ACCT 508 Notes Quiz 2

ACCT 508 Notes Quiz 2 - Chapter 4 Alimony and Child support...

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Chapter 4 Alimony and Child support Imputed interest Annuities Unemployment and social security Recovery of capital doctrine – there is no income subject to tax until the taxpayer has recovered the capital invested. Accrual method – an item is gross income for the year in which it is earned regardless of when it’s collected. It’s about how much the taxpayer has a right to receive. EX: A contractor completed a building in 09 and presented the bill to the customer but they refused to pay. A settlement was not reached until 2010; no income accrues to the contractor until 2010, if the customer paid for the work and then filed suit for damages, the contractor cannot defer the income; income is taxable in 09. Income from property – (interest, dividends, rent) must be include in the gross income of the owner of the property. Interest – interest accrues daily; the interest for the period that includes the date of the transfer is allocated btw the transferor and the transferee based on the number of days during the period each owned the property. Cash basis; a taxpayer gives his son bonds w/a face amt of 10,000 and an 8% stated annual interest rate. The gift was made 1/31/09 and the interest was paid on 12/31/09; taxpayer must recognize $68 in interest inc (8%x10,000x[31/365]) Son will recognize $732 (800-68) Dividends – a corp is taxed on earnings; shareholders taxed on dividends paid to them for corp’s after-tax earnings. Qualified dividends – are not treated as capital gains in the gains in the gains and losses netting process; thus they are not reduced by capital losses. It is merely taxed at the rates that would apply to the taxpayer if they had an excess of net long-term capital gain over net short-term capital loss. Excludes: dividends from foreign corps, tax-exempt entities, and dividends that don’t satisfy the holding period requirement. Dividends from foreign corp is eligible if the foreign corp’s stock is traded on US market, or the foreign corp is eligible for the benefits of a comprehensive income tax treaty btw its country of incorporation and the US. Holding period requirement; the stock on which the dividend is paid must have been held for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. Partnership – serves to provide the data necessary for determining the character and amount of each partner’s distributive share of the partnership’s income and deductions. Income must reported in the year earned. Community property system – all property is deemed either to be separately owned by a spouse or to belong to the marital community. Property may be held separately by spouse if it was acquired before marriage or received by gift or inheritance following marriage. Otherwise any property is deemed to be community property. For Federal tax purposes each spouse is taxed on one half of the income from property belonging
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This note was uploaded on 03/11/2010 for the course ACCT 508 taught by Professor Mcdre during the Spring '10 term at San Diego State.

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ACCT 508 Notes Quiz 2 - Chapter 4 Alimony and Child support...

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