of view (including self-employed taxpayers). This chapter provides a general discussion of the previous material as it applies to other entities and provides a discussion of accounting periods and accounting methods as they apply to all entities. Discussions of specifi c provisions as they apply to other entities (e.g., corporations, partnerships, etc.) are contained in subsequent chapters. The term “fi nancial accounting” refers to the reporting of the fi nancial data of an enterprise through fi nancial statements prepared in accordance with generally accepted accounting principles. Income tax accounting, hereafter referred to as “tax accounting,” is concerned with the reporting of fi nancial data to satisfy the requirements of the Internal Revenue Code, the Regulations which interpret the Code, rulings by the IRS which further interpret the Code and Regulations, and the decisions of the courts on litigated issues. Tax accounting is statutory. It is concerned with the determination of taxable income as the base to which tax rates are applied to establish the tax liability for a period, usually...
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...I have reviewed your situations and each of your tax considerations and outlined my advisement below. Part I: Discuss the various forms of organization that are available to Penelope, Mark and John. There are a few different options from which you can chose to organize your business under. For example: partnership, LLP, S Corporation, C Corporation for which I know you are all familiar with. It is my duty to give you my own educated and unbiased opinion to which would be most beneficial to all of you. Part II: Make your recommendation as to what form of organization you believe will be best and be sure to explain the reasoning for your choice. I find the Limited Liability Partnership to be the best form of organization for your company. It will provide the company with adequate protection while safeguarding each partner’s personal assets as well. Under this organization each of you will be strictly removed from responsibility from one anthers actions or potential misconducts. Given that the three of you are great friends I find this to be the most attractive quality in an organization. Regardless of the outcome of the business I know that you will all find comfort in the safety of the LLP. In turn I find this will lift any further burden and allow you to all perform your best for this new company. In addition, a LLP will provide flexibility in business ownership. Each partner will have the authority to decide how they will each contribute to the business operations. Managerial...
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...Federal Income Taxation I Facts: Murray reported his employer to the Environmental Protection Agency. He claimed that his employer was illegally dumping chemicals into the river. The court filed in favor of Murray and his employer was fined. This cost Murray his employment and his employer made deliberate efforts to prevent Murray from obtaining other employment. Murray sued his employer saying that his reputation had been damaged. Murray won the lawsuit and received an award for “damages to his personal and professional reputation and for his mental suffering.” Murray wants to find out if this award is taxable and argues that he was awarded damages as a recovery of his human capital and a recovery of capital I not income. Therefore, the Federal government does not have the power to tax the award. Issue: Whether Murray was compensated for his reputation and his mental suffering is he required to pay taxes for such compensation? If so what amount and how should it be reported on his income tax. Analysis: Code Sec 61(a) state “Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items; (2) Gross income derived from business; (3) Gains derived from dealings in property; (4) Interest; (5) Rents; (6) Royalties; (7) Dividends; (8) Alimony and separate maintenance payments; ...
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...affect every person, business, and property. This environment of constant change is a challenge for most accountants or anyone for that matter. This paper seeks to explore the history of the Federal Income Tax System, the Internal Revenue Code, the Internal Revenue Service, and guidelines and improvement of the tax system. History of Taxation in the United States The history of taxation in the United States commenced when the British, French and Spanish Empires ruled the individual colonies established in the US. This was back in the 1790’s after World War I. After their independence from Europe, the taxation system continued by collection of poll taxes, tariffs, and excise taxes. There were various acts passed by parliament which imposed taxation of various items such as lead, paper, paint, glass, stamps, sugar, and tea as a means of tax collection. From these come the Sugar Act, the Stamp Act, and the Townshend Revenue Act. The Boston Tea Party was the insurgency against the British colonists by the American colonists to not pay the tea tax levied upon them. Federal Government Income Tax History The taxation system in the United States is governed by different levels of government. There are different methods of taxation as well. The tariffs imposed were the largest source of federal revenue from 1790 to the eve of World War I. This was the largest source of income until the collection of income taxes. Congress adopted federal statutes imposing legal obligation...
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...Introduction to Federal Taxation Week 4 Assignment November 24 2012 4. What is the purpose of Code Sec. 351 in regard to transfers to corporations? The purpose of Code Sec. 351 is to allow shareholders of a corporation to defer recognition of a gain or loss on the transfer of assets to a corporation. The transfer of property can be made when a new corporation is formed, or when additional capital is put into existing corporations. Without Code Sec. 351, sole proprietors and partnerships would have a difficult time adopting the corporate form of organization for legal and tax purposes because the transfer of appreciated property would create a taxable transaction. The deferral of gain or loss under this section is justified because the assets have simply been transferred to a corporation that is controlled by the transferors. Section 351 also prevents the recognition of losses on transfers of property that has declined in value. 20. What tax years are available to corporations? How do the options differ from other forms of business organizations? Upon establishing a new corporation, the corporation may choose either a calendar year or a fiscal year. They may choose either of the two regardless of the tax years of its owners which creates tax savings. This differs from other forms of business organization as the S corporation, the Partnership, and Limited Liability Companies are all required to use the calendar year unless they can establish a business purpose to...
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...Concepts in Federal Taxation 2011 Murphy Higgins 18th Edition Solutions Manual Click here to download immediately!!! http://www.testbankpdf.com/taxation/concepts-in-federal-taxation-2011murphy-higgins-18th-edition-solutions-manual/ ----------------------------------------------------------------------Concepts Concepts Concepts Concepts in in in in Federal Federal Federal Federal Taxation Taxation Taxation Taxation 2011 2011 2011 2011 Murphy Murphy Murphy Murphy Higgins Higgins Higgins Higgins 18th 18th 18th 18th Edition Edition Edition Edition Solutions Solutions Solutions Solutions Manual Manual Manual Manual -------------------------------------------------------------------------***THIS IS NOT THE ACTUAL BOOK. YOU ARE BUYING the Solution Manual in e-version of the following book*** Name: Concepts in Federal Taxation 2011 Author: Murphy Higgins Edition: 18th ISBN-10: 0538467924 Type: Solutions Manual - The file contains solutions and questions to all chapters and all questions. All the files are carefully checked and accuracy is ensured. - The file is either in .doc, .pdf, excel, or zipped in the package and can easily be read on PCs and Macs. - Delivery is INSTANT. You can download the files IMMEDIATELY once payment is done. If you have any questions, please feel free to contact us. Our response is the fastest. All questions will always be answered in 6 hours. This is the quality of service we are providing and we hope to be your helper. Delivery is in the next moment...
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...winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC Sec 104(a)(2).Taxability also depends upon the place of residence of the taxpayer. Conclusion: As per the provisions of IRC Sec 104(a) (2), $300,000 received by John Smith as fees from jury award is taxable for federal tax income purposes. 1b Issue: Treatment for purposes of Federal Tax Income of $25,000 expenses paid upfront and received out of the amount awarded by Jury. Applicable Law: Any winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC Sec 104(a)(2).Any expenses can be claimed as a deduction.Taxability also depends upon the place of residence of the taxpayer. Conclusion: Expenses paid upfront and received as part of the jury award can be claimed as a deduction in the hands of the recipient (IRC Sec 104(a) (2). 1c Issue: Reducing the taxable amount of income for both (a) and (b) above. Applicable Law: An annuity payment in contrast to a lump sum receipt can reduce the taxation amount. Conclusion: If there is an option to choose the form of payment i.e. an annuity or a lump sum payment, it is better to choose the option of an annuity payment as it can reduce the amount of taxation. Jane Smith tax issues: 2a Issue: Different tax consequences between paying down the mortgage (debt) and assuming...
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