Ind. IO Chap. 4 - 2008

Ind. IO Chap. 4 - 2008 - Chapter I:4 Gross Income...

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Chapter I:4 Gross Income - Exclusions Learning Objectives After studying this chapter, the student should be able to 1. Explain the conditions that must exist for an item to be excluded from gross income. 2. Determine whether an item is income. 3. Decide whether specific exclusions are available. 4. Understand employment-related fringe benefit exclusion items. Areas of Greater Significance The area of employee fringe benefits (including employer-paid insurance, meals and lodging, cafeteria plans, etc.) is important because most employee taxpayers are affected. In addition, any employer offering such employee benefits will be interested in the tax consequences to the employee. Areas of Lesser Significance In the interest of time, the instructor may determine that the following area is best covered by student reading, rather than class discussion: 1. Introduction and overview. Problem Areas for Students The following areas may prove especially difficult for students: 1. The difference between a gift and an award or prize. 2. To what extent, if any, income from the discharge of indebtedness is recognized (dependent on status of taxpayer - bankrupt, insolvent, or solvent) and the effect of such unrecognized income on tax attributes (net operating loss, etc.). I:IO4-1
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The following items have changed from the 2007 edition of this chapter: 1. The per child exclusion for employer-paid adoption expenses increased to $11,390 with the phase-out beginning at $170,820 of modified adjusted gross income. 2. The exclusion for periodic payments made under the “accelerated death benefits” rules to a chronically ill person increased to $260 per day. 3. Similarly, the exclusion for benefits received under a qualified long term care contract increased to $260 per day. 4. The qualified transit benefit exclusion increased to $110 per month. 5. The qualified parking exclusion increased to $205 per month. 6. The foreign-earned income exclusion increased to $85,700. Teaching Tips 1. Continue using an overall view of gross income utilizing both Chapter I:3 and Chapter I:4. 2. Many of the rules in this chapter will directly affect the students during their lives. Try to build enthusiasm for tax by applying these topics to the students (i.e., Would you rather receive property by gift or inheritance?; How many of you have scholarships - What are the tax consequences?; How could the employee benefits provided by potential employers affect your job selection decision?). Lecture Outline I. Items That are Not Income (Problem I:4-33) A. Unrealized Income EXAMPLE: If the value of certain stock held by the taxpayer appreciates from $10,000 at the beginning of the tax year to $25,000 at the end of the tax year, that $15,000 unrealized income is not subject to tax. I:IO4-2
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This note was uploaded on 11/18/2008 for the course ACCT 45089 taught by Professor Instructor during the Spring '08 term at University of Phoenix.

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Ind. IO Chap. 4 - 2008 - Chapter I:4 Gross Income...

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