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Tax Planing Chapter 4 Outline

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Submitted By dream130
Words 302
Pages 2
Ch4 income exclusion
 Donative items
Gift, Inheritances (Face value exclu, interest inclu)
Life Insurance Proceeds (annuity exclu formula
200k FV , 32k/yr for 10yr ,
Amt exclue= cost contract/#pmt=$200k/10yr=20k
Total tax =32k-20k=10k
Scholarships not work and direct cost education
 Employment-related foreign earned income ($95,100 and 330day) ex: earn 90k, 20k paid foreign, salary 30k
TAX =tax on tax income w/out exclu-tax on exclusion
Exclu 90k
Tax 120k (90+30)-17442.5+28%(120k-85650) 27,061
Less 90k-17442.5+28%(90k-85650) (18,661)
Equal tax on 30k 8400
Foreign tax credit Tax 120k (90+30)-17442.5+28%(120k-85650) 27,061
Tax credit paid 20k
Net tax due 7061
Save tax credit 8400-7061=1339
- qualified pension plans - group term life insurance 50k
Ex: 33yr 0.96*(80k-50k)=$29 tax
-health and accident insurance( excut officer-discriminate in favor high compensate)
-Meals and lodging -Fringe benefits (No add cost services, discount, Qualified retirement plan $240 parking,5k children care, 5250 education)
-Cafeteria Plans-benefit no tax, cash tax
-Health Savings Accounts: $6,250 family/ $3,100 single
Ex: gross income 62k-2.6k (3100-500 emplyee conftribute)
 Returns of human capital
Employer u
Personal phsycal ex ex
Non physical in ex
 Investment related
-Interest income (excluded state and local municipalities to sell bonds for a lower interest rate)
Ex: tax except bond 6%, 33% tax bracket
0.06=x-.33x ; x=0.0896 , higher x, has higher reture
-Stock dividends (excl realization concept)
-Discharge of indebtedness –(Discharge due to insolvency or bankruptcy is excluded from income)
Qualified principal residence indebtness 2 millions
Ex: 375k mortgage debt+65k home improvement
-Leasehold improvements (value of improvements to property made by a lessee are excluded under the wherewithal-to-pay concept)

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