WEEK 3 Assignment – Questions: 7-7) Active income is income received by the taxpayer directly from the taxpayer’s efforts or services. For example, salary, wages, and commissions. Passive Income is income received usually on a regular basis with little to no effort of the taxpayer. There are only two sources of passive income, “income from rental activity, and from a business in which the taxpayer does not materially participate. http://www.irs.gov/businesses/small/article/0,,id=146330,00.html.” Dividends, interest, annuities, and royalties not accumulated through the ordinary course of trade or business is Portfolio income, not passive income.
14-18, Code Sec.1032 states that a corporation does not recognize a gain or loss on the receipt of money or other property in exchange for its stock. Also, it does not recognize income when it receives money or other property as a contribution to capital (i.e., the corporation does not issue stock, debt, money, or property in return for the contributed property). It also states any amounts received from voluntary pro rata payments from shareholders are not income to the corporation even though no stock is
the expense is actually incurred. None of the above 4. (TCO A) Which of the following constitutes tax evasion? (Points : 5) Arranging your affairs to keep your tax liability as low as possible under the tax law Avoiding taxes Failing to disclose a tax liability from a completed transaction Trying to minimize your tax liability 5. (TCO C) Which of the following items is subject to federal income tax?
Well, first of all Stanley did not have to do taxes because his income is way to low and he could have chosen not to file taxes. But still, Stanley’s taxable income would be as follows. His AGI is$3000, which are $1000 +$2000. He did not have any itemized deductions, so we will assume there is standard deduction, which is 5700 for single filers. He is claimed as a dependant on other tax return, so we cannot deduct him as an exemption.
Green’s gambling activities do not qualify as a trade or business, can he deduct his gambling-related travel and lodging expenses against his gambling winnings? Applicable Case Law, Code & Regulations Per Section 165(d) of the Internal Revenue Code (IRC), a taxpayer may deduct their gambling losses to the extent of their gambling winnings. However, Section 262 of the IRC indicates, “…no deduction shall be allowed for personal, living, or family expenses.” In ruling on Stanley B. and Rose M. Whitten v. Commission of Internal Revenue, the US Tax Court has stipulated that travel and lodging expenses are not considered losses and therefore cannot be used as a deduction. Conclusion Given the current tax regulations and case law, travel and lodging expenses associated to Dr. Green’s gambling activities cannot be categorized as a loss. The Tax Court clearly established in Stanley B. and Rose M. Whitten v. Commission of Internal Revenue the difference between gambling losses and travel and lodging expenses in the closing of the judgment wherein they stated there is no need, “…to eliminate the distinction between wagering losses, i.e., the amount of wagers or bets lost on wagering transactions, and expenses related thereto, e.g., expenses for transportation, meals, and lodging incurred to engage in wagering transactions… Unlike a wager or bet, petitioner incurred the expenses in question in exchange for specific goods and services, such as transportation,
Footwear's operating income was a pre-tax loss of $10 million in 2011. Foxtrot's income tax rate is 40%. 3. In the 2011 income statement for Foxtrot Co., it would report income from discontinued operations of: a. $9.2 million.
Law and Analysis The taxpayer relief act of 1997 exempted from taxation the profits on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This exemption applies to residences the taxpayer(s) lived in for at least two years over the last five. Taxpayers can only claim the exemption once every two years Under § 1.121-1 Exclusion of gain from sale of principle residence of the Internal Revenue Code, the sale of the home of Mr. Junkiewicz and his wife in 2013 is not a taxable transaction as
The total assets are based upon the two dates reported above, which are June 11, 2011, and March 19, 2011. For June 11, 2011, the total assets were 17.917.00. For March 19, 2022, the total assets were 16, 512.00. There was an increase in the total assets between the three-month period. • What amount of accounts payable did the company have at the end of its 2 most recent annual reporting periods?
c. After purchasing a personal residence, Paul probably will no longer claim the standard deduction on the income tax return. Due to mortgage interest and property tax deductions he will itemize his deductions on Schedule A. 5. For wage earners, the tax system requires employers to withhold for taxes a specified portion of an employee’s wages. Persons with income form other than wages have to make quarterly payments to the IRS for estimated taxes due for the year.
Corporations can choose either calendar year or fiscal year. It is not dependent on the tax years of the shareholders. Sole proprietorship and Partnership generally use the tax year of the owner. S-Corp typically has to use the calendar year, unless it can show the IRS why