Engler Sp03 Fed Tax Outline

Engler Sp03 Fed Tax Outline - www.swapnotes.com Federal...

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Federal Income Taxation Outline Spring 2003 Professor Engler CHAPTER 1. Introduction Criteria for Tax Regimes b Vertical fairness : those with a higher ability to pay should pay more. b Horizontal fairness : those in similar situations should pay the same. b Administrability b Efficient Economic Incentives Possible Tax Regimes b *Income Tax* – taxed on earnings less cost of generating income. o Income tax prefers consumption over savings (b/c interest from savings is itself taxed as income) o Capital gains tax provides distortive effect on savings. b Consumption Tax – tax on what you spend o Unfair b/c no taxation if you save rather than spend. o Poor consume a higher percentage of their incomes than rich. b Property Tax b Head Tax Progressive Tax Rates – the more income, the higher marginal percentage of income is taxed. Tax Law Procedure b Tax advice must be based on “reasonable basis”/“some realistic possibility of success” (at least 1/3 chance of success) for the TP decision if all facts where known. b Chances of wining the “audit lottery” often makes concealment / non-compliance attractive to aggressive TP b If TP discovers a mistake in his return, he may file amended return w/ 3yr statute of limitations. b Tax Court – hear only tax cases; decisions are reviewable by fed. court of appeals in which they sit (decisions are not binding on the government in other circuits) and ultimately by Supreme Court. b District Courts – TP may sue for a refund of tax paid; jury trial available. b U.S. Court of Federal Claims – decisions reviewable by Court of Appeals for the Federal Circuit (decisions favorable to TP are binding on the government). Taxation of Entities b Sole Proprietorship – all income and expense is treated as income and expense of the sole proprietor. b Partnership – “pass-though taxation” partnership files a tax return but pays no tax; partners pay pro rata share of whatever profits/losses was calculated by the partnership regardless of when $ is actually paid out. b Corporations – files a tax return and pays corporate tax. Cash dividends paid to shareholders is also taxed. § 61(a) Gross Income Defined Except as otherwise provided, gross income means all income from whatever source derived including . . . Realization / Recognition Generally b Realization – when there has been some change in circumstances such that the gain or loss might be taken into account for tax purposes. b Recognition – when the change in circumstances is such that the gain or loss is taken into account. Long-Term Capital Gains Taxes ( see infra Capital Assets) b Lower tax rates for capital gains held more than 1 year. www.swapnotes.com
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This note was uploaded on 02/14/2008 for the course LAW 7601 taught by Professor Cunnigham during the Spring '03 term at Yeshiva.

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Engler Sp03 Fed Tax Outline - www.swapnotes.com Federal...

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