...All legal same-sex marriages recognized for tax purposes NOVEMBER 2013. In the wake of the Supreme Court’s Windsor decision (Sup. Ct. Dkt. No. 12-307 (6/26/13)), which invalidated a portion of the Defense of Marriage Act (DOMA), P.L. 104-199, the Treasury Department and IRS announced in late August that “same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes.” The IRS also issued a revenue ruling (Rev. Rul. 2013-17) providing guidance on the topic. The ruling will apply to all federal tax provisions where marriage is a factor, for all federal taxes, including income, estate, and gift taxes. Tax provisions in which marriage is a factor include filing status, personal and dependency exemptions, the standard deduction, employee benefits, contributions to IRAs, the earned income tax credit, and the child tax credit, among others. According to the IRS, more than 200 provisions in the Code and Treasury regulations include the terms “spouse,” “marriage,” “husband,” “wife,” or “husband and wife.” Under the revenue ruling, the IRS will treat gender-neutral terms, such as “spouse” and “marriage,” as including, respectively, an individual who is married to a person of the same sex if the couple is lawfully married under state law and such a marriage between same-sex individuals. The terms “husband,” “wife,” and “husband and wife” will be interpreted to include same-sex spouses. ...
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... Correct Answer: III Question 38 Interperiod income tax allocation causes Correct Answer: tax expense shown on the income statement to equal the amount of income taxes payable for the current year plus or minus the change in the deferred tax asset or liability balances for the year. Question 39 The deferred tax expense is the Correct Answer: increase in balance of deferred tax liability minus the increase in balance of deferred tax asset. Question 40 The rationale for interperiod income tax allocation is to Correct Answer: recognize a tax asset or liability for the tax consequences of temporary differences that exist at the balance sheet date. Question 41 Interperiod tax allocation results in a deferred tax liability from Correct Answer: the amount of deferred tax consequences attributed to temporary differences that result in net taxable amounts in future years. Question 42 Which of the following situations would require interperiod income tax allocation procedures? Correct Answer: A temporary difference exists at the balance sheet date because the tax basis of an asset or liability and its reported amount in the financial statements differ Question 43 Interperiod income tax allocation procedures are appropriate when Correct Answer: differences between net income for tax purposes and financial reporting occur because, even though financial accounting principles and tax laws concur on the item to be recognized as revenues and expenses...
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...Nearly all corporate expenditures create either current or future tax deductions * Corporate taxable income formula is relatively straight forward * Accounting Periods and Methods * Corporations measure their taxable income over a tax year and that their tax year must be the same as their financial accounting year * Generally elect their tax year when they file their first tax return * Timing when corps. recognize income and deductions depends on their accounting method * For tax purposes corps. have some flexibility in choosing methods of accounting for individual items or transactions. However, they are generally required to use the accrual method * Corps. with average gross receipts of $5 million or less over the three prior tax years (or a shorter period for new corporations) may use the cash method. LO2 – Computing Corporate Regular Taxable Income * Most corps starts with book income and then make adjustments for book-tax differences to reconcile to the tax numbers. * Privately held corps may use tax accounting rules for book purposes. (No adjustments required) * Book-Tax Differences * Unfavorable book-tax difference – any book-tax difference that requires an add back to book income to compute taxable income. Requires and adjustment that increases taxable income (and taxes payable) relative to book income. * Favorable book-tax difference – Any book-tax difference that requires corporations to subtract the difference...
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...for financial reporting purposes than they are for tax purposes. Instructions For each item below, indicate whether it involves: (1) A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. (2) A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. (3) A permanent difference. Use the appropriate number to indicate your answer for each. Use the appropriate number to indicate your answer for each. (a) 2______ The MACRS depreciation system is used for tax purposes, and the straight-line deprecia- tion method is used for financial reporting purposes for some plant assets. (b) __1____ A landlord collects some rents in advance. Rents received are taxable in the period when they are received. c. 3 Expenses are incurred in obtaining tax-exempt income. d. 1 Costs of guarantees and warranties are estimated and accrued for financial reporting purposes. e. 2 Installment sales of investments are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes. f. 3 Interest is received on an investment in tax-exempt municipal obligations. g. 2 For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes but the assets’ lives are shorter for tax purposes. h. 3 Proceeds...
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...Financial Reporting and Analysis ChapterÊ12ÊSolutions Income Tax Reporting Exercises Exercises 1. Determining current taxes payable (AICPA adapted) The amount of current income tax liability that would be reported on Ross Co.’s December 31, 1998, balance sheet is determined as follows: Net income before depreciation expense and income taxes $100,000 Depreciation expense (for tax purposes) (20,000) Taxable income 80,000 Tax rate 30% Current income tax liability $24,000 2. Determining deferred tax liability (AICPA adapted) To determine the deferred income tax liability reported on the December 31, 1999, balance sheet requires a calculation of the cumulative temporary (timing) differences that give rise to future taxable amounts as of that date. Gross margin temporary differences are as follows: (Book purposes) (Tax purposes) Temporary Differences Year Accrual Method Installment Method (Future Taxable Amount) 1998 $800,000 $300,000 $500,000 1999 1,300,000 700,000 600,000 Total temporary differences as of 12/31/99 $1,100,000 Tax rate in effect when differences will reverse 25% Deferred tax liability on 12/31/99 $275,000 3. Determining deferred tax liability (AICPA adapted) Tow’s deferred tax liability for December 31, 1998, is computed as follows: | |Reversal of | ...
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...(income after exclusions) for the taxable year. Both formulas reduce gross income by deductions to determine taxable income. Both formulas apply tax rates to taxable income to determine the tax liability. Finally, both formulas reduce the tax liability by credits and tax payments to determine taxes due or the refund. Both formulas include are allowed to take deductions for business expenses to come to taxable income. Differences: Individuals distinguish deductions between for and from AGI deductions and they report adjusted gross income. Corporations don’t distinguish deduction types and don’t report adjusted gross income. This means corporations don’t itemize deductions nor do they deduct standard deductions. Finally, unlike individuals corporations don’t deduct personal exemptions. 2. [LO 1] Is a corporation’s choice of its tax year independent from its year-end for financial accounting purposes? No. The tax year must be the same year as it uses for financial accounting. 3. [LO 1] Can taxable corporations use the cash method of accounting? Explain. The three types of overall accounting methods which are available to corporations are accrual, cash, and hybrid. Generally, corporations must use the accrual method of accounting unless it is a small corporation (average gross receipts for the past 3 years are $5 million or less). For tax purposes, corporations with average gross receipts for the past three years of $5 million or less may use the cash method of accounting. Corporations...
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...Income Tax By Graham Holt Studying this technical article and answering the related questions can count towards your verifiable CPD if you are following the unit route to CPD and the content is relevant to your learning and development needs. One hour of learning equates to one hour of CPD. We'd suggest that you use this as a guide when allocating yourself CPD units. IAS 12 uses a liability method and adopts a balance sheet approach to accounting for taxation. It accounts for the temporary differences between the accounting and tax bases of assets and liabilities rather than accounting for the timing differences between the accounting and tax consequences of revenue and expenses. IAS 12 adopts a full provision balance sheet approach to accounting for tax. It is assumed that the recovery of all assets and the settlement of all liabilities have tax consequences and that these consequences can be estimated reliably and cannot be avoided. As the IFRS recognition criteria are different from those which are normally set out in tax law, certain income and expenditure in financial statements will not be allowed for taxation purposes, thus causing 'temporary differences'. A deferred tax liability or asset is recognised for the future tax consequences of past transactions with certain exemptions. The standard assumes that each asset and liability has a value for tax purposes and this is called a tax base. Differences between the carrying amount of an asset and liability and its tax base...
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...The Malaysian Institute of Certified Public Accountants DISCUSSION PAPER TAX IMPLICATIONS RELATED TO THE IMPLEMENTATION OF FRS 117: LEASES Prepared by: Joint Tax Working Group on FRS Date of issue: 22 January 2010 Tax Implications Related to the Implementation of FRS 117: Leases Disclaimer: This document is meant for the purpose of discussion only and the Malaysian Institute of Accountants, The Malaysian Institute of Certified Public Accountants and the Chartered Tax Institute of Malaysia (“the Institutes”) are not, by means of this document, rendering any professional advice or services. This document is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a professional advisor. Whilst every care has been taken in compiling this document, the Institutes make no representations or warranties (expressed or implied) about the accuracy, suitability, reliability or completeness of the document for any purpose. The Institutes, their Councils and Council members, Committees and Committee members, Working Groups and Working Group members, employees and agents accept no liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this...
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...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 and the degree of vigor with which the taxing power may be employed in order to raise revenue. b. Oliver Wendell Holmes Dictum “Power to tax is not the power to destroy while this court (US Supreme Court) sits” – power to tax knows no limits except those expressly stated in the Constitution. Marshall and Holmes Dictums Reconciled: Although the power to tax is almost...
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...Introduction to Taxation Taxation – is an act of imposing tax. Tax - enforced contribution levied by a sovereign state on persons, property and rights/privileges within its jurisdiction, exercised through its legislative branch, for the purpose of raising revenues to defray the expenses of the government and for public purposes. Nature of taxation – an inherent legislative power of any independent state. Scope of taxation - unlimited and comprehensive but subject to inherent and constitutional limitations or limitations depending on the sense of responsibility of the state to its people. Inherent limitations: 1. for public purpose. 2. Power to tax cannot be delegated 3. Double taxation should be avoided or prevented. 4. Government agencies and instrumentalities are exempted from tax. 5. Imposed only within the territorial jurisdiction of the state. Double taxation is taxing twice, by the same public authority, within the same jurisdiction or taxing district, for the same purpose in the same year or taxing period. Constitutional limitations: 1. Non-impairment of existing contracts. 2. No person shall be imprisoned for non- payment of debt or poll tax. 3. Taxation must be uniform and equitable. 4. All kinds of land, buildings and improvements actually, directly or exclusively used for religious or charitable purposes are exempt from taxation. Basic Principles of a Sound Tax System * Fiscal adequacy – revenue enough to sustain the...
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...maintain the confidentiality of any persons/organisations referred to in this assessment. - I permit this assessment to be copied for academic processes (such as moderation). - I have retained a copy of this assessment electronically. Signature ………………………………. Date …………………………. IntroductionIntroduction of anti-avoidance provisions takes very back in time of 1878, since then the legislation has been twisted many times to ensure interpretation and solicitation against potential treats of tax avoidance. Tax avoidance provisions are illustrated in section BG1, GA1 and YA1 of Income Tax Act (ITA) 2007 closely read with applicable sections of Tax Administrative Act 1994. The report aims to throw light on Tax Avoidance by briefly analysing facts of arrangements and it tries to determine whether there is possibility of violation of General Anti-Avoidance Rules (GAAR) Legitimate tax planning can lessen burden but impermissible tax avoidance tactics undertaken in attempt to avoid tax may lead to penal consequences. To decide possibility of violation of legislations; landmark cases have observed the facts of scheme with intension of parties involved and other circumstances incidental...
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...brush up on the changes to the accounting treatment of tax issues, review IAS 12 under International Financial Reporting Standards (IFRS) as well as section 3465 of the Accounting Standards for Private Enterprises (ASPE). Purpose Knowledge Horizontal and vertical thinking Ethics Legal responsibilities Income Tax Act Steps in computing income tax Source concept Distinctions Employment income versus business income Business income versus capital gain Business income versus property income Business income versus hobby Employment or office income Accounting income versus income for tax purposes Depreciation versus CCA and CECA Taxable versus non-taxable Calculating business income deductions Income from property Dividends 11/23/2014 12:12 PM Untitled Document 2 of 18 http://www.cga-education.org/2014-15/PAP/Refreshers/tx1.refresher.htm Tax integration — Corporation Tax integration — Shareholder Capital cost allowance Cumulative eligible capital amount Relationships Related Associated Connected Capital gains and losses Taxable income Tax payable by individuals Tax on split income Tax payable by a corporation Part I tax payable by a corporation Canadian controlled private corporation Manufacturing and processing profits deduction Part IV tax Refundable tax Tax planning Tax evasion Tax avoidance Areas of tax planning Residency Part XIII tax International issues Purpose 11/23/2014 12:12 PM Untitled Document...
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...Australian resident for tax purposes? Generally, we consider you to be an Australian resident for tax purposes if you: * (1) have always lived in Australia or you have come to Australia and now live here permanently * (2) are an overseas student doing a course that takes more than six months to complete * (3) have been in Australia continuously for six months or more and for most of that time you worked in the one job and lived in * the same place * (4) will be or have been in Australia for more than half of the financial year (unless your usual home is overseas and you do not * intend to live in Australia). If you go overseas temporarily and do not set up a permanent home in another country, you may continue to be treated as an Australian resident for tax purposes. The criteria we use to determine residency are not the same as used by the Department of Immigration and Citizenship or the Department of Human Services. | Foreign resident tax rates are differentA higher rate of tax applies to foreign residents' taxable income and foreign residents are not entitled to a tax-free threshold.You are not entitled to claim the tax-free threshold and tax offsets if you are not an Australian resident for tax purposes. However, there is...
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...Tax Midterm Chapter 1: Taxation- Its role in decision making Taxation and the financial decision process * Taxation is a controllable cost * Tax cost = cost of doing business * Analyzed to determine which actions or activities have a greater/lesser impact on the resulting tax cost * Each alternative= different impact on the amount of tax and the timing of the payment of tax * Even if marketing decision = direct effect on the long term tax cost of the firm → thus on profits and value * Tax= important on any decision making * Tax costs are relevant when alternative strategies are being considered * Cash flow (CF) exists only on an after-tax basis * All CF= after tax * NPV compared and ranked * Shows the actual value of the individual/corporation * Analysis can’t be of value unless the real tax impact is included * Alternative action to minimize the tax impact * After tax = % of interest x (1 – Tax rate) * 5% dividend on the equity of a “public corporation” = not deductible to the business → after tax = 5% (real cost) * Net value to individual investor subject to 45% tax rate = 3.6% (after applying dividend tax credit) The fundamental income tax structure and its complexity Taxpayers * Individuals * Corporations * Trusts | Business & investment structures * Proprietorship * Corporation * Partnership * Limited partnership * Joint venture...
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...Accounting for Income Taxes I. Overview – Accounting for income taxes involves both intraperiod and interperiod tax allocation. Intraperiod allocation matches a portion of the provision for income tax to the applicable components of net income and retained earnings. Income for federal tax purposes and financial accounting income frequently differ. Income for federal tax purposes is computed in accordance with the prevailing tax laws, whereas financial accounting income is determined in accordance with GAAP. Therefore, a company’s income tax expense and income taxes payable may differ. The incongruity is caused by temporary differences in taxable and/or deductible amounts and requires interperiod tax allocation. II. Intraperiod Tax Allocation – Intraperiod Tax Allocation involves apportioning the total tax provision for financial accounting purposes in a period between the income or loss from: a. Income from continuing operations b. Discontinued operations c. Extraordinary items d. Cumulative effect of an accounting change e. Other comprehensive income i. Pension Adjustment ii. Unrealized gain/loss on available for sale security iii. Foreign translation adjustment f. Components of stockholders’ equity iv. Retained earnings for prior period adjustments and v. Items of accumulated (other) comprehensive income g. General Rule – Any amount not allocated to continuing operations...
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