...CHAPTER 6: NON-BUSINESS SOURCE INCOME Introduction Section 4 of the Income Tax Act, 1967 set out the main classes of income on which tax is chargeable. Section 4(a) and Section 4(b) is discussed under Business Income and Employment Income respectively. Section 4 (c), Section 4(d), Section 4(e) and Section 4(f) is covered under this chapter as other sources of income. Section 4(c) Dividend Income Dividend is a distribution of company’s profit to its shareholders by way of cash or non-cash for example distribution of company’s assets or investment shares. The amount distributed to the shareholders will be in proportion to their existing holding. Dividend received by shareholders is a taxable income by virtue of Section 4(c) Income Tax Act, 1967. Dividend distributed, paid or credited by a company that was a Malaysian tax resident at the time the dividend distributed, paid or credited is deemed to be derived from Malaysia. [Section 14 Income Tax Act, 1967] Example 1 Infinity International Sdn Bhd was tax resident in Malaysia since 25.10.2002 as the management and control was in Malaysia. On 31.12.2010, the management and control was started to be exercised in Hong Kong. Is the income a Malaysian source? Tax Imputation System (Section 108) – old system All dividend (except for tax exempt dividend) distributed, paid or credited by a company resident in Malaysia are subjected to a deduction of tax at source at the company’s tax rate (25% as per year of assessment...
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...Estate Planning Individual Assignment Question 1: (a) Mr. Ngan Salaries Tax Computation Year of Assessment 2012/13 $ Salary 1400000 Special bonus 380000 Travelling allowance 55000 1835000 Less: Subscription for professional body (1800) 1833200 Add: Rental Value (1833200*10%) 183320 less: rent suffered (1400000*8%) (112000) 71320 1904520 Less: Self-education (max) (60000) Net assessable income 1844520 (b) Mrs. Ngan Property Tax Computation Year of Assessment 2012/13 $ Rental Income (18000*9) 162000 Less: rates paid (2200*2*9/12) (6600) 155400 Less: Statutory deduction (155400*20%) (31080) 124320 Property tax payable @ 15% (124320*15%) 18648 Mr....
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...emphasis on the cost of capital element in effecting the rate of return and the internal cash flow for investment of the investing firms. Using the Jorgenson’s Neo-classical Investment Model the cost of capital is computed after considering the taxation policy and the treatment of invested capital. The paper elaborated fiscal provisions and their implications on the investment environment specifically available to foreign investors in Pakistan. The computed results show consistent and influencing impact of the cost of capital on FDI inflows. The objective of the study is to explore the a realistic and in depth investigation of the tax concessions and the response of investors. The paper argues that fiscal incentives are more appropriate in attracting FDI as these have no direct drain over public resources and are increase the after tax return by availing the tax holidays and depreciation allowances. 1. Introduction Capital can move inside and outside the boundaries of a country and the worldwide competition for it provides numerous special inducements by the capital importing countries. This movement of capital around the world gets significant attention of the policy makers and researchers in both developing and developed countries. Cross-boarder capital flows are mainly concentrated in Foreign...
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...TAXATION 1)scope of charge 2)classes of income 3)resident status 4)income from employment 5)tax relief and rebates 6)individual tac computation 7)interest income 8)dividend income 9)rental income 10)witholding tax 11)partnership-tax treatment for investment income 12)estate under administration 13)estates under administration 14)settlements 15)trusts 16)badges of trade 17)business income 18)business expenses 19)interest expenses 20)trading stock 21)capital allowances 22)industrial building allowance 23)controlled sales 24)mining allowance & prospecting expenditure 25)approved donation & zakat 26)group relief for companies 27)restriction on use of loss on change in ownership 28)company taxtion 29)double dedustion 30)research & development 31)exemption for increased exports of goods & commodities 32)exemption for increased exports of manufactured products & agricultural produce 33) exemption for increased exports of qualifying services 34)income tax (deduction for cost of acquisition of proprietary rights) 35)income tax (deduction for cost on acquisition of a foreign owned company) 36)single tier dividend system & section 108(6) 37)professional communication tools-reports,letters.... 38)tax incentives-pioneer statuss,investment tax allowance,renvestment allowance 39)computation of chargeable income-company 40)self assessment for individual & companies 41)tax avoidance & wilful evasion 42)tax audit & tax investigation 43)advanced ruling 44)company...
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...9 Other sources of Income and Deductions The amounts that have not been considered under 3(a) income from employment, and 3(b) business or property] are considered under sec.56 as other income. These amounts are included under Division B subdivision d - other source of income. The following are some of the sources of income: 1.Pension Benefit: All amount received as superannuation or pension benefit be included in the computation of income under 56(1) (a) (i) the following receipt must be included; 1. superannuation payments 2. Old age security amount 3. Canada pension plan benefit 4. benefit from prescribed provincial pension plan 5. Pension received from foreign sources. Withdrawal from RRSP, RRIF or DPSF must be included in computing income under 56(1) (h), (i) and (t). 2. Old age security and employment insurance: Old age security payments are paid to individual who are at least 65 years of age and has been resident in Canada for minimum of 10 years. This benefit includes: 1. old age pension 2. supplement for lower income person Both must be included in income, but paragraph 110(1)(f) provide for a deduction for any supplement included in income. OAS claw back: If the taxpayer’s div B income is more than $66,733 for the taxation year, a portion or entire amount of the Old Age Security Benefit must be repaid. The amount of the repayment is compute ad follows: The lesser of: a. OAS Benefits xx b. Income under division B ...
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...Form Department of the Treasury Internal Revenue Service A Principal business activity B Principal product or service 1065 U.S. Return of Partnership Income For calendar year 2011, or tax year beginning ▶ OMB No. 1545-0099 , 20 . , 2011, ending See separate instructions. 2011 35-4545454 01-15-2008 Name of partnership D Employer identification number ZLW GP C Business code number Print or type. Number, street, and room or suite no. If a P.O. box, see the instructions. City or town, state, and ZIP code E Date business started Miami, FL 33146 F Total assets (see the instructions) $ 3301467 Amended return G H I J (1) (2) (3) Initial return Final return Name change (4) Address change (6) Technical termination - also check (1) or (2) Other (specify) ▶ Check accounting method: (1) Cash (2) Accrual (3) Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year ▶ 2 Check applicable boxes: Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information. Merchant card and third-party payments (including amounts 1a reported on Form(s) 1099-K). For 2011, enter -0- . . . . 4173585 b Gross receipts or sales not reported on line 1a (see instructions) 1b 4173585 c Total. Add lines 1a and 1b . . . . ...
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...Form Department of the Treasury Internal Revenue Service A Principal business activity 1065 U.S. Return of Partnership Income For calendar year 2013, or tax year beginning ▶ OMB No. 1545-0099 , 20 . , 2013, ending Information about Form 1065 and its separate instructions is at www.irs.gov/form1065. Name of partnership 2013 12-3456789 D Employer identification number Manufacturing B Principal product or service Walk Upright Company Type or Print Number, street, and room or suite no. If a P.O. box, see the instructions. E Date business started Walking Poles C Business code number 58 Trekkers Point City or town, state or province, country, and ZIP or foreign postal code F Total assets (see the instructions) $ 339900 G H I J Check applicable boxes: Fort Collins, CO 80521 599,999 Amended return (1) (2) (3) Initial return Final return Name change (4) Address change (6) Technical termination - also check (1) or (2) Other (specify) ▶ Check accounting method: (1) Cash (2) Accrual (3) Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year ▶ 2 Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information. 1a b c 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16a b 17 18 19 20 21 22 1a Gross receipts...
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...Lease. (Easy) Annual rental payments, no renewable option clause, executory costs. Lessee's journal entries to record agreement, payments, expenses. Capital Lease. (Moderate) Calculation of rental payments made at end of year. Table summarizing lease payments, interest expense. Journal entries. IFRS differences. Capital Lease. (Moderate) Payments made at beginning of year. Table summarizing lease payments, interest expense. Journal entries. Direct Financing Lease. (Moderate) Calculation of rental receipts, made at end of year. Table summarizing rental receipts, interest revenue. Journal entries. Direct Financing Lease. (Easy) Journal entries to record contract, first rental receipt. Direct Financing Lease / Capital Lease. (Moderate) Table summarizing lease and interest payments. Journal entries for lessor and lessee. Sales-Type Lease. (Moderate) Payments made at end of year. Calculation of selling price (fair value). Table summarizing lease receipts, interest revenue. Journal entries. Sales-Type Lease. (Moderate) Payments made at beginning of year. Calculation of selling price (fair value). Table summarizing lease receipts, interest revenue. Journal entries. Sales-Type Lease / Capital Lease. (Moderate) Computation of lease payments. Journal entries for lessor and lessee. Operating Lease / Sales-Type Lease. (Moderate) Accounted for as operating, should have been sales-type. Computation of effect on net income. Operating Lease. (Easy) Computation of income derived from lease by...
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...CHAPTER 2 PROBLEM 2-1 Multiple choice (IFRIC 13) 1. It is a marketing scheme whereby an entity grants award credits to customers and the entity can redeem the award credits in exchange for free or discounted goods or services. a.. Customer Loyalty Program c. Marketing Program b. Premium plan d. Loyalty award 2. The award credits granted to customers under a customer loyalty program is often described as a. Points b. Awards c. Credits d. Loyalty 3. The consideration allocated to the award credits is measured at a. Fair value of award credits b. Carrying amount of goods to be received in exchange c. Fair value of the goods to be received in exchange d. The proportion of the fair value of the award credits relative to the total consideration received from the initial sale of the goods 4. Under a customer loyalty program, if the entity supplies the awards itself, the consideration allocated to the credits a. Shall be recognized as revenue immediately b. Shall not be accounted for as revenue separately c. Shall be recognized as deferred revenue and amortized as revenue over a reasonable period not exceeding 5 years d. Shall be recognized initially as deferred revenue and subsequently recognized as revenue upon the redemption of the award credits. 5. Under a customer loyalty program, if a third party supplies the awards and the entity is collecting the consideration for the award credits as principal in the transaction a. The entity shall not recognize...
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...received $19,000 in nontaxable funds (disability income, interest on municipal bonds and Social Security benefits) from which $8,000 was equally spent between them on clothing, transportation, and recreation. The remaining $11,000 was invested in tax-exempt securities. Janet Baker paid $1,000 for her mother’s dental work and $1,200 premium on her father’s own life insurance policy. Janet’s father, Calvin, incurred medical expenses that he paid for himself. Darin is the Bakers’ 18-year-old son who is not a student. Darin earned $14,000 from his pool-cleaning business. The cash earned is placed in a savings account. Andrea is the Bakers’ 19-year-old daughter who does not work or go to school. During the year, Andrea purchased a Camaro for $21,000 with her own funds. Morgan is the Bakers’ 23-year-old daughter who obtained a student loan of $20,000 and used the full amount to pay her college tuition at a local university. The Bakers’ fair rental value of their residence, including utilities, is $14,000, while their total food expense for the household is $10,500. Issues Do Calvin and Florence qualify for a dependency exemption as qualifying relatives by meeting the gross income test and the support tests? Are non-taxable funds to be included in determination of support cost of Carters? Did Bakers furnish more than half of the support of Carters? Does $1,200 payment of life insurance premium qualify for inclusion in computation of support? Do Bakers’ children qualify for a dependency...
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...TX1 Basic Concept Tax policy Branch o the department of finance: responsible for the development and evaluation of federal taxation policies and legislation. Canada Revenue Agency: actual collection of taxes and interpretation of tax law Tax payable by persons resident in Canada: An income tax shall be paid … on the taxable income for each taxation year of every person resident in Canada at any time in the year. Persons: including corporations and anybody representing such persons. (Individuals, corporations, and trusts that represent individuals or corporations.) Full time resident: are subject to tax on their worldwide income throughout the entire calendar year. All domestic and foreign sources of income, including capital gains, must be included in the computation of net income. Non-resident person: may be subject to tax only if he was employed in Canada, carried on a business in Canada or disposed of a taxable Canadian property. The tax liability for the non-resident person would be calculated on the income from these items only, not on world income. Deemed resident: ▪ Sojourning in Canada for 183 days or more in a year ▪ Being a member of Canadian forces ▪ Performing services outside Canada under an international assistance program of the Canadian International Development Agency, if the individual was resident in Canada at any time during the three months prior to the day the services commenced; and ▪ Being an officer...
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...Solutions to Problems and Exercises Table of Contents Chapter 1 5 CA 1-4 5 CA 1-6 5 CA 1-8 6 CA 1-10 7 CA 1-12 8 CA 1-17 9 Chapter 2 10 CE2-2 10 CE2-3 10 EXERCISE 2-2 11 EXERCISE 2-3 12 EXERCISE 2-4 13 CA 2-4 13 Chapter 3 15 EXERCISE 3-6 15 EXERCISE 3-10 16 EXERCISE 3-13 19 EXERCISE 3-15 19 EXERCISE 3-20 20 Chapter 4 22 PROBLEM 4-1 22 PROBLEM 4-3 25 PROBLEM 4-5 27 PROBLEM 4-7 29 Chapter 5 31 PROBLEM 5-2 31 PROBLEM 5-4 34 Chapter 6 37 EXERCISE 6-3 37 EXERCISE 6-6 38 Chapter 7 39 PROBLEM 7-2 39 PROBLEM 7-4 41 PROBLEM 7-9 43 PROBLEM 7-11 46 EXERCISE 7-25 48 EXERCISE 7-26 50 Chapter 8 52 EXERCISE 8-23 52 EXERCISE 8-25 53 PROBLEM 8-5 55 PROBLEM 8-11 59 Chapter 9 62 PROBLEM 9-1 62 EXERCISE 9-7 64 EXERCISE 9-9 66 PROBLEM 9-4 67 PROBLEM 9-6 68 Chapter 17 70 EXERCISE 17-6 70 Chapter 18 71 PROBLEM 18-1 71 PROBLEM 18-4 74 PROBLEM 18-6 76 PROBLEM 18-7 79 PROBLEM 18-8 81 EXERCISE 18-20 82 EXERCISE 18-21 82 Chapter 22 84 EXERCISE 22-2 84 EXERCISE 22-8 84 EXERCISE 22-11 84 Chapter 23 86 EXERCISE 23-11 86 EXERCISE 23-13 88 EXERCISE 23-15 90 Chapter 1 CA 1-4 It is not appropriate to abandon mandatory accounting rules and allow each company to voluntarily disclose the type of information it considered important. Without a coherent body of accounting theory and standards, each accountant or enterprise would have to develop its own theory structure and set of practices, and readers of financial...
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...equally situated persons pay equal taxes. Where income tax wins. Vertical Equity- Persons with different amounts of income pay different amounts of tax. 16th amendment-the congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. Statute of Limitations- federal 3 years regular, 6 years-omit>25% of gross income, none-fraud. State may be different, Michigan regular is 4. FICA(federal insurance contributions act)-social security tax -social security 6.2% 2010 4.2% 2011. Base amount is 106,800 -medicare 1.45% FUTA(federal unemployment tax act) 6.2% on first $7,000 of wages Chapter 3 Basic Tax Structure -Economic income (+)only place where u add stuff when determining GI -Gross Income -Adjusted Gross Income (-) -Taxable Income (-) -Tax (-) -Tax Due (-) Tax Formula for Individuals Income Less:exclusions GI Less:deductions for AGI Adjusted Gross Income Less: the greater of Total itemized deductions Or standard deduction Less: personal and dependency exemptions Taxable income Tax on taxable income Less:tax credits Tax due (or refund) *economic income---- exclusions *gross income—deductions for AGI AGI -itemized deductions or standard deduction *itemized deductions are related to production or collection of income and management of property held for the production of income. *Standard deduction: 2010 2011 single...
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...Solutions to Problems and Exercises Table of Contents Chapter 1 5 CA 1-4 5 CA 1-6 5 CA 1-8 6 CA 1-10 7 CA 1-12 8 CA 1-17 9 Chapter 2 10 CE2-2 10 CE2-3 10 EXERCISE 2-2 11 EXERCISE 2-3 12 EXERCISE 2-4 13 CA 2-4 13 Chapter 3 15 EXERCISE 3-6 15 EXERCISE 3-10 16 EXERCISE 3-13 19 EXERCISE 3-15 19 EXERCISE 3-20 20 Chapter 4 22 PROBLEM 4-1 22 PROBLEM 4-3 25 PROBLEM 4-5 27 PROBLEM 4-7 29 Chapter 5 31 PROBLEM 5-2 31 PROBLEM 5-4 34 Chapter 6 37 EXERCISE 6-3 37 EXERCISE 6-6 38 Chapter 7 39 PROBLEM 7-2 39 PROBLEM 7-4 41 PROBLEM 7-9 43 PROBLEM 7-11 46 EXERCISE 7-25 48 EXERCISE 7-26 50 Chapter 8 52 EXERCISE 8-23 52 EXERCISE 8-25 53 PROBLEM 8-5 55 PROBLEM 8-11 59 Chapter 9 62 PROBLEM 9-1 62 EXERCISE 9-7 64 EXERCISE 9-9 66 PROBLEM 9-4 67 PROBLEM 9-6 68 Chapter 17 70 EXERCISE 17-6 70 Chapter 18 71 PROBLEM 18-1 71 PROBLEM 18-4 74 PROBLEM 18-6 76 PROBLEM 18-7 79 PROBLEM 18-8 81 EXERCISE 18-20 82 EXERCISE 18-21 82 Chapter 22 84 EXERCISE 22-2 84 EXERCISE 22-8 84 EXERCISE 22-11 84 Chapter 23 86 EXERCISE 23-11 86 EXERCISE 23-13 88 EXERCISE 23-15 90 Chapter 1 CA 1-4 It is not appropriate to abandon mandatory accounting rules and allow each company to voluntarily disclose the type of information it considered important. Without a coherent body of accounting theory and standards, each accountant or enterprise would have to develop its own theory structure and set of practices, and readers of financial...
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...©2011 CCH. All Rights Reserved. Chapter 5 59 Chapter 5 Gross Income—Exclusions SUMMARY OF CHAPTER Having just completed the study of gross income in the preceding chapter and thus gained a comprehension of what income is and when it is taxable, the student should now be ready to proceed to the concepts underlying exclusions from gross income, which are discussed in the present chapter. Since gross income includes income from all sources, to be excluded from gross income the items must be expressly exempted by law. Sections 101–139 list those items. Common Exclusions from Gross Income ¶5001 Gifts and Inheritances A gift, bequest, or inheritance is excluded from gross income. Thus, the donor does not receive a tax deduction for the property transmitted. If property received by gift or inheritance later produces income, the income is taxable. ¶5015 Life Insurance Proceeds Generally, life insurance proceeds received by the benefi ciary are not included in gross income if such amounts are paid by reason of death of the insured. It is immaterial who the benefi ciary is or whether the policy was part of a group life insurance plan or was individually purchased. However, if payment is delayed and the total amount when received includes interest, the interest is taxable. ¶5025 Sale of Residence Sales of principal residences on May 7, 1997, and thereafter are eligible for a $500,000 exclusion from gross income ($250,000 for single individuals). A two-year ownership and...
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