...The charitable contribution deduction became a part of the Internal Revenue Code in 1917, however, it has undergone substantial revision in the time proceeding. This deduction was enacted to encourage giving to nonprofits by providing a tax incentive to individuals who donate. The deduction was enacted during World War I as a way to provide support for charities to survive the war (Thorndike 1). During this time, new taxes were placed on incomes and estates which became a threat to charities because the taxes took away from the extra money wealthy givers had to give to charities (Thorndike 1). As a result, the charitable contribution deduction became an incentive to individuals to give back to charities to keep them running without the help...
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...Charitable Contributions The first person to be discussed in this paper will be Steve Jobs. He has been referred to as greedy and an ogre by several. Mr. Jobs invested most of his money in real estate and then had it in trusts to reduce his taxable income from approximately 35% to 15% (Vince 2011). Little has been discovered about the personal charitable contributions made by Mr. Jobs. Apple, on the other hand made numerous contributions to schools and other civic groups. Apple (maybe in an effort to reduce criticism from others in his group that gives generously) has started to match employee charitable contributions to their various charities, up to a limit of $10,000.00 (Mogg, 2011). The next individual to be discussed is Warren Buffet. Mr. Buffet states to have made over 62 billion dollars in 2010, with an AGI (adjusted gross income) of 39 billion dollars (Kent, 2011). Most of the variance is due to capital gains and losses which are the adjustments for AGI. The charitable contributions and local taxes are from AGI which is how his taxable rate of 17.4% was determined. This is a much lower rate than many of those employed by his company, and since his income is much higher than this group of employees he qualifies for a higher percentage of charitable contribution. At the AGI, Mr. Buffet states to have in 2010, he would qualify to contribute about 20 billion dollars just in cash donations. Mr. Buffet is obviously doing many things right, not only to benefit him and his family...
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...your employment as an instructor You will receive an e-mail containing access information after we have verified your instructor status. Thank you for your interest in this text and the accompanying instructor resources. Copyright and distribution of this PDF is prohibited without written permission. For permission, please contact Copyright Clearance Center at www.copyright.com Healthcare Business Basics Chapter 2 8/1/12 ANSWERS TO END-OF-CHAPTER QUESTIONS 2.1 a. A business is an entity that obtains financing from the marketplace, uses those funds to buy assets (e.g., land, buildings, equipment, and inventories), and finally uses those assets to create goods or services that are sold to the public. b. A pure charity obtains contributions and then distributes those funds to meet the charitable goals of the organization. A (not-for-profit) business’s primary source of funds is revenues from the sale of goods...
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...to plan with charitable deductions to public charities, private operating foundations and private non-operating foundations. For this issue, the focus will be on charitable contributions and deductions of individuals. Definitions: Public charities: All organizations, foreign and domestic, described in IRC 501(c)(3) are private foundations except the types of organizations set forth in IRC 509(a)(1), (2), (3), or (4). Some examples of the exceptions that would qualify as public charities, as defined in 509(a)(1) and IRC 170(b)(1)(A)(i)-(v) are: churches, educational organizations, and hospitals. Private operating foundations, as best discerned from IRC 170, are foundations whose income or assets are used for operations that directly benefit the public, rather than for grant making. Some examples would be zoos, museums and libraries. Private non-operating foundations are foundations whose income or assets are disbursed to other, charitable organizations. Some examples are foundations that support cancer research. For this topic: Contribution base means adjusted gross income (AGI). For this topic: Capital gain property is defined as any capital asset that, if sold, would result in a long-term capital gain. Additionally, any property that is used in the trade or business should be treated as a capital asset. Analysis: IRC 170(a)(1) states: There shall be allowed as a deduction any charitable contribution…which is made within the taxable year. In general...
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...must exceed the standard deduction before taxpayers receive any tax benefit from the deductions (this 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...
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...a business Legal forms of business For-profit versus not-for-profit ownership Organizational goals Financial goals Taxes 2-2 Concept of a Business A business is an entity that raises money in the capital markets, invests these funds in assets (land, buildings, equipment, inventories, and so on), uses these assets to create products or services, and sells these products or services to sustain itself. A pure charity is different. Why? 2-3 Legal Forms of Business There are four major categories of business organization (legal forms of business): Proprietorship (sole proprietorship) Partnership Corporation Hybrid forms How much does the organizational form influence the practice of healthcare finance? 2-4 Proprietorships and Partnerships Advantages: Ease of formation Subject to few regulations No corporate income taxes Disadvantages: Limited life Difficult to transfer ownership Unlimited liability Difficult to raise capital 2-5 Corporation Advantages: Unlimited life Easy transfer of ownership Limited liability Ease of raising capital Disadvantages: Cost of formation and reporting Double (or triple) taxation for investor-owned corporations 2-6 Hybrid Forms of Organization Limited partnership (LP) General partners have control Limited partners are liable only for their initial contribution Not commonly used by healthcare providers Limited liability partnership (LLP) Partners share general business...
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...must exceed the standard deduction before taxpayers receive any tax benefit from the deductions (this 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...
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...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 properly deducted $1,000 for state income taxes on his Federal Form 1040 for 2011. His total federal itemized deductions were $6,000 for 2011. His state income tax return for 2011 showed a refund of $800, which he received on May 25, 2012. Juan should: a. Ignore the state income tax refund – do not report it to the IRS E b. Amend federal income return for 2011. Report corrected amount of...
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...$50 a year seems so easy to do and you wouldn’t miss that money anyway right? But should you? Feed the children is one of the most popular charity organizations in the United States. This charity was created by Reverend Larry Jones in 1979. The Oklahoma City headquarters buzzed with activity After the Haiti earthquake, as donors sent in a million dollars in cash. According to CBS News investigative correspondent Sharyl Attkisson, most donors have no idea about the nasty accusations that is tearing apart the billion-dollar a year charity. Millions of donators ask themselves one simple question, where does my money really go? Do we want to give charities the benefit of the doubt that they are indeed honest? Do we hope that the hard earned money we give out of our pockets really go straight to those poor suffering? Those whom are moved by the sad and desperate TV commercials asking for our help would be appalled to find out, only 10% of the money they donate actually goes to those suffering. Feed the Children ask for a mere $7 per month to provide: food, medical, education and other needs. The non-profit takes in roughly $1 billion annually in cash and in-kind contributions, making it one of the nation's largest charities. The charity's claim that it spends 91% of donations on programs[->0] and likely makes donors assume that the charity is doling out 91 cents worth of...
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...It’s the Season for Tax Planning Clean Up It is autumn and time for a tax planning review. You may have been distracted by a struggling global economy affecting all that you do, but Uncle Sam still wants his share of your personal pocketbook. Taxes must be taken into account on every financial decision. There are many financial issues we cannot control, but there are some we can. You can control the timing of certain transactions relative to income tax planning. It is particularly important before yearend to pay attention to what will be reported on your tax returns. As always, consult with your tax advisor on all tax matters. Here are some tips to consider. * First, review your financial picture. How have things changed? Is cash flow increasing, or decreasing? Do you need to adjust your withholding or estimated tax payments? * Can you accelerate or delay income? * What deductions should be paid 2011, or deferred to 2012. For example, do your deductions exceed the IRS thresholds; medical bills, miscellaneous investment charity donations, property tax, etc. * Are you taking full advantage of retirement plans? If you are over age 50, or are turning age 50 this year, you can make a catch up contribution. For age 50 or older, add $6,000 to your plan. There are some unique aspects of tax planning in 2011. Some of them actually continued from 2010. There is no phase-out of itemized deductions, which this year continues to be a benefit for higher...
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...Abstract…………………………………………………………………………………………….. Who files the schedule A with their return………………………………………………………… Itemizing deductions……………………………………………………………………………….. Schedule A Detail………………………………………………………………………………….. Allowable Deductions……………………………………………………………………………… Non allowable deductions………………………………………………………………………….. Conclusion…………………………………………………………………………………………. Takisha Locke Dr. Xiaoli Yuan Federal Taxation October 25, 2014 An Understanding of Itemizing Deductions Some taxpayers can become misunderstood on the meaning of itemizing deductions. Itemizing deductions are for those that can exceed their standard deduction, which is done by a couple of different ways. One way is by having certain deductions, such as, home mortgage interest, real estate taxes, and other tax deductions. Another way may be through force, because one spouse that may file married filling separate from the other spouse; may itemize deductions which will default the other spouse to itemize deductions rather if there are deductions to itemize or not. Nevertheless, taxpayers are miss informed on exactly what can be itemized or what cannot. Having a clear understanding of these, deductions will not only maximize the taxpayer’s taxable deductions, but will also minimize the notion of being audited. Understanding the tax return, as the taxpayer is vital because the taxpayer bares the responsibility of the tax return. Additionally, it is the best way to avoid penalties and interest. Itemizing deductions Itemizing tax...
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...use the study guide to highlight this information. TERMS 1. Budget: A policy document allocating burdens (taxes) and benefits (expenditures). Budgeting is concerned with translating financial resources into human purposes. A budget is also a series of goals with price tags attached. 2. Deficit: An excess of federal expenditures over federal revenue in a fiscal year. In other words, the national government spends more money that it receives in taxes. 3. Revenues: The financial resources of the government. The individual income tax and Social Security tax are two major sources of the federal government’s revenue. 4. Expenditures: Government spending of revenues. Major areas of federal spending are social services and national defense. 5. Income tax: Shares of individual wages and corporate revenues collected by the government. Enacted to pay for the Civil War by Congress; however, it was called the first step to a “communist march.” The Sixteenth Amendment explicitly authorized Congress to levy a tax on income. Furthermore, this is generally progressive—pays more and higher rates as it continues. 6. Excise tax: a tax levied on the manufacture, transportation, sale, or consumption of a good—for example, those on gasoline. 7. Progressive tax: A progressive tax is one that makes those with more taxable income not only pay more taxes, but also pay higher rates of tax on that income—some argue this is the fairest type of tax, because those who have...
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...Computation of income statement of Mr & Mrs Waden-FORM 1040 Click Link Below To Buy: http://hwaid.com/shop/computation-income-statement-mr-mrs-waden-form-1040/ FORM 1040 - U.S. INDIVIDUAL INCOME TAX RETURN Assume that the taxpayers, George A. Warden (social security number 333-33-3330) and Mary S. Warden (social security number 444-44-4440) file a joint return. Both are 50-years old, have good eyesight, and live with their three children, Edward, John and Ruth, at 789 N. Code Drive, Chicago, Illinois 60699. The Warden's home phone number is 312-555-9999. Mr. Warden elects to have $3 of his income tax go to the Presidential Election Campaign Fund. Mrs. Warden elects not to contribute. The Wardens' son, Edward, is a junior in college and he is 20 years old. He worked during the summer and earned $4,000. Their other son, John, is 17 and a high school student. He earned $3,600 during the summer and worked part-time dur ing the remainder of the year. Neither son had any additional income. Their daughter, Ruth, is eight years old and an elementary school student. She had no earned or unearned income during the year. Edward's social security number is 300-11-000t John's social security number is 300-22-0002, and Ruth's social security number is 300-33-0003. In August, the Wardens paid $4,000 in tuition for their son, Edward, for the academic period that started in September. The Wardens claim Mrs. Warden's mother, Grace D. Taylor, as a dependent under a multiple-support...
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...example by offering tax incentives such as Individual Savings Accounts (ISAs) and tax relief for pension contributions • Donations to charity, for example through the Gift Aid scheme • Investment into business, for example through Venture Capital Trusts and the Enterprise Investment Scheme • Entrepreneurs who build their own businesses, through reliefs from capital taxes • Capital investment by businesses, through capital allowances for plant and machinery Governments discourage: • Capital investment in most buildings, for which there are no capital allowances • Smoking and alcoholic drinks, through substantial taxes on each type of product • Motoring, through vehicle excise duty and fuel duties The free market approach is generally adopted by the Conservative Party, whereas the redistributive approach is broadly supported by the Liberal Democrat Party and the Labour Party. Since the Liberal Democrats are currently in coalition with the Conservatives, this has led to some of their policies being adopted by the Government. An individual may be liable to the following direct taxes: • Income tax (IT), for example on income from investments, income from employment, and income from a business which he operates as a sole trader • Capital gains tax (CGT) on the disposal of capital assets owned by him as investments or used in his sole trade • National insurance contributions (NICs) as an employee, as a sole trader, and as an employer An individual is resident in the UK in...
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...CHAPTER 5 ITEMIZED DEDUCTIONS DISCUSSION QUESTIONS AND PROBLEMS Discussion Questions 1. What is the difference between deductions from AGI and deductions for AGI? Answer: For AGI expenditures are outflows made for the production of income or for a trade or business and are included in the calculation of adjusted gross income. From AGI deductions are primarily personal expenditures that are allowed to reduce taxable income. 2. What are the six types of personal expenses that can be classified as itemized deductions on Schedule A, Form 1040? Answer: Personal expenses allowed as itemized deductions include medical expenses, state and local taxes, interest, charitable gifts, casualty losses, and miscellaneous deductions. 3. Describe the concept of a 7.5% floor for medical deductions. Answer: The 7.5% floor means that medical expense deductions are not allowed until the total medical deductions exceed 7.5% of AGI. Thus, medical expenditures, net of insurance reimbursements, must be substantial in order to gain any tax benefit. 4. Can an individual get a medical deduction for a capital improvement to their personal residence? If so, how is it calculated? Answer: For medical capital expenditures that improve the taxpayer's property, the deduction is available only to the extent that the medical expenditure exceeds the increase in the FMV of the residence. 5. What are the general requirements...
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