1 / 10

BA 128A Agenda 2/1

BA 128A Agenda 2/1. Questions from lecture Review Assignment I2-52,55, I3-48 Additional problems I2-46,47 I3-35,39,40,41. Kiddie Tax . $700 standard deduction, $700 statutory deduction taxed at the child’s tax rate

fareeda
Download Presentation

BA 128A Agenda 2/1

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. BA 128A Agenda 2/1 • Questions from lecture • Review • Assignment I2-52,55, I3-48 • Additional problems I2-46,47 I3-35,39,40,41

  2. Kiddie Tax • $700 standard deduction, $700 statutory deduction taxed at the child’s tax rate • If the dependent has both earned and unearned income, figure out the taxable income and then the unearned income • Tax = Taxable Income - Net unearned income at child’s rate; net unearned income at parent’s rate.

  3. Capital Gains and Losses • Net STCG and STCL • Net LTCG and LTCL • Then, net ST and LT together • First, loss is netted against gains within the same tax rate group • Second, excess and short term loss is netted against the highest tax bracket capital gain first • If the net is a capital gain, gain is taxed at different rates according to different asset classification

  4. Accounting method • Cash receipts and disbursement method (constructive receipt principal) • advantages: simpler, greater tax planning • Accrual method • concept of earned • Hybrid method (accrual basis for purchase and sales of goods, cash basis for all other income and expenses • Who is required to use accrual method?

  5. Gross Income • Compensation (fringe benefits excluded)_ • Business income (service income, manufacturing income- sales - COGS) • Interest Income (EE Bonds - defer or tax free) • Rents and Royalties • prepaid rent is taxed in the year of receipt • Lessee’s improvements

  6. Gross Income (cont) • Cash dividends/Stock dividends/constructive dividends • Alimony - deductible by payor and inclusive for payee; alimony recapture • Pensions - amount contributed is deductible • Annuities - cost can be recovered; exclusion ratio

  7. Other Gross Income • Income from flow through entities • S-corp, partnership • Price Awards, Gambling winnings, treasury finds, illegal activities • Unemployment compensation and Social Security benefits

  8. Social Security Benefits • Provisional Income = AGI (excluding SS benefits) + Tax-exempt interest - Foreign earned income + 50% of SS benefits • Calculation depends on filing status PI3-23

  9. Insurance Proceeds • Proceeds from destruction of property included in GI only if proceeds > adjusted basis of property • Proceeds from guarding against profit loss is taxable • Involuntary conversion - if proceeds are reinvested in a qualified replacement property, not GI

  10. Choosing bonds for tax-planning • Assume risk is the same, choose tax-free bonds if Interest of tax free bonds > (1-marginal tax rate)* interest of taxable bonds • Tax deferred bonds • tax bracket • present value of money

More Related