0 the expense is actually incurred. 0 None of the above (TCO A) Which of the following does not constitute tax evasion? 0 Arranging your affairs to keep your tax liability as low as possible under the tax law 0 Trying to legitimately maximize profits 0 Trying to legitimately minimize your tax liability . ; @ All of the above (TCO C) Which of the following items is not subject to federal income tax? 0 Interest on U.S. Treasury bonds 0 Gambling winnings 0 Interest on loans made in the ordinary course of business .
61(a),(1)) Conclusion: The tax issue here is that John Smith wants to know how the $300,000 he earned through his client fee is taxed. The $300,000 is taxed as ordinary income and is taxed in the year received. John Smith worked on the case for two years but he did not earn the $300,000 until this year so he will include it in this year’s taxable income. Therefore John Smith needs to include the entire $300,000 as ordinary income on his Federal tax return Issue b) How is the $25,000 treated for purposes of federal tax income? Applicable Law & Analysis: “Gross income does not include income attributable to the recovery during the taxable year of any amount deducted in any prior taxable year to the extent such amount did not reduce the amount of tax imposed by this chapter.“ (IRC Sec.
Gross income includes "all income from whatever source," and is not limited to cash received. The amount of income recognized is generally the value received or which the taxpayer has a right to receive. Certain types of income are specifically excluded from gross income. The time at which gross income becomes taxable is determined under federal tax rules. This may differ in some cases from accounting rules.
It is necessary to establish whether or not compensation earned or payable on a current basis, but deferred until a future period, could be taxed as income. This could include contributions to trust or escrow accounts through an employee deferred compensation program. By placing and deferring compensation into an irrevocable, non-assignable trust that is for the sole benefit of the taxpayer, the taxpayer does not actually or constructively receive anything. As a result, a deferred compensation plan will result in the contribution by the taxpayer being excluded from income, and therefore not subject to tax in that period. The doctrine does not apply if there restrictions or conditions on receiving the funds in the future.
If Casper decided to take out a loan that charges 20% APR over one year for the amount of £2000 over 12 months he would expect to pay £183 per month for 12 months with interest of £205. (candid money calculator accessed 28/7/11) If Casper makes the decision to use his credit card and he borrowed £2000 over 2 years at 15% APR his total monthly payments would be £96.08 per month, the interest would calculate to £306 this would be a total repayment of £2306 over 2 years. (candid money calculator accessed 28/7/11) Comparing the ‘loan’ to the credit card loan, Casper would pay his debt back quicker but at nearly double the price of the credit card loan, the advantage the credit card loan has, his monthly installments will be half of what the ‘loan’ but at 2 years rather than 1 year. Question 2 In question 2 of this essay I shall attempt to answer questions on expenditure and budgeting, giving a brief example from the study of the personal finance course book DB123 and the transcript of the dvd accessed on the Open University website.
Because companies do not get tax benefits from paying excess earnings out as dividends when no debt is issued, a tax savings is associated with paying interest payments before taxes. The tax benefits for one year of the 30%, 50%, and 70% debt structures are $25.3M, $42.1M, and $59.0M respectively. The present values of these tax shields are $180.5M, $300.8M, and $421.2M (assuming that the risk of debt is constant at 14%). The value of the company is the sum of the value of the firm’s equity and the value of the firm’s debt. Specifically, the value in this case was calculated using the following formula: Value of firm = Value of the unlevered firm + PV(ITS) We used the market value of the firm with very little debt (as is the case in 1981) as our unlevered firm value.
None of the above Question 2. 2. (TCO F) A business bad debt is deductible for tax purposes as a(n): (Points : 5) short-term capital loss. ordinary business deduction. long-term capital loss.
General Priciple – Performance are only recorded when the target is proable to be acheived Sooner and Later Inc On January 1, 2006, Sooner or Later Inc. granted 1,000 “at-the-money” employee stock options (i.e., the exercise price was equal to the stock price on the grant date). To align the compensation of the employees with the financial performance of the company, the award will vest only if cumulative revenue over the following three-year reporting period is greater than $10 million and the employees are still employed by Sooner or Later. As of the date of the grant, management believes it is probable that the company will achieve cumulative revenue in excess of $10 million over the following threeyear period. Each award has a grant-date fair value of $9. Sooner or Later’s valuation professionals have indicated that if the revenue target was factored into the fair value assessment, the grant-date fair value would be $6.
A tax advantage of business combination can occur when the existing owner of a company sells out and receives: a. cash to defer the taxable gain as a “tax-free reorganization” b. stock to defer the taxable gain as a “tax-free reorganization” c. cash to create a taxable gain d. stock to create a taxable gain 2. Publics Company acquired the net assets of Citizen Company during 20X9. The purchase price was $800,000. On the date of the transaction, Citizen had no long-term investments in marketable equity securities and $400,000 in liabilities. The fair value of Citizen assets on the acquisition date was as follows: |Current assets |$ 800,000 | |Noncurrent assets | 600,000 | | |$1,400,000 | How should Publics account for the $200,000 difference between the fair value of the net assets acquired, $1,000,000, and the cost, $800,000?
ACCT553 Week 1 Homework _________________________________________________________ Chapter 1 1. Briefly discuss the purpose of the Sixteenth Amendment. Before Sixteenth Amendment, taxes was not allowed on income through constitution, with this amendment Congress was given the power of imposing and collecting taxes on income regardless of its source without any consensus and distribution among the states. Cited: CCH Federal Taxation page no 1151 2. What is the difference between tax avoidance vs. tax evasion?