Tax Final
Business A329 with Kennedy at Indiana University-Bloomington
About this deck
By: Zack Hadley
Created: 2011-04-26
Size: 94 flashcards
Views: 33
Created: 2011-04-26
Size: 94 flashcards
Views: 33
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Nexus
required to have jurisdiction
Jurisdiction
government's ability to tax
Where do the governments make their money?
Local - property
State - sales and income
National - individual, corp., and employment
What is a related party sale?
sale of an asset to a spouse, linear ancestor or sibling
What happens to the basis in a related party sale?
a new basis is created, but no losses are recognized for taxes
What is a sole proprietorship?
a business owned by one individual, but it is not an entity
What are the passthrough entities?
Partnerships, LLCs, and S corporations are pass through entites where the owners are taxed and not the business
What is the drawback of a C corporation?
susceptible to double taxation because the corporation is taxed and any dividends paid to the owners is also taxed
What is publication 970?
publication 970 is focused on education
What is Code section 1231?
handles capital gains and losses; if loss - ordinary loss and fully deductible, if gain - capital gain
What is the foreign earned income exclusion?
amount that expatriates do not have to pay federal income tax; $92,900
How do foreign tax credits work?
only available for income taxes and is the lesser of foreign taxes paid or domestic taxes paid on income
What is cross crediting?
allows you to accumulate foreign taxes paid to determine tax credit
What is the midmonth convention?
how real property is depreciated; the asset was purchased in the middle of the month you bought it in
What is midquarter convention?
depreciation of personal property, active in the middle of the quarter in which it was bought
What does a permanent difference result in?
nothing
What is the objective of tax planning?
maximize the value of the business
How much do you depreciate assets for tax?
depreciate the asset all the way to $0
What happens if tax income is > book income?
deferred tax asset, prepaid tax, unfavorable
what happens if tax income is < book income?
deferred tax liability, delayed tax, favorable
What is a C corporation referred to as and why?
lobster trap - easy to get into but hard to get out because of liquidation taxes
What is the commerce clause?
gives the government authority to regulate commerce with foreign nations, between states and among Indian tribes
state income tax
federal deduction
What is UDITPA?
uniform division of tax purposes act - method for apportioning income among multiple state jurisdictions by sales, payroll, and property
What is the taxation hierarchy?
Constitution then treaties then supreme court
What are the different ways to file taxes?
Married-joint, married-separate, and head of household
AGI
adjusted gross income; total income less specific deductions (above the line deductions)
alimony received
taxable
alimony paid
deductible
child support
not deductible or taxable
moving expenses
50/50 mile rule then deductible deductible
self-employment tax
deduct 1/2 above the line
IRA
deductible
Roth IRA
nondeductible
student deductions
above the line
Personal exemptions
$3,700 for each dependent under 19 or under 24 if full-time student
itemized deduction
any deduction that is not above the line
independent contractor
controls how, when and where; do
independent contractors hired by companies
not subject to FICA and not required to withhold income tax
employees of companies
employers must pay federal and state payroll taxes, withhold taxes, and fringe benefits
Does the government see a difference in ind. contractors or employees?
no, they collect the same regardless
What are the advantages of fringe benefits?
nontaxable to employees and deductible to employers
What is an ISO?
an incentive stock option
What is the difference between an ISO and compensatory stock?
an ISO does not have to recognize the bargain element as ordinary income at the time acquired while compensatory stock does
Traditional IRA
deductible, money drawn is taxable
Roth IRA
nondeductible, but the money drawn is tax free
Roth or Traditional IRA?
to the extent you can afford, contribute to Roth because lower current tax rate (Kennedy)
defined benefit pension
company guarantees payment of a fixed amount every year
defined contribution pension (most companies)
proportional to amount the company makes
What does AMT do?
distorts investment incentives because of accelerated depreciation effect
state income tax
deductible for federal income taxes
like kind exchange
real property for real property
boot
non qualified property
partnership basis
debt = basis; deduct up to basis
social security
taxable
welfare and food stamps
non taxable
scholarships
tax free except for room and board
MID
miscellaneous itemized deduction; deduction = MID - 2%AGI
American Opportunity Credit
best; hope credit; claim for the first 4 years of post secondary education
QTP (qualified tuition program)
non taxable, no limit, spent on any related child
Coverdell
used to cover all expenses
business education
tax deductible if education to maintain current position in company
negligence
did not make good faith effort to comply; disregard of regulations; penalty of 20%
fraud
intentional understatement of tax; 75% penalty of deficiency; burden of proof is on the government
tax evasion
jail and $100,000, deficiency, and interest
tax court
you don't pay first and they hear 90% of the cases, expert judges
district court
pay deficiency first and then sue the government
court of federal claims
pay deficiency and then sue the government
correspondence audit
mail audit that cannot occur more than 2 out of 5 years if clean
small claims court
$60 cost to hear a case of less than $50,000 without attorney; arbitration
economic nexus
conducting regular commercial activity within a state
personal exemption for 2011
$3,700
standard deduction
function of filing status; married, single, etc.
head of household
$8,500
single
$5,800
qualified dividends
taxed at 15%
qualified dividend income
dividends received from taxable corporations
return on corporate capital
non taxable
non qualified dividends or ordinary dividends
taxed at marginal tax rate
state and local bonds
non taxable
accelerated death benefit
non taxable
nonbusiness bad debt
write off as short-term capital loss
capital loss
above the line deduction; $3,000 max
short-term capital gain
taxed at marginal rate
long-term capital gain
15% or if marginal rate is 15% then 0, unless said otherwise
prizes or awards
taxable income
inheritance
non taxable
items given up in a divorce
carry-over basis
QTP
above the line
loss on personal asset
non deductible
401K
employee funded; non taxable
non qualified retirement plan
deferred compensation; rabbi trust
keogh plan
self employeed
About this deck
By: Zack Hadley
Created: 2011-04-26
Size: 94 flashcards
Views: 33
Created: 2011-04-26
Size: 94 flashcards
Views: 33
About StudyBlue
STUDYBLUE makes things that make you better at school.
Things like online flashcards with photos and audio.
Things like personalized quizzes and friendly reminders about when (and what) to study next.
Think of it as a digital backpack™: access to all of your study materials online and on your phone.
STUDYBLUE exists to make studying efficient and effective for every student, for free. Join us.
“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis
Dennis