This is important primarily for the deduction of losses. Losses from passive activities can only be deducted to the extent that passive income exists. They generally cannot be deducted from ordinary income. Losses from activities in which the individual materially participated and the income is considered active WOULD be deductible from any
Answers of Discussion Questions Chapter No 6 2. 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.
What is the difference between tax avoidance vs. tax evasion? Intent is the only difference between these two concepts even though you have to pay fine when you evade tax. The purpose of both of these actions is to
Comparing Roth IRA’s to Roth 401 (k)’s A Roth IRA account is an individual’s personal retirement account that allows them to set aside after tax income up to a specified amount per year. The earning on the account as well as the withdrawals after age 59 ½ are tax free. The Roth 401 (k) combines the features of a traditional 401 (k) with features of a Roth IRA. Both of these retirement plans allows for the individual to contribute to the account without any up front tax deductions. As long as the account was held for more than five years withdraws are not subject to income tax after the normal retirement age.
According to IAS 17- paragraph 7, the classification of leases is based on the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. IAS 17-paragraph 8 also mentions that a lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership, while a finance lease is determined if it transfers substantially all the risks and rewards incidental to ownership. 1. Based on the IAS 17-7 and IAS 17-8, the junior accountant's analysis was incorrect. The junior accountant interpreted the lease as an operating lease based on the fact that the equipment reverts to the lessor at the end of the lease.
If Dawn, Lind, and Mike were to select this type of entity they would each pay another tax on the corporation’s distribution of corporate earnings and profits when dispersed as dividends. However, contrary to C corporations, an S corporation is not a separate taxable entity for most federal and state income tax purposes. Dawn, Lind, and Mike will need to determine the best entity type that will
Net operating losses cannot be used to shelter personal income but can be carried forward by a C corporation to provide tax benefit in future when the business expects profit. Apparently, Mr. Jones is already in the top tax bracket. S-Corporation income tends to support start-up businesses and taxpayers with little income, because the corporation is taxed at the individual's lower personal income tax rate. The initial
Now there are some exceptions to the Buy American Act which include if the items are being used outside the United States; domestic items that are unreasonably priced; information technology that is a commercial item; when compliance to the Act would not be in the best interest of the government; and item purchased only for the commissary resale. Also, if the purchase is within the micro-purchase threshold of $3,000 then the Buy American Act does not apply. Explain whether or not you agree with the Buy American Requirements, and give the reasons for your
Apple may choose to reimburse employees for nonqualified expenses as well, however, these amounts are subject to income tax withholding, FICA and FUTA. Those expenses that are unreimbursed by Apple and are considered “qualified moving expenses,” can be deducted by completing form 3903. Unqualified moving expenses that are not reimbursed by Apple, cannot be deducted and thus taxpayers cannot submit these items as deductible moving expenses. According to Publication 521 (2013), those employees who experience a loss on their sale of home and are reimbursed by their employer, must include the reimbursement amount in their taxable income. With this being the rule, even if Apple were to provide its employees with an accountable plan, it is treated as paid under a non-accountable plan and reported on the employee’s taxable
The useful life of an intangible asset is the period over which the asset is expected to contribute to the future cash flows of the entity. Intangibles with a fixed useful are amortized. However, intangibles with indefinite useful lives are not amortized but are subject to impairment. Other relevant factors include the legal or contractual provisions, the level of maintenance expenditures required to obtain future cash flows, and the effects of obsolescence. (para 11 SFAS 142) c) Jonas Tech Corp’s suggested treatment of goodwill is unacceptable because the U.S. GAAP requires that goodwill acquired in a business combination is allocated to the reporting unit through which it was obtained.