...support, which does not have any tax ramifications. | | The other half, $1500, is alimony paid to Barbara. Alimony is taxable to payee and deductible to payer. | Barbara should include $1500 in gross income and Arnold can deduct $1500 from his gross income. | | | | | | | | Q5-26 | | | | | | | US Series EE bonds: the interest on US Series EE bonds is tax exempt when the interest is used for educational purpose; If this is not used for educational purposes then it's a tax deferred bond, which means the purchaser pays tax when he withdraws the money. | bonds for industrial development for mass transit: it's private activity bond which is not tax exempt. | qualified veterans' mortgage bonds: Interest on a private activity bond that is a qualified bond is tax exempt. | Therefore, the investor should choose qualified veterans' mortgage bonds to minimize his tax liability. | | | | | | | | Q6-29 | | | | | | | Salaries and wages to employees | deductible | salaries and wages are business expense | Purchase of new office building | not deductible | capital expenditure is not deductible | Payment of illegal parking fines | not deductible | illegal or in violation of public policy | President's daughter's wedding | not deductible | it's considered personal expense | Entertainment expenses...
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...distinguishes "business" activities from "personal" activities. True False 2. All business expense deductions are claimed above the line. True False 3. All investment expenses are itemized deductions. True False 4. Rental or royalty expenses are deductible "for" AGI. True False 5. To be deductible, business expenses must be directly related to a business activity. True False 6. The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit. True False 7. All reasonable moving expenses are deductible if the move is a minimum of 35 miles in distance. True False 8. To deduct a moving expense, the taxpayer must be employed or self employed for a specific amount of time after the move. True False 9. Self employed taxpayers can deduct the cost of health insurance as long as they do not actually participate in their spouses' employer-provided health plan. True False 10. Self employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self employment taxes paid. True False 11. An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD. True False 12. Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend...
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...was interest. c) $1500 is for child support, which does not have any tax ramifications. The other half, $1500, is alimony paid to Barbara. Alimony is taxable to payee and deductible to payer. So Barbara should include $1500 in gross income and Arnold can deduct $1500 from his gross income. 5-26 US Series EE bonds: the interest on US Series EE bonds is tax exempt when the interest is used for educational purpose; otherwise, it's a tax deferred bond, which means the purchaser pays tax when he withdraws the money. Qualified veterans' mortgage bonds: Interest on a private activity bond that is a qualified bond is tax exempt. The interest is a preference item and may be subject to AMT. 6-29 · Salaries and wages to employees ......deductible ............. salaries and wages are business expense · Purchase of new office building .............not deductible......capital expenditure is not deductible · Payment of illegal parking fines ............. not deductible .......illegal or in violation of public policy · President's daughter's wedding ................. not deductible.....it's considered personal expense · Entertainment expenses related to business ............50% deductible meals & entertainment... expense is 50% deductible ·...
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...Ch06. Itemized Deductions LO 1 Identify the common deductions necessary for calculating adjusted gross income (AGI). LO 2 Describe the different types of itemized deductions available to individuals and compute itemized deductions. LO 3 Explain the operation of the standard deduction, determine the deduction for personal and dependency exemptions, and compute taxable income. 1. [§213]Patricia paid the following medical expenses in the current tax year: Surgeon's fees $1,200 Medical insurance premiums 600 Hospital fees 800 Prescription drugs 310 Vitamins, not prescribed by doctor 200 Her adjusted gross income for the year is $20,000. She receives a $500 reimbursement from his health insurance company. Determine the amount of her medical expense deduction for the current year. a. $ - 0 - b. $ 610 c. $410 d. $910 e. $1,110 D 2. [§165] Jim's home was totally destroyed by fire in 2011. The structure had an adjusted basis of $150,000 and a FMV of $160,000 before the fire. Jim received insurance reimbursement of $120,000 for the destruction of the home. Jim's adjusted gross income was $100,000, before considering this loss. Jim had no casualty gains during the year. What amount of the fire loss was Jim entitled to claim on his tax return? (Ignore furniture etc. inside.) a. $ 30,000 b. $ 19,900 c. $ 4,500 d. $24,900 e. Other B 3. [§111] Juan (who is single, age 30, no dependent) had $1,000 of state income taxes withheld from his salary during 2011. Juan...
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...Propositions to be proven to take a deduction under IRC section 162(a): -Must be expenditures for education (including research undertaken as part of an educational program) -the education must: - maintain or improve skills required by taxpayer in their employment or other trade or business OR -meet the express requirements of the taxpayers employer, or the requirements of applicable law or regulations, imposed as a condition to the retention by the taxpayer of an established employment relationship, status, or rate of compensation -the education must not be: -education for Minimum education requirements, or -education for qualification for a new trade or business I. Citation: Rev. Rul. 74-78, 1974-1 C.B. 44 II. Facts: The taxpayer, a dentist engaged in general dental practice, returned to dental school for...
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...paid rent. Paid late, landlord received in January 3. Include the rent in previous year’s taxable income v. Own a ten-flat in the city. Landlord lives in one of the ten, rent the other nine out. What is the net rental income? What about the deductions 4. What fractions of the building can you depreciate? 90% vi. Had inside information down in Springfield that a third airport was going to be built in the Chicagoland area. With this inside the information, goes and buys land, pays $50K for it. Thinks the land will appreciate in value. However due to decrease in flights, the airport is never built, the land declines in value to $40K. Can you take a deductible loss? No you cannot take deductible loss. 5. For a deductible loss, there must be a sale or exchange of the property. A. § 162 Ordinary & Necessary...
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...amount was not included in Ima’s Form W-2 wages. Issues 1. What portion of the $6,300 reimbursement (if any) needs to be included in Ima’s gross income on Form 1040 and does she need to pay taxes on it? 2. Is the amount she paid in tuition and fees - $10,500 – fully deductible from AGI or toward AGI, partially deductible from AGI or toward AGI, or not deductible at all? Analysis of Applicable Law and Authority 1. ISSUE 1: What portion of the $6,300 reimbursement (if any) needs to be included in Irma’s gross income on Form 1040 and does she need to pay taxes on it? According to IRC Section 127, an employee is allowed to exclude from gross income up to $5,250 annually of employer-paid education expenses (mainly tuition, books and supplies) under an education assistance program. Therefore, since Ima received reimbursement from her employer under an education assistance program, she can exclude $5,250 out of the $6,300 under this section. The remaining reimbursement balance of $1,050 can be excluded from her gross income under another section that provides for the exclusion of employer-paid education expenses - IRC Section 132. According to Sec 132 (j) (8) employer-paid education expenses...
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...is equivalent to an overall floor limit). In contrast, business deductions that are deductible for AGI (above the line) reduce taxable income without being subject to an overall floor limit. Also, itemized deductions are subject to many mechanical limitations including ceilings, floors, and phase-outs whereas business deductions are generally not subject to these limits (there are limits on certain specific deductions, but this will be described in greater detail in chapter 8). 2. [LO 1] How is a business activity distinguished from an investment activity? Why is this distinction important for the purpose of calculating federal income taxes? Both business and investment activities are motivated primarily by profit intent, but they can be distinguished by the level of profit-seeking activity. A business activity is commonly described as a sustained, continuous, high level of profit-seeking activity, whereas investment activities don’t require a high level of involvement. The distinction can be important for the location of deductions, because business deductions are claimed above the line (for AGI on Schedule C) while investment deductions are generally itemized or from AGI deductions (with the exception of rent and royalty expenses which are deductible for AGI on Schedule E). 3. [LO 1] Describe how a business element is reflected in the requirements to deduct moving expenses and how Congress limited this deduction to substantial moves. A...
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...is equivalent to an overall floor limit). In contrast, business deductions that are deductible for AGI (above the line) reduce taxable income without being subject to an overall floor limit. Also, itemized deductions are subject to many mechanical limitations including ceilings, floors, and phase-outs whereas business deductions are generally not subject to these limits (there are limits on certain specific deductions, but this will be described in greater detail in chapter 8). 2. [LO 1] How is a business activity distinguished from an investment activity? Why is this distinction important for the purpose of calculating federal income taxes? Both business and investment activities are motivated primarily by profit intent, but they can be distinguished by the level of profit-seeking activity. A business activity is commonly described as a sustained, continuous, high level of profit-seeking activity, whereas investment activities don’t require a high level of involvement. The distinction can be important for the location of deductions, because business deductions are claimed above the line (for AGI on Schedule C) while investment deductions are generally itemized or from AGI deductions (with the exception of rent and royalty expenses which are deductible for AGI on Schedule E). 3. [LO 1] Describe how a business element is reflected in the requirements to deduct moving expenses and how Congress limited this deduction to substantial moves. A...
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...Concepts in Federal Taxation 2011 Murphy Higgins 18th Edition Solutions Manual Click here to download immediately!!! http://www.testbankpdf.com/taxation/concepts-in-federal-taxation-2011murphy-higgins-18th-edition-solutions-manual/ ----------------------------------------------------------------------Concepts Concepts Concepts Concepts in in in in Federal Federal Federal Federal Taxation Taxation Taxation Taxation 2011 2011 2011 2011 Murphy Murphy Murphy Murphy Higgins Higgins Higgins Higgins 18th 18th 18th 18th Edition Edition Edition Edition Solutions Solutions Solutions Solutions Manual Manual Manual Manual -------------------------------------------------------------------------***THIS IS NOT THE ACTUAL BOOK. YOU ARE BUYING the Solution Manual in e-version of the following book*** Name: Concepts in Federal Taxation 2011 Author: Murphy Higgins Edition: 18th ISBN-10: 0538467924 Type: Solutions Manual - The file contains solutions and questions to all chapters and all questions. All the files are carefully checked and accuracy is ensured. - The file is either in .doc, .pdf, excel, or zipped in the package and can easily be read on PCs and Macs. - Delivery is INSTANT. You can download the files IMMEDIATELY once payment is done. If you have any questions, please feel free to contact us. Our response is the fastest. All questions will always be answered in 6 hours. This is the quality of service we are providing and we hope to be your helper. Delivery is in the next moment...
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...Accounting 411 In Class Exercise 1. What types of educational expenses are deductible? -interest paid on qualified education loans, education expenses incurred for continuing professional education courses if certain requirements are met, education expenses incurred to maintain or improve skills required in a present job, education expenses incurred to meet expressed requirements of an employer, tuition, books, and other misc. expenses and any related travel and transportation costs. 2. What types of educational expenses qualify for the American Opportunity Credit? -$2500 credit for a student for the first four years of college, qualified expenses include tuition, fees, and course materials. 3. Any differences between 1 and 2? -number 2 is more for middle and lower level income persons, it also just covers the first four years of college 4. How do you claim an educational expense on a return? -deduction “for” AGI 5. I donated a used car (value $3,000) to a qualified charity. I itemize my deductions, and I would like to take a charitable contribution for the donation. Do I need to attach any special forms to my return? -Yes, you would have to fill out the Schedule A form for itemized deductions 6. Is the mortgage interest and property tax on a second residence deductible? -yes, for property taxes you may deduct all taxes on all your houses, however on mortgage interest you are allowed only deductions on the primary residence and one more abode. ...
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...Q1) List a dozen above the line deductions and explain the rule regarding moving expenses. List 7 itemized deductions from schedule A. Above the line deductions: a) Educators expenses b) Certain business expenses of reservists, performing artists, etc. c) Health savings account deduction d) Moving expenses e) Deductible part of self-employment tax f) Self-employed SEP, SIMPLE, and qualified plans g) Self-employed health insurance deduction h) Penalty on early withdrawal of savings i) Alimony paid j) IRA deduction k) Student loan interest deduction l) Tuition and fees deduction m) Domestic production activities deduction n) Jury duty repayments Below the line deductions (itemized deductions): a) Medical and dental expenses b) Taxes paid c) Interest paid d) Gifts to charity e) Casualty and theft losses f) Job expenses and certain miscellaneous deductions g) Other miscellaneous deductions Moving expenses: 1) Deduction for job-related relocation 2) Moving expenses are deductible to arrive at AGI to the extent the expenses are not reimbursed or paid for by the taxpayer’s employer. a) If expenses exceed reimbursements only the qualified expenses in excess of the reimbursement are deductible. b) If reimbursements exceed expenses, the excess is included in income 3) Qualifications: a) The individual’s new principal place of work is at least 50 miles farther from the former...
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...his children would receive an education. Terry made a quid pro quo contribution, in which only the excess of the value of the services received is deductible. We rule in favor of the IRS due to overwhelming legislative support, as outlined below. FACTS * In 2006, Craig Terry “contributes” $6,000 to his church which operates the school that his two children attend. * The school charges no tuition for students to attend, but the families are provided with a suggested donation of $200, which is how much it costs to educate a child per year. However, no child is refused admission to the school if their family is unable to contribute. * The IRS disallows $4,800 of the charitable contribution stating it is tuition. * Terry responds that because the school charges no tuition, the entire $6,000 is deductible. Terry, also, argues that because the IRS allows the Church of Scientology to deduct fees paid to the church for religious education, he should be allowed this deduction as well. ISSUES Per IRC section 170(c)(2)(B), “a charitable contribution is defined as a contribution or gift to or for the use of a corporation, trust, or community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes.” These charitable contributions are deductible by IRC section 170(a)(1). On the other hand, if these charitable contributions fall within the definition of a quid pro quo exchange, then they would...
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...Severance as income? IRC § 61 defined Gross Income as “all income from whatever source derived,” to include “compensation for services, including fees, commissions, fringe benefits, and similar items.” The court in Glenshaw defined income as “an undeniable accession to wealth.” Moreover, Treas. Reg. § 1.61-2 included “termination or severance pay” as compensation for services. IRC § 102 states that gross income does not include the value of property acquired by gift, bequest, devise, or inheritance. However, a gift cannot be from an employer to an employee. Here, Ariel Asher (“AA”) was paid $1,000 a year for the 10 years that she was with the firm. The firm characterized the $10,000 payment as a “severance.” AA will argue that the amount was a gift, thus not taxable. The IRS will argue that § 61 includes severance pay in the language itself. Additionally, § 1.61 states that a gift cannot be from AA’s employer. Therefore, the severance pay will be included in gross income. Purchasing bargained work equipment income? In Pellar, the court established that bargain purchases generally do not constitute gross income. If property is transferred as compensation for services in the amount less than its fair market value, the difference between the fair market value and the amount paid is gross income. Here, the firm was downsizing and had excess furniture and invited only departing members to make an offer. The firm accepted AA’s offer of $1,700 for the furniture (FMV $4,800). AA received...
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...your main destination. However, this does not include any extra, non-business-related days spent at the destination. If the trip is primarily for business, travel costs such as plane fare, a cab to the airport, and lodging can generally be deducted only the cost of meals, lodging, etc., for the business days are deductible-not for the personal vacation days. c. So the difference the number of business vs. vacation day makes is very Big when determining deductions. Could Monica have spent more vacation days. In terms of overall travel expenses. yes should could have spent more days vacationing without effecting these deductions. However for any extra day she vacationed this would have affected the meals and lodging benefits...so the answer is YES and NO. Depending on what aspect of deductions you were looking at. 39. The job-search expenses relate to the same trade or business that Anthony was in and is, therefore, deductible. It does not matter that no job resulted from the expenditure. Since they relate to his employment as an employee, the $6,200 should be classified as a deduction from AGI and would be subject to the 2%-of-AGI limitation. The moving expenses are deductions for AGI and consist of the following:...
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