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April 16 mgmt127a

April 16 mgmt127a - MGMT 127A What if you had a high...

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April 16, 2008 MGMT 127A What if you had a high overall income, and a big portion of it is LTCG. Income $200,000 LTCG $190,000 Ordinary $10,000 Every dollar of LTCG gets a break. Every dollar of LTCG that goes over 15% tax bracket is taxed at 15%. Every dollar of LTCH that falls into 15% tax bracket or below is taxed at 5% Each segment gets its own break. Ordinary income would be taxed at its normal rate $10,000 x 10% Tax bill would be sum of the parts
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Gross income-“Except as otherwise provided, All income from whatever source derived. Broad interpretation of income. Tax code has brought it down in certain ways (Disability Income not taxed, Municipal Bonds, etc.). You are only taxed on realized gains or losses. You are taxed on proceeds that exceed recovery. Example You went to an event and had $8 plate of food. Under this situation, do you have income? What if your boss didn’t pay you with money, but with food instead, provided a doctor on staff, a babysitter, free use of company cars, etc? Would these in-kind benefits be considered income? Yes. However, you have to look at the situation to decide whether or not to tax. You can look at the $8 plate of food as a gift, or it is an immaterial, incidental benefit. If your boss is buying you lunch so as to keep up productivity, then it is an immaterial, incidental benefit. The question is whether or not it is a reasonable cost of business. Value of health insurance is tax free—anything dealing with accidents, injuries, etc. For employer, it is a reasonable expense for the company and therefore fully deductible. Realization Realization means that the earnings process is complete. Simple example: If I give up inventory, and get cash for it, there is realization.
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