Tax_Rakowski - Tax Outline Fall 2005 Prof Rakowski...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Tax Outline Fall 2005, Prof. Rakowski Ranganath Sudarshan WHAT IS INCOME? Non-Cash Benefits Competing dictates of fairness, efficiency, and practicality. Use of non-cash benefits may make enforcement difficult. §61 – treats compensation in cash and kind alike. Old Colony Trust – employer’s payment of income tax on behalf of employee constitutes income to employee. “The discharge by a third person of an obligation to him is equivalent to receipt by the person taxed.” Employee Fringe Benefits §132 – the following are excluded from gross income o 1) no-additional-cost services (free seating for airline employees on flights that would not otherwise have sold out) service offered to employee must be offered to customers in ordinary course of line of business of company; no additional cost o 2) qualified employee discounts (Macy’s gives discount to employees) for property, discount cannot exceed profit percentage at normal offer price for services, discount cannot exceed 20% of price to customers o 3) working condition fringes (company car use for business, free subscription to magazine relating to job) o 4) de minimis fringes – sufficiently low value to make accounting unreasonable (eating facility counts as this if it’s on premises of employer, and revenue >= costs of facility) o 5) qualified transportation fringes (employer-provided parking or mass transit o 6) qualified moving expense reimbursement o 7) qualified retirement planning services o 8) on-premises gyms and other athletic facilities o For 1) and 2), you must work in the line of business of your co in which you get the discount, plus doesn’t apply to highly compensated employees if employer discriminates in favor of them. Also, these may be provided to spouse, surviving spouse, or dependent children. Regs 1.61-21 and 1.132-1 to -8 give valuations of certain fringes, mainly personal use of employer-provided aircraft and cars. Rule: FMV, except for safe-harbors (annual lease value for cars, $3 round trip for bona fide commuting in employer’s vehicle) Cafeteria plans (authorized by §125) – employee may choose among a variety of non-cash non-taxable benefits or may choose to take cash (taxable)
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
o Without this plan, employee would be taxed on cash that he could have taken, even if non-taxable option were chosen (constructive receipt) o Allows employer to provide nontaxable fringe benefits to those who want them without disfavoring employees who have no need for them. o Offerings limited to group-term life insurance (up to $50K), dependent care assistance, adoption assistance, excludable accident/health benefits, and 401(k) o Use-it-or-lose-it: if you elect $5K child-care reimbursement, if you don’t use all of the $5K by the end of the year, you can’t cash out the rest.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern