Chapter 6.pptx - Chapter 6: Individual Deductions 1...

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Chapter 6: Individual DeductionsInstructed by: Kelly Wentland1
Ch. 6 Videos OutlineLecture video 1 – general info on two deductioncategories and distinguishing “For AGIDeductions”Lecture video 2 – distinguishing “FromAGIDeductions” and where deductions go in taxformsRemaining videos – Ch. 6 – in-class exercises2
My goal with the slides today…My note sheets give a table of thedetailsto use in yourassignment and for the midterm.However, a list of details can often be hard to remember. So…My goal with the slides is to try to give you a means ofgrouping expenses intobroader categories conceptuallyto help with remembering how the categories are classifiedin reducing taxable income.The general rules for a category help for many of the detailedrules. But, there are always exceptions that you may just haveto memorize because they don’t perfectly fit the format….othat’s just the complexity of tax law.3
First goal – decide if FOR orFROM AGIOne wayto help classify them is to group theactivities generating the expenses by type andremembering which type typically fits undereach category of deduction.Your book starts by grouping activities into“business-related” or “investment-related.”4
Understand the differencebetween business andinvestment activitiesBoth are for profit, but…Trade or businessactivities require a relatively high involvement oreffort from the taxpayer whereas investment activities don’t requireEx: self-employed business activityInvestmentactivities involve investing in property for appreciationor for income payments.Ex: owning stocks (investment in a C corp), a partnership interest (flow-through entity income), rentals and intangible assets that bring inroyaltiesProfessor Wentland adds: investments in education5

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Term
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Taxation in the United States

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