Chapter5_2of4 - 1 TIMING ISSUES Accounting Periods and...

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Unformatted text preview: 1 TIMING ISSUES Accounting Periods and Methods When is income reported? When are deductions claimed? TIMING ISSUES Accounting Periods and Methods When is income reported? When are deductions claimed? Who cares? 2 Government Response to Deferral Opportunity 3 Tax Accounting Principles Tax Accounting Principles Time Value of Money Income: Deferral Deductions: Accelerate Other reasons 4 5 Change the Rules? Reagan signs the Tax Reform Act of 1986 6 Tax Rate Changes? 36 52 88 1952-53 36.45 50.75 87.2 1951 38 42 80 1950 39 38 77 1948-49 47.5 38 85.5 1946-47 50 40 90 1944-45 48 40 88 1942-43 50 31 81 1941 56.9 22.1 79 1940 60 19 79 1938-39 64 15 79 1936-37 49.25 13.75 63 193435 Difference Corporate Rate (%) Individual Rate (%) Year 7 Individual & Corporate Tax Rates Historical Comparison Year Individual Rate (%) Corporate Rate (%) Difference 1954-63 87 52 35 1964 77 50 27 1965-78 70 48 22 1979-81 70 46 24 1982-86 50 46 4 1987 38.5 40 (1.5) 1988-90 28 34 (6.0) 1991-92 31 34 (3.0) 1993-2001 39.6 34/35 5.6 2003-2007 35 35 0.0 8 Individual & Corporate Tax Rates Historical Comparison Year Individual Rate (%) Corporate Rate (%) Difference 1954-63 87 52 35 1964 77 50 27 1965-78 70 48 22 1979-81 70 46 24 1982-86 50 46 4 1987 38.5 40 (1.5) 1988-90 28 34 (6.0) 1991-92 31 34 (3.0) 1993-2001 39.6 34/35 5.6 2003-2007 35 35 0.0 When is the income reported? When report the income? Accounting Periods and Methods REPORTING PERIOD TAXABLE YEAR ASSIGNMENT OF INCOME AND DEDUCTIONS ACCOUNTING TO PERIODS METHODS 12/31/08 12/31/09 12 Tax Accounting Principles PERIODS (Tax Years) Tax Accounting Principles PERIODS (Tax Years) 13 2008 Tax Years What year CAN I use? What year should I use? 14 ACCOUNTING PERIODS: GAAP VS. TAX ACCOUNTING PERIODS: GAAP VS. TAX Financial vs. Tax Is conformity required? Financial vs. Tax Is conformity required? Internal Revenue Code 15 Accounting Periods Accounting Periods Conformity requirement Period: must be same as used for books (446(c)) Meet by sufficient workpapers that reconcile differences between book and tax May be modified by statutory requirements Conformity requirement Period: must be same as used for books (446(c)) Meet by sufficient workpapers that reconcile differences between book and tax May be modified by statutory requirements 16 Tax Years Calendar Year What? Who uses? 2008 What year CAN I use? What year should I use? 17 Tax Years Fiscal Year What? Who can use a fiscal year? How about individuals, S corps, pshps, PSCs, trusts, estates, exempts? Limitations. Why? 2009 What year CAN I use? What year should I use? 18 Tax Years: Reporting Income from Partnerships and S Corps Partners or S shareholders Report their shares of the entitys income in their taxable year within which (or with which) the partnership or S corporation tax year ends Pshp Pshp Income 19 Pshp Income 2/1 1/31/x1 1/1/08 12/31/x2 Tax Years Reporting Income from Partnerships and S Corps 1/1 12/31 9/30 $120,000 1 st qtr $30,000 $1,000 Problem 5-41 21...
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Chapter5_2of4 - 1 TIMING ISSUES Accounting Periods and...

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