The first safe harbor rule states that as long as the taxpayers quarterly payments equals 90% of what is due on the tax return they can escape a penalty. The second safe harbor allows the taxpayer to avoid a penalty as long as they pay 100% of the amount from the previous year’s tax return. If the taxpayer’s AGI exceeds $150,000, they must pay 110% of the previous year’s return. Chapter 3 (5 pts) Above-the-line, or For AGI deductions, are taken out before your AGI is calculated. Above- the-line deductions include alimony, student loan interest, and moving expenses.
This is done by focusing on key components of taxable income. How can timing strategies and income-shifting strategies be used to affect deductions for adjusted gross income (AGI), dependency exemptions, itemized deductions, and tax credits? Provide at least one example for each. Postponing income until the following year is one way to lower your AGI, paying into a 401K allows one to defer paying taxes on a portion of their income until a later date. Shifting a portion of income to family members can also lower ones tax bill, you are allowed to give $12,000 per year to each recipient without incurring a gift tax but watch out for kiddie tax rules before considering this option.
Good Citizen, Inc. incurred their first loss during this fiscal year on both their financial statements and tax returns. Suppose there are no differences between the calculation of book income and taxable income. The net loss this year was $1,000,000, prior year's income was $12,000,000 and the applicable tax rate was 40%. What would the entry be if the government(s) allowed the Company to carry a tax loss back to prior tax years for a full refund of prior taxes paid? a. DR Deferred tax asset $400K, CR Tax benefit (provision) $400K b. DR Current tax receivable $400K, CR Tax benefit (provision) $400K c. DR Tax expense (provision) $400K, CR Current taxes payable $400K d. DR Tax expense (provision) $400K, CR Deferred tax liability $400K e. DR Current tax expense $400K, CR Deferred tax expense $400K 4.
As per the agreement between Jack and Joshua, the $900,000 was paid to Jack as Joshua’s attorney. Upon receipt of the funds Jack immediately paid Joshua $600,000, keeping $300,000 for himself. Question: Prior research revealed that the settlement was taxable income to Joshua. How should Joshua report/deduct Jack’s $300,000 legal fee? Specifically he would like to deduct it other than as a miscellaneous itemized deduction, which would give him no tax benefit due to the Alternative Minimum Tax.
663 you decide Y O U D E C I D E | | Activity | 1. John Smith tax issues: a. How is the $300,000 treated for purposes of federal tax income? The $300,000 will have to be treated as ordinary employment income, subject to federal and state income taxes. b.
Christopher Nelson Intermediate Accounting II Research Case 1 1. As of December 31, 2011, what amount, if any , of sales taxes due should be recognized in eVade’s financial statements? Assuming the financial statements for year ending 12/31/2011 have not been issued, an adjustment to sales tax liability can be recognized for the entire $25,000.000. As well, affected prior period statements will need to be re-stated. This is consistent with FASB codification ASC250-10-45-23 2.
Case 1 Solution: Problem Identification: How should a company report, if at all, cash and non-cash transactions owed to an entity’s financial subsidiary? Keywords: Cash flows; financ* subsidiaries; operating income. Conclusion: Per ASC 230-10-50-5), Mead should exclude transactions that involve no cash payments or receipts. However, per 230-10-45-17, it should record cash payments to GMCC for repayments of principle (and interest thereon) due to suppliers or their subsidiaries as operating cash (out) flows. Case 2: Narda Corporation agreed to sell all of its capital stock to Effie Corporation for three monthly payments of $200,000.
[3] http://www.irs.gov/businesses/small/article/0,,id=146335,00.html It is important to determine if the taxpayer martially participates because this classifies the income as active or passive. Passive activity losses are non-deductable from active and portfolio income. This is why it is important to determine if the taxpayer martially participates in the business activity. PROBLEMS: 7-46) The $30,000 loss is considered a passive loss and can only be deducted against passive income, it is therefore suspended and carried forward to future years to offset potential passive income in those years. Mary has no martially participation in the rental activity, therefore the loss is considered
7-20 47. An NOL carryforward is used in determining the current year’s NOL. ANS: F An NOL carryforward is not used in determining the current year’s NOL. PTS: 1 REF: p. 7-21 48. The excess of nonbusiness capital losses over nonbusiness capital gains must be added to taxable income to compute the net operating loss of an individual.
30% Withholding Tax Nonresident individuals earning rental income and other fixed and determinable annual or periodic income which are not effectively connected with trade or business are taxed at a flat rate of 30%, withheld by the tenant. Electing Business Income Option Nonresident individuals earning rental income can elect to consider this income as effectively connected with trade or business. Through this option, the taxpayer will be taxed on his net income at progressive rates. CAPITAL GAINS TAX Capital gains incurred for the transfer of property in Guam is taxed as in the US. The taxable gain is computed by deducting the acquisition costs (adjusted for inflation) and transfer costs from the selling price.