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Income Tax Due = G___ I___ minus D_____, minus P____ E_____ x T___ R___ - T___ C_____
Income Tax Due = Gross Income - Deductions - Personal Exemptions x Tax Rate - Tax Credits
What\'s included (& not) in gross income?
All income from any source, legal or not (but not loans)
How is income (and capital gains) by a child taxed?
Income is not taxed to parents, capital gains taxed to the person with higher bracket between kid and parents
When is cancelation of debt not income?
Bankruptcy or insolvency
How is education IRA taxed?
Contributions are not tax deductable, income generated & withdrawn is not taxed.
When are benefits from employer to employee not taxed?
No cost to employer, employee discounts, de minimus fringes, moving expenses, education/tuition, dependant care
When are capital losses from sale of property deducted
Limited to $3k, but NO deduction for losses on primary residence
What are the (six) requirements for alimony to be income to receiver (and deduction to payer)?
1) cash (not property) 2) pursuant to divorce decree 3) not sharing household 4) no liability after death of ex, 5) not for support of child 6) no agreement to contrary in decree
How are deductions for casualty & theft calculated?
Uninsured loss - $100 - 10% of AGI
How are deductions for medical expenses calculated?
Uninsured costs - 7.5% of AGI
How is a trust taxed?
As separate taxable entity, unless settlor retains reversionary interest, then taxed to her.
What are two methods of accounting?
Cash receipts / distribution method and accrual method
How is cost basis determined to a purchaser?
Cost at time of purchase
How is basis determined to an inheritor under will/intestacy?
FMV at time of death
How is basis determined for a gift to a donee?
Same basis as it hands of donor plus gift tax paid on transfer.
When is transfer of property nonrecognized? L__ K__ E___ & I___ C___
Like kind exchange (trade of investment property); Involuntary conversion - insurance/condemnation if reinvested in similar value.
What is NOT capital asset property of business
Inventory, depreciable property, IP expected to depreciate, notes, supplies
Define capital gains?
Gain produced when capital asset is sold (including involuntary)
What is maximum tax rate for long-term capital gains?
15%, except for collectables, taxed up to 28%
How is deduction for capital losses calculated (limited)?
Deduction Capital losses + carry forward ≤ capital gains + $3k
How long can capital losses be carried forward by an individual?
Indefinitely
How is alternative minimum tax calculated?
(AGI - 42k (62.5 if joint)) x 26% + (AGI - $175k (if any)) x 28%
How are partnerships & S-corps taxed?
Pass thru - PS does not pay tax.
What must partnership & S-corp do, re; IRS?
No tax, just file information return
What is partner's tax effect from forming partnership or transferring ?
Nonrecognition exchange, creates basis as cost-equivalent.
What is partner's tax effect from liquidation of partnership?
No gain or loss on liquidation, except difference from basis as capital gain/loss
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