...Chapter 14 1. Please describe the concept of "double taxation" and discuss which entity(ies) are subject to this type of taxation. (5 pts) A C Corporation has shareholders and therefore subject to double taxation. The double tax includes the tax the corporation pays taxes on its profits as well as the distributions to its shareholders. 2. What type of taxpayers are considered "eligible" taxpayers with regard to special ordinary loss treatment of IRC Section 1244 stock? (5 pts.) Individuals report ordinary losses from the sale or exchange (including worthlessness) of section 1244 (small business) stock on line 10. To qualify as section 1244 stock, all six of the following requirements must be met. 1. You acquired the stock after June 30, 1958, upon original issuance of the shares from a domestic corporation (or the stock was acquired by a partnership in which you were a partner continuously from the date the stock was issued until the time of the loss). 2. If the stock was issued before November 7, 1978, it was issued under a written plan that met the requirements of Regulations section 1.1244(c)-1(f), and when that plan was adopted, the corporation was treated as a small business corporation under Regulations section 1.1244(c)-2(c). 3. If the stock was issued after November 6, 1978, the corporation was treated as a small business corporation at the time the stock was issued under Regulations section 1.1244(c)-2(b). To be treated as a small business corporation, the total...
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...04 1st Semester Final Exam Review Name: Michael Piper Company Information – Provide the following information: Company website: http://geneva304.wix.com/area-304 Company E-mail address: area304.il@veinternational.org Area 304 Slogan: Dream Big. Dream Worldwide. Organizational Chart – How are we structured? We use a hierarchical organizational chart, which means that every employee is grouped by department, and each employee has a supervisor. Form of business organization: We are a C-Corporation. Purpose of employee orientation: It provides employees the opportunity to get acclimated to their positions and their role in the firm. What is included in employee personnel files: Evaluations, raises, disciplinary actions and commendations. Business Knowledge How does the US Wholesale Marketplace work? Distributors buy products from a manufacturer, then they sell the product to retailers. How do US savings accounts work? Interest can be earned on any money that is stored. Different banks pay different rates, and interest is also compounded differently from bank to bank. What is FDIC insurance and how does it work? The FDIC is a United States government agency that preserves confidence in banks by insuring money deposited into those banks (up to a certain point). What are CD’s (Certificates of Deposit)? These are certificates issued by banks to people who deposit money. What are IRA’s? This stands for Individual Retirement Account. It is a good way to save...
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...Homework 2 1. Rachel is a limited partner in Starship Partners. This year Starship reported that Rachel's share of dividend income was $3,700 and his share of municipal interest was $2,750. Early this year Rachel found a bundle of $100 bills in the alley outside his apartment. When no one claimed the money, the cash (a total of $2,400) was returned to Rachel. Finally, Rachel earned salary of $42,000 but almost $6,500 was withheld for income taxes and FICA tax. Compute Rachel's (a) realized income and (b) gross income. BE SURE TO CALCULATE BOTH AMOUNTS. a) 3,700 + 2,750 + 2,400 + 42,000 = $50,850 b) 3,700 + 2,400 + 42,000 = $48,100 2. Ted works as a painter for local businesses on weekends, and he often provides services in exchange for property. This year Ted provided painting services in exchange for $1,275 of car repair services, $3,570 of groceries, and a certificate of deposit (CD) for $4,050. The (CD) matures next year with interest. Finally, Ted received a gift card that can only be applied for $850 of clothing at a local mall. Ted has only applied the gift card to purchase $100 of clothing. Compute Ted's gross income assuming that he uses the cash basis of accounting. 1,275 + 3,570 + 4,050 + 850 = $9,745 3. Jennifer was married on November 1 of this year and on that day received numerous gifts from her extended family. Her grandfather presented Jennifer with a check for $15,000; her uncle gave Jennifer 1,000 shares of Ford stock worth $10 per share (the uncle purchased...
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...History of U.S. Taxation A. An income tax on individuals was used to provide financing for the Civil War. ألغى then the war ended, the tax was repealed . In 1894, a new individual income tax was enacted سنت but the Supreme Court held the tax to be unconstitutional. After a constitutional challenge to the taxation of income, the Sixteenth Amendment, this sanctioned both the federal individual and corporate income taxes, عقوبات was ratified in 1913. The present income tax on individuals was enacted in 1913. The corporate income tax, which was originally adopted in 1909, withstood صمدت constitutional challenge because it was viewed as an excise tax, not a direct tax. ضريبة المكوس B. Numerous revenue acts, which rewrote completely the federal tax provisions, were enacted between 1913 and 1939. These provisions were reorganized and included, in a more permanent form, in the Internal Revenue Code of 1939. Thereafter, tax laws were changed when Congress adopted amendments to the 1939 Code; a complete rewriting of the laws was unnecessary. A revised Internal Revenue Code was adopted in 1954. The 1954 Code was the controlling body of tax law until 1986. In 1986, Congress enacted the most comprehensive overhaul of the Internal Revenue Code in over thirty years. As a result of the massive changes contained in the new law, the federal tax code was renamed the Internal Revenue Code of 1986. Nevertheless, many of the provisions of the 1954 Code were carried over to the...
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...programs. Taxes affect every person, business, and property. This environment of constant change is a challenge for most accountants or anyone for that matter. This paper seeks to explore the history of the Federal Income Tax System, the Internal Revenue Code, the Internal Revenue Service, and guidelines and improvement of the tax system. History of Taxation in the United States The history of taxation in the United States commenced when the British, French and Spanish Empires ruled the individual colonies established in the US. This was back in the 1790’s after World War I. After their independence from Europe, the taxation system continued by collection of poll taxes, tariffs, and excise taxes. There were various acts passed by parliament which imposed taxation of various items such as lead, paper, paint, glass, stamps, sugar, and tea as a means of tax collection. From these come the Sugar Act, the Stamp Act, and the Townshend Revenue Act. The Boston Tea Party was the insurgency against the British colonists by the American colonists to not pay the tea tax levied upon them. Federal Government Income Tax History The taxation system in the United States is governed by different levels of government. There are different methods of taxation as well. The tariffs imposed were the largest source of federal revenue from 1790 to the eve of World War I. This was the largest source of income until the collection of income taxes. Congress adopted federal statutes...
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...Questions 1. | Taxes influence many types of business decisions but generally do not influence personal decisions. True False | 2. | Taxes influence business decisions such as where a business should locate or how a business should be structured. True False | 3. | Tax policy rarely plays an important part in presidential campaigns. True False | 4. | Margaret recently received a parking ticket. This is a common example of a local tax. True False | 5. | George recently paid $50 to renew his driver's license. The $50 payment is considered a tax. True False | 6. | A 1% charge imposed by a local government on football tickets sold is not considered a tax if all proceeds are earmarked to fund local schools. True False | 7. | One key characteristic of a tax is that it is a required payment to a governmental agency. True False | 8. | Common examples of sin taxes include the taxes imposed on airline tickets and gasoline. True False | 9. | One benefit of a sin tax (e.g., a tax on cigarettes) is that it should increase the demand for the products being taxed. True False | 10. | In addition to raising revenues, specific U.S. taxes may have other objectives (e.g., economic or social objectives). True False | 11. | The two components of the tax calculation are the tax rate and the taxpayer. True False | 12. | The tax base for the federal income tax is taxable...
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...Chapter 03 Taxes in Your Financial Plan True / False Questions 1. (p. 76) Tax Freedom Day represents the day that the average person works until to pay their taxes each year. TRUE Bloom's: Knowledge Difficulty: Medium Learning Objective: 1 Topic: Tax strategy 2. (p. 78) An example of an excise tax is Social Security. FALSE Social Security is a tax on earnings. Bloom's: Comprehension Difficulty: Easy Learning Objective: 1 Topic: Tax strategy 3. (p. 78) Individuals are allowed to give money or items of any value to a person without being subject to taxes. FALSE The maximum amount that can be gifted without tax implications in 2009 is $13,000. NOTE: This question can be updated using current tax data. Bloom's: Knowledge Difficulty: Easy Learning Objective: 1 Topic: Tax strategy 4. (p. 78) Amounts given for tuition payments or medical expenses are not subject to gift taxes. TRUE Bloom's: Knowledge Difficulty: Easy Learning Objective: 1 Topic: Tax strategy 5. (p. 79) Determining Adjusted Gross Income is the final step in calculating federal income tax. FALSE Adjusted Gross Income (AGI) is a step in the tax calculation, but it is not the final step to calculate income taxes. Bloom's: Comprehension Difficulty: Medium Learning Objective: 2 Topic: Income tax 6. (p. 79) Cash and prizes won on television game shows are usually subject to both federal and state taxes...
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... RE: In order to fulfill your request, I explain the types of taxes involved in determining the payroll and paying employer payroll taxes. The taxes involved in determining the payroll are: • FICA taxes. Congress, intended to provide workers with supplemental retirement, employment disability, and medical benefits, passed FICA. These benefits are financed by a tax levied on employees’ earnings. Congress sets the tax rate and tax base and both change intermittently. FICA tax rate is 7.65% on the first $110,100 of gross earnings. FICA taxes are withheld by the employer and then remitted to the government. These taxes are not an expense to the employer. FICA consists of Medicare and Social Security tax. • Federal income taxes. Employers are required to withhold federal income taxes from employees each pay period. The amount depends on the employee’s gross ...
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...Why Fairness Matters Progressive Versus Flat Taxes Robert J. Shapiro April 1996 Pro gres s iv e FOUNDATION Why Fairness Matters: Progressive versus Flat Taxes Progressive Foundation The Progressive Foundation works to develop and promote a new progressive political philosophy and governing agenda for America based on individual liberty, equal opportunity, civic responsibility, and nonbureaucratic governance. The substantive work of the Foundation revolves around some of the most difficult challenges facing America in the 1990s: assuring upward mobility for working Americans in the new world economy; resolving the great American dilemma of race; restoring a civil society and strengthening the social ties that foster a sense of community; finding America’s proper role in the post-Cold War world; and rethinking the size, shape, and mission of government in an Information Age. The Foundation explores public controversies over cultural questions—race, ethnicity, gender, religion, morality, and civic education—that are often ignored in conventional political discourse. The Foundation’s Project on Tax Reform and Economic Growth works to develop a tax reform program that is consistent with a progressive distribution of the tax burden, and can help promote stronger job and business formation, greater productivity, and higher family incomes. This report is the first of two new reports outlining the essential features of such a tax reform program. The preface contains more...
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...rate that is constant regardless of the given income level. Types of proportional taxes include most excise taxes, general sales taxes, and employment taxes (FICA and FUTA). All of these taxes are a fixed percentage and are not subject to change. A tax is progressive, however, if a higher tax rate coincides with a higher tax base. Examples of this include the Federal income tax, Federal gift and estate taxes, and most state income tax rate structures. Those that make a higher income are given a higher tax rate on their federal income tax than those who make a lower income. 23. a. The “piggyback” approach is when states impose a flat rate on adjusted gross income as used for Federal income tax purposes. It makes use of what was done for Federal income tax purposes. However, some states will “decouple” from this piggyback approach to avoid major revenue losses. Congress will sometimes pass tax deductions, and often times states cannot afford to take the revenue loss from these deductions. b. There are very few states left that allow for a deduction of Federal income taxes. Alabama, Iowa, and Louisiana are the only three that allow for a full deduction of these taxes, and various other states allow for partial deductions of the tax. c. Most states allow for their residents some form of tax credit for income taxes paid to other states. 47. a. Revenue neutrality. Revenue neutrality means that for every new tax law that lowers taxes, there must be off-setting revenue to make up...
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... Federal State Local Major Role Making laws relating to domain of Constitution Collecting revenue Industrial relations Revenue collection Law enforcement Education Municipality administration and development Expenditure Item Transfer payments Social Security Medicare Law enforcement Education Infrastructural and facilities development and maintenance Revenue Item 1 Payroll Taxes Income Tax Property Taxes Revenue Item 2 Income Taxes Transfers Transfers Revenue Item 3 Corporate Taxes Sales and gross Taxes Sales and gross Taxes The Federal revenue sources enumerated above are just some of the means through the US Government makes money. Payroll taxes are federal or state taxes that are withheld by employers on behalf of their employees, along with social security and Medicare taxes. This is computed by the IRS form W-4. This is also commonly known as withholding tax. The other is a fixed or variable charge on the company for hiring a worker; this deduction goes toward contributing to social security. In most jurisdictions, quarterly reporting of withholding taxes by employers is required. This is in addition to the annual filing of taxes. Income taxes, as the term implies, is the tax on an employee’s monthly income. This is usually computed on annual gross income, and then distributed monthly or quarterly. This tax is levied on all income – received and receivable – with some exceptions, considered admissible deductions. The tax rate is annual income-slab based...
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...government sticking their dirty hands into our pockets and taking anywhere from 30-40% of our hard earned money really rubs me the wrong way. There is a very common sense solution to this serious problem that is being very seriously discussed and considered in our Congress. It is a plan called the Fair Tax. Legislative Status: The FairTax has been reintroduced for the 111th Congress. It is H.R. 25 in the House and S. 296 in the Senate. Benefits of the FairTax: The FairTax plan brings fairness, transparency, and efficiency to our unfair, complex, and confusing Tax Code. The FairTax rewards job creation, hard work, and individual responsibility. By doing away with payroll taxes, companies can afford to hire more employees and outsourcing looks less attractive. By taxing consumption instead of income, individuals are provided with a strong incentive to work hard because they keep more of what they earn. By taxing spending, the FairTax allows us to control how much tax we pay depending on our individual lifestyle choices. The FairTax ensures that all Americans pay their...
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...would take a tax course. Why is this a rather naïve view? Taxes are a part of everyday life and have a financial effect on many of the major personal decisions that individuals face (e.g., investment decisions, evaluating alternative job offers, saving for education expenses, gift or estate planning, etc.). 2) [LO1] What are some aspects of business that require knowledge of taxation? What are some aspects of personal finance that require knowledge of taxation? Taxes play an important role in fundamental business decisions such as the following: • What organizational form should a business use? • Where should the business locate? • How should business acquisitions be structured? • How should the business compensate employees? • What is the appropriate mix of debt and equity for the business? • Should the business rent or own its equipment and property? • How should the business distribute profits to its owners? One must consider all transaction costs (including taxes) to evaluate the merits of a transaction. Common personal financial decisions that taxes influence include: choosing investments, retirement planning, choosing to rent or buy a home, evaluating alternative job offers, saving for education expenses, and doing gift or estate planning. 3) [LO1] Describe some ways in which taxes affect the political process in the United States. U.S...
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...couldn’t understand why someone would take a tax course. Why is this a rather naïve view? Taxes are a part of everyday life and have a financial effect on many of the major personal decisions that individuals face (e.g., investment decisions, evaluating alternative job offers, saving for education expenses, gift or estate planning, etc.). (2) [LO1] What are some aspects of business that require knowledge of taxation? What are some aspects of personal finance that require knowledge of taxation? Taxes play an important role in fundamental business decisions such as the following: * What organizational form should a business use? * Where should the business locate? * How should business acquisitions be structured? * How should the business compensate employees? * What is the appropriate mix of debt and equity for the business? * Should the business rent or own its equipment and property? * How should the business distribute profits to its owners? One must consider all transaction costs (including taxes) to evaluate the merits of a transaction. Common personal financial decisions that taxes influence include: choosing investments, retirement planning, choosing to rent or buy a home, evaluating alternative job offers, saving for education expenses, and doing gift or estate planning. (3) [LO1] Describe some ways in which taxes affect the political process in the United States. U.S. presidential candidates often distinguish...
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...corresponding changes to the federal tax code that would fund these plans on his website. The revenues needed to pay for these plans would come from five primary sources: increases in (1) federal income taxes, (2) payroll taxes, (3) business income taxes, (4) estate/gift taxes, and (5) two new excise taxes. There is variance regarding the amount the plan would generate in a decade but the average is roughly $14.5 trillion. Aside from personal opinions regarding changes, the intrinsic questions seem to be- Will Bernie’s proposed changes to the tax code generate enough revenue to cover his plans? Economists’ predictions along with Sanders’s own estimates state that no, Sander’s tax plan will not be able to generate enough revenues to cover all of his plans as expansively larger taxes and governmental spending will severely damage long-term economic growth. In order to analyze Sander’s plan more in depth, it is beneficial to look at each proposed change to the federal tax code individually. First, increases in federal income taxes. There are many changes Sander’s has proposed in regards to income taxes but according to the Tax Policy Center, the three changes that are expected to generate the biggest portion of revenue over the next decade are: (1) four new surtax brackets for high-income households; (2) taxing of gains/dividends as ordinary income; and (3) raising the net investment income tax to 10 percent. Collectively, the increases to federal income taxes are expected to generate...
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