...Income Tax: Small Family and Minimal Deductions ACC 401 July 23, 2012 Instructor Income Tax: Small Family and Minimal Deductions One of the jobs of tax consultants is to determine the types of forms to complete when assisting a person in completing his or her income tax forms. The number and types of forms used is determined based-on the person’s income, if the person is having his personal or business tax forms completed, the deductions the person is taking, and the proof of deductions that a person has saved. The family chosen for this paper is a small one-child family completing their personal income tax, filing jointly, and using minimal deductions. Based on the couple’s income, a recent home purchase, attendance in college, dependent child, and deductions, the most appropriate forms to complete are the 1040 U.S. Individual Income Tax Return, earned income credit form, form 8812-Additional child tax credit, form 8863 education credits and form 5405 (First Time Homebuyer Credit and Repayment of the Credit) (Internal Revenue Service, 2012). Scenario: The couple is Jackson R. Parker and his wife Elizabeth Parker. They have a healthy non-disabled three-year-old son named Colton. Mr. Parker is in the United States Army. Mrs. Parker is unemployed and does not work, but attends college full-time. The couple purchased their first home on February 23, 2011. They paid $300,000 for their home. They had few receipts with the exception of the husband’s W-2 from...
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...06"()()
CC:ITA:2:MEBrookens COR-117177-00 March 19,2001 MEMORANDUM fOR MR. MICHAEL PERLMUITER LEAD CUSTOMER SERVICE REPRESENTATIVE ACCOUNTS MANAGEM£NT DIVISION III, GROUP S140 JACKSONVILLE, fL FROM: Heather C. Maloy Associate Chief Counsel (Income Tax & Accounting) Section 280A{c)(o)
SUBJECT:
This technical assistance memorandum responds to your inquiry concerning the effect of § 280A(.cX6) of the Internal Revenue Code on the deductibility by an individual taxpayer of expenses attributabie to the rental of a portion of a dwelling unit to his employer. The employer is an S corporation of which the empfoyee is the sole shareholder and sole employee. During the period of the rental the individual used the rented portion in performing services as an employee. The individual atso used the dwelling unit as a principal residence. Our discussion supplements previous oral advice we have given you on this subject. Your inquiry was prompted by an individual described above who was concerned because he could not find a place on the applicable forms -to claim 'Certain business expenses and depreciation attributable to the rental income. You asked for guidaooe concerning the appropriate form(s) to use in reporting the rental income and deductions. Please note that technical assistance Words: 1846 - Pages: 8
...1) The advertising expense is absolutely to be claimed 100% for the amount incurred as it is a part of the business property investment. Repairs is categorized as to the extent which is to refresh the house as to its beginning state will be a deduction for example repair the leaking proof, repair the floor be tear out. However the repairs that is excessive relating to using the better material or replacing the stuff or equipment which are not supposed to be a part of the property such as electronic system, gas, water system and etc would be not entitled to be deductible. 2) Kelly would record the amount that is out of her pocket ($350-$295=$55) as the deduction for repair. 3) Nina and Ben can claim the depreciation for the investment property as 2.5% per year applied for kind of house or building, so they could claim $146,700 x 2.5% = $3668 for ITR 2013. The written down value of the property could be $146,700 - $3668 x 9 - $3688 x 313/365 = $110542 . 4) If the house is rented out fully and Luke does not living there at all, then it is treated as an investment property and all the expenses incurred likewise would be deductible. In the case Luke would like to rent it partly for example he rents out 2 out of 3 rooms of house and hold the remaining room for living when he is staying the holiday there, then he could no claim the occupation expense such as depreciation, mortgage or interest,… but the running expense such as advertising, cleaning, travel to the...
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...Retirement Planning Allen and Nancy Berger The ideal retirement benefit plan to install in Allen’s company would be the Defined Benefit Plan. The defined benefit plan best fits Allen’s current business situation in multiple ways. Allen will be able to maximize corporate tax deduction because employers are generally allowed to contribute more (and therefore tax deduct) than the alternative retirement plans. Business owners can write off these contributions as a business expense which is tax deductible, which will assist in Allen maximizing his corporate tax deduction. Defined benefit plans have no contribution limits, Allen and Nancy have a goal to secure a $61,241.90 after-tax serial payment by retirement. Other retirement plans such as the 401(k) have contribution limits that will not allow for Allen and Nancy to meet this future retirement goal. Defined benefit plans are truly ideal for small business owners who are behind in retirement savings and are nearing retirement. In the case of Allen who is currently 54 years old, the defined benefit plan is ideal because he is not restricted on how much he can contribute, so by the time he does reach the age of retirement, he will likely be able to reach his goal. Because of the maximums on plans such as 401(k) and Money Purchase plans, those alternatives would serve little use to someone like Allen looking to retire in less than a 20 year period. Allen currently has stable, predictable cash...
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... 1. ATTRACTIVE INCENTIVES FOR INVESTORS The most competitive Free Trade Zone in Latin America: 15% Income Tax as well as the possibility to sell to local markets • • • • • A single 15% income tax rate, allowing sales in the local market. No customs taxes (VAT and customs duties). VAT exemption for raw materials, inputs and finished goods sold from the national customs territory to industrial Free Trade Zone users. Exports made from Free Trade Zones to foreign countries (except Peru) benefit from international trade agreements. No customs taxes on machinery, related directly to the business operation which is imported from abroad and entered into the FTZ. Single Enterprise Free Trade Zone (SEFTZ): Investors can take advantage of the benefits provided by the Free Trade Zones even by locating out of a Permanent Free Trade Zone. Investors can sign Legal Stability Contracts with the Colombian Government In order to promote new investments and expand existing ones, the government provides investors the option to sign a Legal Stability Contract, securing key conditions for investment promotion. Companies must meet the following requirements: • • • Minimum investment of USD 1,930,000 . Investors must pay a premium to the government equivalent to 1% of the investment. The period of the contract can last between 3 and 20 years. 1 . Income Tax deductible expenses Among the deductions included are the following: • 100% of the amount paid for industry and commerce, signs and billboards...
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...agreements are reached, “settlement payments” occur. Hence, people consider settlement payments as prices that one party pay to the others for their wrongful behaviors or violation of laws. For tax purposes, are settlement payments deductible? According to Internal Revenue Code (IRC) Section 162(a), any ordinary and necessary business or trading expenses are deductible during the current taxable year. That is to say if any settlement payments meet criterions of deduction under 162(a), but not in the exception of Section 162, should be deductible. In real court cases, IRS uses the exceptions of Section 162 to disallow settlement payments. Nowadays, more court cases and arguments appear to show that even though some settlement payments are in the exceptions of 162 (a), they can also be deducted. The relief of settle payments deductibility causes disagreements among tax professionals. Some believes settlement payments may be composed of deductible compensatory damages from non-deductible punitive damages; however, others worries that allowing deductibility may leads an indirect lesser penalty, because juries are unaware of tax benefits from deductions. This essay will mainly discuss the deductibility of settlement payments by explaining of original laws and regulation languages, citing tax professionals’ perspectives and illustrating actual court cases. According to IRC Section 162(a), “all the ordinary and necessary expenses” from “any trade...
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...Name; Anita Nana Yaa Addai Index; Bsc/Admin/12/13/047 Course; Financial Accounting Users of financial information and their informational needs. Users of accounting information are either internal or external to the organization. These users need information to help them make informed or reliable decisions or judgements with regards to the organization. Different groups have different demands for the financial information contained in a set of accounts. Information needs of internal users These include; * Management; This category is made up of the senior employees who run the organization on a day- to- day basis. They are interested in information such as, Finance of the organization (working capital) The growth prospects (value of shares and dividends) * Employees ; This is the group of workers in the organization made up of existing potential and past employees. The members of this group are concerned with job security and future prospects. Therefore, they need information to assess the company’s profitability, liquidity and growth prospects. Employees need information about The financial state of the organization ( for their salaries) The growth and stability of the organization ( new investments ) to ensure continuity of employment. Profitability. Others are informational needs of external users including * Customers; Those who buy from the organization either for cash or on credit are interested in; The profitability The growth and stability ( new product...
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...Income Limitations on Lifetime Learning Credit The amount of the Lifetime Learning Credit is limited over a phase-out range. If your adjusted gross income is below the phase-out, your credits are not reduced. If your income is in the middle of the phase-out range, your credits will be reduced. If your income exceeds the phase-out range, you are not eligible to claim the Lifetime Learning tax credit. Below is the income phase-out range for the year 2011: • $51,000 to $61,000 : Single, Head of Household, or Qualifying Widow • $102,000 to $122,000 : Married Filing Jointly The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits on the first $10,000 of college tuition expenses. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the American Opportunity credit, you need not be in the first four years of undergraduate classes. Even if you took only one class, you may take advantage of the Lifetime Learning Credit. The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit provides up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. The tax credit is scheduled to have a limited life span: it will be available...
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...administration is also planning tax incentives to assist in managing the financial burden of student loan debt. American families are continuously trying to figure out how they are going to pay for the rising cost of higher education expenses. These expenses can be overwhelming for those who aren't prepared. The U.S government is attempting to support those in pursuit of higher education and is sympathetic to those who are having problems managing this expense as well as those who have accumulated student loans that seem impossible to repay. In coming to the aid of taxpaying American citizens the U.S. government is offering a number of tax credits and other incentives that can provide substantial relief for many taxpayers. Let’s first consider the various credits and deductions available to students of higher education and for their parents. The most prevalent ways of reimbursing taxpayers for higher education expenses is through tax credits. There are two main credits available, one was introduced in 2009. The American Opportunity Tax Credit, it provides a credit of up to $2,500 per student. This credit is offered for up to four years of undergraduate studies and is therefore both an improvement and an expansion on the Hope Credit which it replaced, and which was only applicable for the first two years of college (Cussen, 2010). The American Opportunity Tax Credit has an income limitation for single taxpayers with adjusted gross incomes from $80,000-90,000...
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...ACCT 324 Federal Tax Accounting I Entire Course http://www.devryguiders.com/downloads/acct-324-federal-tax-accounting-i-entire-course/ ACCT 324 Week 1 DQ 1 ACCT 324 Week 1 DQ 2 ACCT 324 Week 1 Quiz – Federal Tax Law and Process ACCT 324 Week 2 DQ 1 ACCT 324 Week 2 DQ 2 ACCT 324 Week 2 Quiz – Income Inclusions, Exclusions & Accounting Methods ACCT 324 Week 2 You Decide ACCT 324 Week 3 Course Project: Deductions, Losses & Depreciation ACCT 324 Week 3 DQ 1 ACCT 324 Week 3 DQ 2 ACCT 324 Week 3 Quiz – Deductions, Losses & Depreciation ACCT 324 Week 4 DQ 1 ACCT 324 Week 4 DQ 2 ACCT 324 Week 4 Midterm Exam – Deductions, Losses & Passive Activities ACCT 324 Week 5 Course Project ACCT 324 Week 5 DQ 1 ACCT 324 Week 5 DQ 2 ACCT 324 Week 5 Quiz – AMT, Tax Credits, & Tax Payments ACCT 324 Week 6 DQ 1 ACCT 324 Week 6 DQ 2 ACCT 324 Week 6 Quiz – Property Transactions ACCT 324 Week 7 DQ 1 ACCT 324 Week 7 DQ 2 ACCT 324 Week 7 Quiz – Capital Gains & Losses ACCT 324 Week 8 Final Exam ACCT 324 Federal Tax Accounting I Entire Course http://www.devryguiders.com/downloads/acct-324-federal-tax-accounting-i-entire-course/ ACCT 324 Week 1 DQ 1 ACCT 324 Week 1 DQ 2 ACCT 324 Week 1 Quiz – Federal Tax Law and Process ACCT 324 Week 2 DQ 1 ACCT 324 Week 2 DQ 2 ACCT 324 Week 2 Quiz – Income Inclusions, Exclusions & Accounting Methods ACCT 324 Week 2 You Decide ACCT 324 Week 3 Course Project: Deductions, Losses & Depreciation ACCT 324 Week 3 DQ 1 ACCT 324 Week 3 DQ 2 ...
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...psychological factors and level of income also affects our decisions. The market gives us choices by the production of goods and services they produce. To produce the consumable goods businesses have to sell and buy raw materials, labor, plant & equipment. The market and government a force behind what is presented for consumption. The government is a direct force of these goods and services. Government tries to create a balance of economic determinates by imposing taxes to raise revenues and establishing rates at which the private sector can borrow money to consume. Government tries to create a stable economy where the amount produced equals the amount consumed. There are many parts of our economy and each plays an important role in economic efficiency. Consumer spending accounts for the biggest portion of our nations GDP at 70%. Businesses are 17% of GDP they are important because they create the jobs, good and services for the consumer. Governments roll in overall GDP is 19%. Net exports and imports create the remainder of our GDP. The GDP is the ratio by which we measure the total spending, total costs of goods sold that equals our total income. Spending is increased when the level of credit issued is increased. This increased credit increases production as more consumers are demanding more goods and services. Americans are high consumers compared to the other nations. Other nations governments encourages saving excess income. The United States credit card...
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...Case Analysis for Chapter 3, Case Number 3-5 IRS Whistleblower and Informing on Tax Cheats 1. The ethical issue in this case is Wall Street insider Mr. ABC disclosed the information of Illinois Tool Works Inc. (ITW) tax fraud to IRS and received a whistleblowing award of $2 million. 2. The accounting issue involved is ITW enlisted a Swiss bank to fabricate unauthorized tax deductions in order for ITW (bank’s client) to claim the same deductions as an offset to ITW’s otherwise taxable income. 3. The incorrect or improper action taken in this case was ITW conducted illegal tax avoidance by involving a Swiss bank to fabricate unauthorized tax deductions by duplicating same deductions for both of them. 4. The correct or proper action that should have been taken is ITW should have followed GAAP and related regulations to not duplicate tax deductions and avoid tax legally. 5. Answers to case questions: 5.1 Should we regard Mr. ABC as a new “caped crusader” or an opportunist? Explain the reasons for your response. In my opinion, Mr. ABC should be regarded as a “caped crusader”. As a Wall Street insider, he has a moral sensitivity that “it was just a fake deduction scheme”. His motivation is to criticize the government’s ability to identify and investigate sophisticated tax shelters. He took the ethical action to expose the fact to IRS. I don’t think Mr. ABC is an opportunist, who is totally self-centered and only took advantage. He has already...
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...investment opportunities available today. For most Americans, their homes are their greatest source of net worth and a substantial source of tax savings. This article presents an overview of the tax savings opportunities available to homeowners and analyzes the investment value of home ownership in the current real estate environment using different levels of mortgage financing and costs of renting compared to owning a home over different time horizons. Introduction or many Americans, the purchase of a home is a major step toward the fulfillment of the American dream. It is a very personal and emotional transaction involving a tremendous feeling of pride of ownership and family security. In addition to being a very emotional experience, buying a home is an important financial transaction. For most Americans, the purchase of a home is the largest purchase that they will ever make, their homes are their greatest source of net worth, and the ownership of a home offers tax savings opportunities that are difficult to match. In the year 2004, the percentage of Americans owning homes reached an all-time high. Approximately 70% of the adult population or roughly 120 miilion people in the United States are currently homeowners.' The recent upward trend in home ownership has been aided by record low mortgage interest rates, an improving economy, and the many tax savings benefits of home ownership. This article analyzes the investment valtie of home ownership in the current real estate environment...
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...ASSIGNMENT OF INTERNATIONAL FINANCE SUBMITTED TO : SUBMITTED BY : MRS. PARUL KHANNA PRIYANKA BAKHSHI MBA 4 Union Finance Minister Pranab Mukherjee today tabled his third consecutive union budget in Lok Sabha, primarily focusing on trimming the rising fiscal deficit, rising inflation, interest rate and boosting the decreasing growth rate. Here is the key features and main points of Union Budget 2012-13. Budget identifies five objectives relating to growth recovery, private investment, supply bottlenecks, malnutrition and governance matters. * GDP growth to be 7.6 per cent (+ 0.25 percent) during 2012-13. * Amendment to the FRBM Act proposed as part of Finance Bill. New concepts of "Effective Revenue Deficit" and "Medium Term Expenditure Framework" introduced. * * Central subsidies to be kept under 2 per cent of GDP; to be further brought down to 1.75 per cent of GDP over the next 3 years. * Efforts to reach broadbased consensus on FDI in multi-brand...
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...charitable deductions to public charities, private operating foundations and private non-operating foundations. For this issue, the focus will be on charitable contributions and deductions of individuals. Definitions: Public charities: All organizations, foreign and domestic, described in IRC 501(c)(3) are private foundations except the types of organizations set forth in IRC 509(a)(1), (2), (3), or (4). Some examples of the exceptions that would qualify as public charities, as defined in 509(a)(1) and IRC 170(b)(1)(A)(i)-(v) are: churches, educational organizations, and hospitals. Private operating foundations, as best discerned from IRC 170, are foundations whose income or assets are used for operations that directly benefit the public, rather than for grant making. Some examples would be zoos, museums and libraries. Private non-operating foundations are foundations whose income or assets are disbursed to other, charitable organizations. Some examples are foundations that support cancer research. For this topic: Contribution base means adjusted gross income (AGI). For this topic: Capital gain property is defined as any capital asset that, if sold, would result in a long-term capital gain. Additionally, any property that is used in the trade or business should be treated as a capital asset. Analysis: IRC 170(a)(1) states: There shall be allowed as a deduction any charitable contribution…which is made within the taxable year. In general, an income tax...
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