Premium Essay

Fed Tax

In: Business and Management

Submitted By SelectaLion
Words 543
Pages 3
ACCT553
Week 5 Homework Solutions
_________________________________________________________
Chapter 14
1. Please explain how Charitable Contributions come into play in determining "Corporate" taxable income. (5 pts)
The maximum amount deductible by a corporation for charitable contributions is 10 percent of its adjusted taxable income. The deduction is limited to the lesser of 10 percent of adjusted taxable income or the sum of the initial measures of all property donated during the tax year. Adjusted taxable income is equal to taxable income without regard to the charitable contribution deduction, the dividends-received deduction, any net operating loss carryback, any capital loss carryback, and the domestic production activities deduction. If the charitable contributions for the tax year exceed the 10 percent limitation, the excess can be carried forward for five years. Carryovers are used on a first-in, first-out basis after first deducting the current year’s contributions.

2. What happens to a loss on the Corporate Tax Return (Form 1120)? Does it pass through to the shareholders? Is it available for future or past periods? Please explain in detail. (5 pts.)
If a company has a loss they can claim relief from Corporation Tax by offsetting the loss against other gains or profits from the business in the same accounting period. They can also carry the loss back or it will be carried forward to another accounting period. Corporations can elect to pass loss to shareholders.

3. Please describe the purpose of Sch3edules M-1 and M-3. When is a Schedule M-3 required in lieu of a Schedule M-1. (5 pts.)
Schedule M-1 is for Reconciliation of Income (Loss) per Books With Income per Return)
Schedule M-2 is for Analysis of Unappropriated Retained Earnings per Books.
Schedule M-3 is for Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or...

Similar Documents

Premium Essay

Fed Income Tax

...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......

Words: 3292 - Pages: 14

Premium Essay

Monetary Policy

...The primary economic impact of any change in the government budget is felt by particular groups make tax cut for families with children, for example, raises the disposable income of such families. Discussions of fiscal policy, however, usually focus on the effect of changes in the government budget on the overall economy on such macroeconomic variables as GNP and unemployment and inflation. Fiscal Policy also can be explained as the economic term which describes the behavior of governments in raising money to fund current spending and investment for collective social purposes and for transfer payments to citizens and residents of the territory for which the government is responsible. The money may be raised by taxation, by borrowing, by user charges on social assets or services, or by fiat. Fiscal policy can include deficit spending to stimulate demand for domestic goods and services to help unemployment or make efforts to cut deficits or raise the budget surplus to fight inflation. There are many different types of Fiscal Policy. It all depends on the given situations the government is in. A government may adopt certain policies that can either increase or decrease...

Words: 2795 - Pages: 12

Premium Essay

Economic

...If the Federal Reserve loosened monetary policy today because it believed a recession was going to hit the economy in about one year, this is an indication that the Fed a. is undertaking an inappropriate monetary policy. b. recognizes the problem of lags. c. recognizes the fact that money is neutral. d. is conducting a procyclical monetary policy. ANSWER: b recognizes the problem of lags. SECTION: 1 OBJECTIVE: 1 4. When economists say that there is a time lag in the effect of monetary policy, they mean that a. it takes time to observe the effects of fiscal policy on the economy. b. the Fed takes awhile to figure out what it wants to do. c. the Congress takes awhile to figure out what it wants to do. d. it takes time to observe the effects of monetary policy on the economy. ANSWER: d it takes time to observe the effects of monetary...

Words: 1782 - Pages: 8

Premium Essay

The Federal Reserve

...The Federal Reserve has a large control over the supply of money within the country, the Federal Reserve can control the flow of money in and out of the government, this is all because the fed controls the monetary base. There are two types of economist Monetarist Economists and Keynesian economists, In the following paragraph I will explain what the difference between these two types of economist are and how they believe the Fed controls the money supply. Not only does the Fed have a large influence on the money supply within the economy. The Federal Reserve also has a tremendous amount of power over the interest rates that are being used in today’s economy. Many of the ways that money supply can be altered can also heavily affect the feds fund rate in a predictable manner, the Federal Reserve uses that to their advantage even though they cannot set a rate for the Fed funds rate, they can hold it around a target percentage that they agree upon. In 1789 Treasury Department was established all due to an act of congress, The first Secretary of the Treasury was Alexander Hamilton. Alexander Hamilton is said to be one of the greatest economist of all time. He is credited with coming up with todays financial system that the Federal Reserve and the Treasury Department has been using. The...

Words: 2760 - Pages: 12

Premium Essay

Monetary and Fisical Policy

...CHAPTER 11 MONETARY AND FISCAL POLICY Chapter Outline: • The effects of fiscal and monetary policy on output • Monetary policy and the transmission mechanism • The liquidity trap • The classical case • The quantity theory of money • Fiscal policy and crowding out • Monetary accommodation • The effects of alternative policies on the composition of output • The U.S. economy in the 1980s and 1990s • Anticipatory monetary policy • The policy mix during the German re-unification Changes from the Previous Edition: The material in this chapter has been updated, but its format is essentially the same. More emphasis is given to the economic expansion in the U.S. in the 1990s. Introduction to the Material: Chapter 11 uses the IS-LM model derived in Chapter 10 to show how monetary and fiscal policies can be used to dampen economic disturbances. The economic effects of various policy mixes are highlighted in discussions of actual events: the recession and recovery in the United States in the 1980s, the U.S. recession in 1990-91, the long economic expansion thereafter, and the policies enacted by Germany during the re-unification process in 1990-92. First, the Fed's conduct of monetary policy is discussed, with an explanation of how open market operations can be used to change nominal money supply. The effectiveness of monetary policy in changing the amount of output demanded depends on the steepness of the LM-curve. The transmission mechanism,......

Words: 9155 - Pages: 37

Premium Essay

Federal Reserve Paper

...Federal Reserve Paper Eco 212 August 22, 2010 Federal Reserve Paper The Federal Reserve System (Feds) in the Central Bank, essentially it is a bank’s bank. Its main function is to implement policies to control the nation’s money supply. Because of the economic recession, the Feds reacted with the expansionary monetary policy. Expansionary monetary policy is the Feds increases the money supply. The current year’s effects of expansionary monetary policy are documented by the Federal Reserve Board of Governors within the Monetary Policy report to Congress. Also, if the economy were in an inflationary gap then the Feds would react with contractionary monetary policy. Contractionary monetary policy is the Feds decreases the money supply (Arnold, 2005 pg 242). Money is defined as any good that is widely accepted for purposes of exchange (payment for goods or services) and in the repayment of debts. Money has three functions. Its functions are: 1) Medium of exchange. 2) Unit of account. 3) Store of value. Medium of Exchange is anything that generally acceptable in exchange for goods and services. Unit of Account is a common measure in which relative values are expressed. Store of Value is the ability of an item to hold value overtime a function of money. In addition, with out money, the nation will still be using the barter system. This is an exchange of goods and services for other goods and services....

Words: 875 - Pages: 4

Premium Essay

Expansionary Economic Policy

...In most cases adjustments in tax rates and government spending work concurrently. During a time of high deficit and debt, it is in the government’s best fiscal interest to raise tax rates to create more revenue, and to cut spending to save what they have. “Fiscal policy is mainly directed at shifting aggregate demand…the goal is an equilibrium level of national income that generates full employment with price stability” (Amacher & Jennifer, 2012). In order to shift aggregate demand however, the income of the people must be considered. With lesser...

Words: 1711 - Pages: 7

Premium Essay

Keynesian and Monetary Policy

...The Keynesian view of the monetary policy transmission mechanism operates as follows: First, the Fed uses its policy tools to change the money supply. Second, changes in the money supply change the equilibrium interest rate, which affects investment spending. Finally, a change in the investment changes aggregate demand and determines the level of prices, real GDP, and employment. Since the 1950s, a new view of monetary policy, called monetarism, has emerged that disputes the Keynesian view that monetary policy is relatively ineffective. Monetarism is the simpler view that changes in monetary policy directly change aggregate demand, and thereby prices, real GDP, and employment. Thus, monetarists focus on the money supply, rather than on the rate of interest. 2) Monetarism is the prevailed economic theory per 2008. This theory dominated in the 20 year period leading up to the 2008 economic crisis. Monetarism argues that the markets are self-correcting and self-regulated. It believes that capital market naturally tend towards efficiency and fair value. The market theory that goes along with monetarism is the Efficient Market Hypothesis (EMH) which believes that it is impossible to beat the market because all the relevant information is already reflected in the stock price. Monetarism and EMH have been criticized since 2008 because it is clearly not that case that capital market can correct by...

Words: 494 - Pages: 2

Premium Essay

The Us Fiscal Outlook & China’s Role in the Us Treasury Market

...------------------------------------------------- The US Fiscal Outlook & China’s Role in the US Treasury Market ------------------------------------------------- -Fixed income project key words FISCAL, DEBT CEILING, TREASURY, THE FED, CHINA Written by Gong Li 1155019071 Jiang Peng 1155038183 Yang Mengdi 1155020855 Zhang Yiwen 1155010794 Zheng Qianfei 1155038175 Written by Gong Li 1155019071 Jiang Peng 1155038183 Yang Mengdi 1155020855 Zhang Yiwen 1155010794 Zheng Qianfei 1155038175 CONTENT Executive Summary 1 1, The US Fiscal Outlook 3 -Recent and historical fiscal outlook 3 -The US debt ceiling and recent crises 4 -Financial cliff (2013) and its impacts to the US economy 5 -The US fiscal future 6 2, Fiscal Situation and Treasury Market 9 -The role of US department of the treasury 9 -The role of the Federal Reserve 9 -The US treasury market 10 -The Fed, the interest rates, the QE and the taper 12 -The prediction of the future interest rate 13 -Summary 14 3, China’s involvement in the US Treasury market 15 -China’s Ownership of US Treasury Securities 15 -Reasons of China’s preference for the US Treasuries 16 -The Symbiosis between China and the US in Terms of US Public Debt Holdings 18 -Our Suggestion on China’s Future Position in the US Treasury Market 20 References 22 Executive Summary The state and local governments continue to face fiscal challenges in the short- to medium-term term....

Words: 6091 - Pages: 25

Premium Essay

Economic Policy

...“Supply-side economics has focused primarily on lowering marginal tax rates with the purpose of increasing the after-tax rate of return from work and...

Words: 2113 - Pages: 9

Premium Essay

Expansionary Economic Policy

...“The goal is to keep tax rates stable and allow the deficit to fluctuate over the cycle. It would be a...

Words: 1852 - Pages: 8

Premium Essay

Gm 520 You Decide

...Kathy Lee believes that raising taxes and reducing government spending is the best solution, but I believe that this will result in tax avoidance and tax evasion; which will deepen the recession in the United States. Patricia Lopez recommends that the Feds should leave interest rates alone and too strongly sell bonds and raise the bank reserve requirement. Although this is an interesting idea, raising the reserve requirements forces banks to withhold a larger portion of their funds, therefore reducing the money supply. It will ultimately restrict the bankers’ ability to make more loans, and those banks that were already operating just barely above the old reserve requirement will be forced to re-work their existing loans to meet the new restrictions, which will lead to raising interest rates. Allison Tanney believes that you should focus on increasing government spending and lower taxes and have the Feds work on buying bonds, raising interest rates, and if only necessary, raising the reserve requirement. Unfortunately, I do not believe that raising the reserve requirement is a good recommendation due to the fact that this could cause the banks to lessen their loan capabilities due to less money being available to loan to consumers. Furthermore, this will lead to a more restrained money supply and as I see it this will result in higher rates for the consumers....

Words: 544 - Pages: 3

Free Essay

Subprime

...The Fed members meet at the Federal Open Market Committee eight times a year, seven weeks apart to establish the fed funds target rate. To reach this target rate, the Fed conducts open market operations in the buying and selling of government treasuries to influence the money supply. Essentially, when the Fed is looking to inject money into the economy, the Fed purchases the bonds, which in turn raises the bond prices and effectively decreases the...

Words: 1524 - Pages: 7

Premium Essay

International

...The Fed...

Words: 1202 - Pages: 5

Premium Essay

Research Paper

...Lecture 1: The needs of lenders and borrowers * Fin markets provide opportunities for lenders and borrowers to get together in a cost effective manner. Robot fin markets do the following: * Enhance investment opp * Improve resource allocation * Promote economic productivity Borrowers are deficit spending units because investments exceed savings. Lenders save more than they end so they’re surplus spending units. How the deficit/surplus units interact * Business – borrower of funds each year (deficit) * Household – supply more funds than they demand (surplus) * Government- net borrower of fund MOST years (deficit) * (1970-1999 deficits) * 1969 was a surplus and last two years of Clinton admin. * Foreign sectors – borrower of funds each year (surplus) * US relies on this sector to contribute funds Lecture 2: Direct and Indirect Finance Type of financial markets * US money market * Securities: Trade short term debt with maturities less than 1 year * Bond market * Securities : Trade long term debt with maturities greater than 1 year * Stock Market * Equities with no debt * Mortgage * Securities relating to realty * Derivatives * Futures and options * Forex * Securities for international trade and investments * Two broad types of financing 1. Indirect * The process in which financial intermediaries borrow funds......

Words: 2350 - Pages: 10