...Question and Facts Connie Complainer’s doctor prescribed her to install a swimming pool at her home. Connie followed through and it increased the value of her home by $95,000 and cost $185,000. Connie claimed a deduction of $90000 on her return. A pool costing $40000 would have fulfilled her doctor’s orders. Issues Connie’s pool maybe overly extravagant. Since her prescription only needed the design of the $40,000 pool. Also if her home is located close to a gym that has a pool that fulfilled her prescription, if it is her pool may not be deductible. She may also be only able to deduct what her prescription called for. Applicable Law ¶2147. “Medical” capital expenses for equipment or improvement says that swimming pools that are used primarily for medical purpose are deductible, but “medical deduction is limited to that part of the expenses that exceeds the amount by which the improvement increases the value of taxpayer's property.”...
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...daily routine of swimming. Because there is not readily available public facility nearby, Mr. Smith purchases a house with a pool for $175,000. Replacing the pool would cost $20,000. The existing pool increases the fair market value of the house by $8,000. Mr. Smith spends $500 maintaining the pool and $1,800 in other medical expenses. Mr. Smith wants to know the total amount of medical expenses that he may claim in the current year. His AGI is $60,000. Relevant Tax Law: IRC Sec. 213(a) states that “there shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent to the extent that such expenses exceed 7.5 percent of adjusted gross income. Sec. 213 (d) defines medical care as amounts paid for: (A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, (B) for transportation primarily for and essential to medical care (C) for qualified long-term care services or (D) for insurance (http://www.taxalmanac.org/index.php/Internal_Revenue_Code:Sec._213._Medical,_dental,_etc.,_expenses) Treasury Regulations, Subchapter A, Sec. 1.213-1: “Reg. Section 1.213-1 permits a deduction of payments for certain medical expenses. A deduction is allowable only to individuals and only with respect to medical expenses actually paid during...
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...regimen of exercise, specifically, daily swimming. In the current tax year, Mr. Smith purchases, for $175,000, a house with an existing pool. He spends $1800 in other medical expenses, and $500 on pool maintenance. Since the accident was last year, he has no further expenses, except for the purchase of the house with the pool. Of course this $2300 total ($1800 on medical expenses and the $500 on the pool maintenance) is deductible, if he can meet the 7.5% of Adjusted Gross Income threshold. So the crux of the question is, can he deduct anything for the purchase of the home with pool, and thus push himself over the threshold, into the happy land of itemized minimum deductions. Unfortunately, and counter-intuitively, the answer is no. Admittedly, Mr. Smith purchased a house with an asset, in this case, the pool, primarily for his own rehabilitative care. Quite possibly, Mr Smith would never have thought of buying a house, with such an aquatic appliance, had it not been for the accident. He may even detest the darn thing as a nuisance. He may also loathe the vampiric drain upon his income, from the myriad of maintenance expenses incurred by owning a pool. All those concerns are of no consequence. The governing determination, in this matter, may be found in the IRS Publication 502, Medical and Dental Expenses, which states “The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. The cost of the improvement is reduced...
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...the newly built swimming pool facility in your house was to reduce the deduction down to $40,000 because, according to them, the “minimum adequate facility” should have cost you $70,000 instead of $200,000. They are stating that building such a luxurious facility was your personal choice and not necessary for medical expenses. Generally, the main rule regarding this subject is that medical expense deduction is available for a capital expenditure, such as swimming pool, if this expense is directly related to medical care exceeds the amount of the increase in value of the property affected. However, I believe in your specific situation there is a chance to prove that deduction taken was adequate. First of all, the installation of the swimming pool was recommended by the doctor, which clearly means that it is a medical expense. Section 213 of Internal Revenue Code states that there is no ceiling limitation on the amount of deductible medical expenses and you are not limited to choose the cheapest form of medical treatment available. Another important factor is the fact that even after a closer examination to determine minimum reasonable cost, IRS experts did not consider all of the items necessary for the medical purpose that should have been included in the deduction, such as vapor barriers and water temperature. These items should have been included in the calculation of the necessary construction costs which would increase the adequate cost of the swimming pool. I believe there...
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...Accounting 411 In Class Exercise 1. What types of educational expenses are deductible? -interest paid on qualified education loans, education expenses incurred for continuing professional education courses if certain requirements are met, education expenses incurred to maintain or improve skills required in a present job, education expenses incurred to meet expressed requirements of an employer, tuition, books, and other misc. expenses and any related travel and transportation costs. 2. What types of educational expenses qualify for the American Opportunity Credit? -$2500 credit for a student for the first four years of college, qualified expenses include tuition, fees, and course materials. 3. Any differences between 1 and 2? -number 2 is more for middle and lower level income persons, it also just covers the first four years of college 4. How do you claim an educational expense on a return? -deduction “for” AGI 5. I donated a used car (value $3,000) to a qualified charity. I itemize my deductions, and I would like to take a charitable contribution for the donation. Do I need to attach any special forms to my return? -Yes, you would have to fill out the Schedule A form for itemized deductions 6. Is the mortgage interest and property tax on a second residence deductible? -yes, for property taxes you may deduct all taxes on all your houses, however on mortgage interest you are allowed only deductions on the primary residence and one more abode. ...
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...paid rent. Paid late, landlord received in January 3. Include the rent in previous year’s taxable income v. Own a ten-flat in the city. Landlord lives in one of the ten, rent the other nine out. What is the net rental income? What about the deductions 4. What fractions of the building can you depreciate? 90% vi. Had inside information down in Springfield that a third airport was going to be built in the Chicagoland area. With this inside the information, goes and buys land, pays $50K for it. Thinks the land will appreciate in value. However due to decrease in flights, the airport is never built, the land declines in value to $40K. Can you take a deductible loss? No you cannot take deductible loss. 5. For a deductible loss, there must be a sale or exchange of the property. A. § 162 Ordinary & Necessary...
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...is equivalent to an overall floor limit). In contrast, business deductions that are deductible for AGI (above the line) reduce taxable income without being subject to an overall floor limit. Also, itemized deductions are subject to many mechanical limitations including ceilings, floors, and phase-outs whereas business deductions are generally not subject to these limits (there are limits on certain specific deductions, but this will be described in greater detail in chapter 8). 2. [LO 1] How is a business activity distinguished from an investment activity? Why is this distinction important for the purpose of calculating federal income taxes? Both business and investment activities are motivated primarily by profit intent, but they can be distinguished by the level of profit-seeking activity. A business activity is commonly described as a sustained, continuous, high level of profit-seeking activity, whereas investment activities don’t require a high level of involvement. The distinction can be important for the location of deductions, because business deductions are claimed above the line (for AGI on Schedule C) while investment deductions are generally itemized or from AGI deductions (with the exception of rent and royalty expenses which are deductible for AGI on Schedule E). 3. [LO 1] Describe how a business element is reflected in the requirements to deduct moving expenses and how Congress limited this deduction to substantial moves. A...
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...is equivalent to an overall floor limit). In contrast, business deductions that are deductible for AGI (above the line) reduce taxable income without being subject to an overall floor limit. Also, itemized deductions are subject to many mechanical limitations including ceilings, floors, and phase-outs whereas business deductions are generally not subject to these limits (there are limits on certain specific deductions, but this will be described in greater detail in chapter 8). 2. [LO 1] How is a business activity distinguished from an investment activity? Why is this distinction important for the purpose of calculating federal income taxes? Both business and investment activities are motivated primarily by profit intent, but they can be distinguished by the level of profit-seeking activity. A business activity is commonly described as a sustained, continuous, high level of profit-seeking activity, whereas investment activities don’t require a high level of involvement. The distinction can be important for the location of deductions, because business deductions are claimed above the line (for AGI on Schedule C) while investment deductions are generally itemized or from AGI deductions (with the exception of rent and royalty expenses which are deductible for AGI on Schedule E). 3. [LO 1] Describe how a business element is reflected in the requirements to deduct moving expenses and how Congress limited this deduction to substantial moves. A...
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...This literature review of academic research suggests that competitive markets in health care can offer patients greater quality, more options, and lower costs. The Federal Employees Health Benefits Program and Medicare Part D serve as two illustrative examples of competition in health care today. Proper reforms to add further competition to the health care industry would be quite significant and would further America’s position as the world’s leader in health care for years to come. KEY POINTS 1. The body of peer-reviewed academic literature suggests that health care can and should operate like a traditional market. 2. Market-oriented reforms have the potential to improve the quality and cost-effectiveness of care, as demonstrated by the Federal Employees Health Benefits Program (FEHBP) and Medicare Part D. 3. Consumer-driven health plans are viable alternatives to traditional plans, and consumers should have the option of choosing such plans. 4. Proper risk adjustment mechanisms can prevent adverse selection. 5. Migrating toward value-based payment systems will result in greater quality of care at lower costs, in part by incentivizing the health care industry to make great strides in offering integrated care, innovative treatments, and personalized medicine. ABOUT THE AUTHOR Kevin D. Dayaratna, Ph.D.Senior Statistician and Research Programmer Center for Data Analysis Over the course of the past several decades, federal and state lawmakers have proposed...
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...CPA QUESTIONS CHAPTER 3 1. For “qualifying widow(er)” filing status, which of the following requirements must be met? I. The surviving spouse does not remarry before the end of the current year II. The surviving spouse was eligible to file a joint tax return in the year of the spouse’s death III. The surviving spouse maintains the cost of the principal residence for six months. A. I, II, and III B. I and II, but not III C. I and III, but not II D. I only A. Incorrect. A taxpayer may file a tax return as a qualifying widow or widower for 2 tax years after the year in which a spouse dies provided the couple qualified to file a joint return for the year of death; that the taxpayer provided over 50% of the cost of maintaining the principal residence of a dependent child or stepchild; and that the taxpayer has not remarried as of the end of the current year. Maintaining the cost of the taxpayer’s principal residence for six months is not sufficient. B. Correct! A taxpayer may file a tax return as a qualifying widow or widower for 2 tax years after the year in which a spouse dies provided the couple qualified to file a joint return for the year of death; that the taxpayer provided over 50% of the cost of maintaining the principal residence of a dependent child or stepchild; and that the taxpayer has not remarried as of the end of the current year. Maintaining the cost of the taxpayer’s principal residence for six months...
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...when it is realized often means that the tax becomes due at the same time the taxpayer collects the sales price. p. I:3-4. I:3-5 A loan repayment is not consistent with the normal meaning given to the word income. A taxpayer is no better off because a loan is repaid. There has been no economic benefit. As a result the repayment of a loan is not taxable simply because it is not income. p. I:3-3. I:3-6 Congress taxes prepaid rental income because of concern that taxpayers might otherwise spend the money and then be unable to pay the tax when it comes due. Taxing such amounts is to tax income when taxpayers have the greatest wherewithal to pay. The problem created for taxpayers is that they are taxed before they incur related expenses. Repairs,...
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...HBSP Product Number TCG239 THE CRIMSON PRESS CURRICULUM CENTER THE CRIMSON GROUP, INC. Boulder Public Schools Edward Caton, a teacher in a midsize elementary school in Boulder, Colorado, hoped someday to rise through the administrative ranks to serve as a principal of his own school, but he felt that to do so, he should understand more about the position to which he aspired. This was especially important to him in terms of the control he might have over the budget, which he knew was central to real power in many organizations. In an effort to learn more about the operations of the Boulder Public Schools, he set up some informational interviews with the principals of an elementary school, a middle school, and a high school. Before making those rounds, he visited the headquarters of the Boulder School Committee to obtain background information for his interviews. BACKGROUND Mr. Caton learned that the Department of Implementation (DI) was central to the school system. It’s manager reported directly to the Superintendent of Schools. The DI was responsible for making school enrollment projections each December for the coming fiscal year (which ran from July to June). These projections were important since annual staffing needs for each school were determined by a rather complex formula that used the DI's projections as the starting point. Moreover, since personnel formed the bulk of the budget, these projections effectively determined a school's budget. Each school...
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...Table of Contents Chapter 1 Taxation overview---------------------------------------------------------------- 1 2 General principles ---------------------------------------------------------------- 8 3 Specific principles on gross income------------------------------------------- 12 4 Pension receipts and payments------------------------------------------------- 22 5 Double Taxation------------------------------------------------------------------ 29 6 General deductions----------------------------------------------------------------34 7 Expenditure-------------------------------------------------------------------------38 8 Capital allowances-----------------------------------------------------------------48 9 Leasing------------------------------------------------------------------------------ 60 10 Exemptions------------------------------------------------------------------------- 66 11 Partnership-------------------------------------------------------------------------- 71 12 Farmers------------------------------------------------------------------------------ 76 13 Miners------------------------------------------------------------------------------- 85 14 Exports------------------------------------------------------------------------------ 98 15 Capital gains------------------------------------------------------------------------ 101 16 Hire purchase-----------------------------------------------------------------------...
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...Taxation Finance Act 2009 Alan Melville S IT IN TH W EEN ON NO IFT ITI F ED ● ● 15th Annual Edition ● ● Class Tested Over 250 Worked Examples ● Over 250 Exercises and Questions On ACCA, CIPFA, AIA and IFA Reading Lists Taxation Supporting resources For instructors Visit www.pearsoned.co.uk/melville to find valuable online resources • Complete, downloadable Instructor’s Manual For more information please contact your local Pearson Education sales representative or visit www.pearsoned.co.uk/melville We work with leading authors to develop the strongest educational materials in accounting, bringing cutting-edge thinking and best learning practice to a global market. Under a range of well-known imprints, including Financial Times Prentice Hall, we craft high quality print and electronic publications which help readers to understand and apply their content, whether studying or at work. To find out more about the complete range of our publishing please visit us on the World Wide Web at: www.pearsoned.co.uk Taxation Finance Act 2009 Fifteenth edition Alan Melville FCA, BSc, Cert. Ed. Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published 1995 Fifteenth edition published 2010 © Pearson Professional Limited 1995, 1996 © Financial Times Professional Limited 1997, 1998 © Pearson Education Limited 1999...
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...101 Small Business Ideas for Under $5,000 Corey Sandler Janice Keefe John Wiley & Sons, Inc. 101 Small Business Ideas for Under $5,000 Corey Sandler Janice Keefe John Wiley & Sons, Inc. This book is printed on acid-free paper. ● ∞ Copyright © 2005 by Word Association, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose...
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