ACCT-4021EL Chapter Notes - Chapter 7: Property Income, Dividend Tax, European Cooperation In Science And Technology

126 views10 pages

plumbee368

5 Nov 2018

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

In cases where a great deal of time and effort is directed at producing interest or rents, such returns can be considered business income and the classification of such is important! There are differing views on the extent to which interest costs should be considered a deductible item . The real problem, however, is that there are such a multitude of provisions related to the special treatment of certain types of income and to the deferral of income, that the application of this concept becomes complex. In general, participating payments (ex. payments based on earnings) are not considered to be interest. However, if there is an upper limit on the applicable rate and that upper limit reflects prevailing market conditions, such payments may qualify as interest. Payments that are contingent on some future event would not generally be considered interest.

Related Questions

Amber & Bryan (both age 45), are married and file a joing tax return. 2017 income includes:

1. Salary of $200,000

2. Amber was in a car accident and received compensatory damages of $25,000 for broken nose.

3. Amber also received punitive damages of $15,000; the person who hit her car was intoxicated

4. interest income from Disney bonds in the amount of $1,000

5. refund of 2016 NJ IncomeTaxes of $2,000 (the couple itemized their deductions in 2016; itemized deductions exceeded the standard deduction by $5,000)

Amber and Bryan also incurred and paid the following expenses during the year:

6. Medical expenses: $7,000

7. Parking tickets $300

8. Alimony (Bryan was previously married and pays Alimony to his ex-wife): $12,000

9. Legal fees associated with divorce proceedings- not tax related: $4,000

10. Charitable contributions- paid on 12/30/17: $2,000

11. Casualty loss (after $100 floor, but before any further limitations) $1,000

12. Mortgage payment on principal residence: principal only: $10,000

13. Mortgage payment on principal residence: interest expense: $14,500

14. Property taxes (real estate taxes) on personal residence: $4,200

15. Nephew, Gerardo, owns a home and could not make his property tax payment as he is unemployed. Amber paid Gerardo's property taxes (real estate taxes): $3,000

16. Federal income tax withheld: $18,000

17. Qualified Moving expenses in conjuction with a new job: $2,000

18. Contribution to a traditional IRA: $4,000

19. Cost of new roof on personal residence: $14,000

20. NJ income tax withheld: $1,300

A. Identify items 1-5 as taxable or not taxable. Identify items 6-20 as a deduction for AGI, deduction from AGI, or not deductible. Give a sentence or two explaining limitations, rules, etc for the following items: 5, 6, 10, 11, 15,19

B. Use the tax formula to provide a detailed calculation of the couple's 2017 taxable income. Be sure to compare the standard deduction amount to total itemized deductions.

ultramarineyak360

Amber & Bryan (both age 45), are married and file a joing tax return. 2017 income includes:

1. Salary of $200,000

2. Amber was in a car accident and received compensatory damages of $25,000 for broken nose.

3. Amber also received punitive damages of $15,000; the person who hit her car was intoxicated

4. interest income from Disney bonds in the amount of $1,000

5. refund of 2016 NJ IncomeTaxes of $2,000 (the couple itemized their deductions in 2016; itemized deductions exceeded the standard deduction by $5,000)

Amber and Bryan also incurred and paid the following expenses during the year:

6. Medical expenses: $7,000

7. Parking tickets $300

8. Alimony (Bryan was previously married and pays Alimony to his ex-wife): $12,000

9. Legal fees associated with divorce proceedings- not tax related: $4,000

10. Charitable contributions- paid on 12/30/17: $2,000

11. Casualty loss (after $100 floor, but before any further limitations) $1,000

12. Mortgage payment on principal residence: principal only: $10,000

13. Mortgage payment on principal residence: interest expense: $14,500

14. Property taxes (real estate taxes) on personal residence: $4,200

15. Nephew, Gerardo, owns a home and could not make his property tax payment as he is unemployed. Amber paid Gerardo's property taxes (real estate taxes): $3,000

16. Federal income tax withheld: $18,000

17. Qualified Moving expenses in conjuction with a new job: $2,000

18. Contribution to a traditional IRA: $4,000

19. Cost of new roof on personal residence: $14,000

20. NJ income tax withheld: $1,300

B. Use the tax formula to provide a detailed calculation of the couple's 2017 taxable income. Be sure to compare the standard deduction amount to total itemized deductions.

yelloweel732

Subpart F was created to prevent U.S. citizens and corporationsfrom deferring taxable income through the use of foreign entities.Prior to subpart F, many U.S. taxpayers achieved deferral of U.S.tax on certain kinds of movable income, such as dividends,interest, rents and royalties, by earning such income throughforeign corporations (Subpart F Overview, 2014). Subpart F operatesby treating a U.S. shareholder of a CFC as if it actually receivedits proportionate share of certain categories of the corporationâscurrent earnings and profits and the shareholder is required toreport this income currently in the United States whether or notthe CFC makes a distribution (Subpart F Overview, 2014). Transferpricing refers to the pricing of transactions between controlledentities. Under IRC 382, controlled entities should pricetransactions in the same way that uncontrolled entities would undersimilar circumstances (Overview of IRC 482, 2015). This is theâarmâs length standardâ, which means that the price of the productthat a US parent company charges its CFC should be the same as itwould charge to an unrelated party for the same product undersimilar circumstances (Overview of IRC 482, 2015). I do not thinkit is fair that companies do not pay a tax on their foreignprofits. Corporations are able to hold these foreign profitsoverseas for years before bringing them back into the United Statesto avoid taxes. While the tax rates on US corporations are veryhigh, as we have discussed in other weeks, there are still manyloopholes in our tax laws that allow corporations to lower theirtaxes. I believe the corporate tax rates could be a little lowerbut even then the tax rules wouldnât be changed. LB&IInternational Practice Service Concept Unit Subpart F Overview.(2014, September 3). Retrieved February 10, 2016, fromhttps://www.irs.gov/pub/int_practice_units/DPLCUV_2_01.PDFInternational global corporations are extremely challenging to taxand audit.

Basically, the US company's foreign subsidiaries are foreigncorporations. It's like France taxing US domestic companies, evenif their parent is in France. It just can't really be done.

Have your say!

ACCT-4021EL Chapter Notes - Chapter 7: Property Income, Dividend Tax, European Cooperation In Science And Technology

Document Summary

Get access

Related Documents

ACCT-4021EL Chapter Notes - Chapter 8: Capital Asset, Property Income, Capital Cost Allowance

ACCT-4021EL Chapter Notes - Chapter 3: Liability Insurance

ACCT-4021EL Lecture Notes - Lecture 7: Canada Savings Bond, Property Income, Passive Income

Related Questions