Week2.LectureNotes.127A.F07

Week2.LectureNotes.127A.F07 - MGMT 127A WEEK TWO Fall 2007...

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MGMT 127A WEEK TWO – Fall 2007 Individual Taxation: Tax Formula, Filing, Gross Income, For AGI Deductions I. BASIC FORMULA A. Some differences with the 1040 Form (admin. Convenience) TP need not report Exclusions (e.g. bonds personal injury, etc.) Other Taxes included (e.g. self emp. tax) SEE FORMULA ON INSIDE COVER OF BOOK: Income - Exclusions -------------- Gross Income - Deductions FOR AGI --------------- Adjusted Gross Income - Deductions FROM AGI ( Standard or Itemized) - Exemptions ( Personal & Dependents) ---------------- Taxable Income X Tax Rate ---------------- Preliminary Tax Due - Credits + Other Taxes ( AMT, Self-Employment ) ----------------- TAX DUE B. TERMINOLOGY: 1. INCOME : Revenues earned 2. NOT INCOME : some examples…. a. Unrealized Income : Home or Stock increases in value 1
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b. Self-Help Income : Paint your own house c. Gross Selling Price of Property : E.g. Ms. X buys house for $ 200,000, sells 2 yrs. later for $ 250,000, = Tax will be on $50,000 d. Statutory Exclusions : Things like Gifts, Emp. Benefits, Personal Injury Awards, child support, interest on Municipal Bonds; child support, scholarships, etc. 3. GROSS INCOME = Total Income - exclusions 4. DEDUCTIONS FOR A.G.I. : Usually business expenses & some miscellaneous, like Alimony, IRA contributions, capital losses (limited though) Deducted before AGI is determined 5. ADJUSTED GROSS INCOME : Falls between Gross Income and Taxable Income Used to set limits for many deductions (e.g. medical, casualty, charitable, etc.) 6. DEDUCTIONS FROM A.G.I. - these are personal deductions, including: a. TP claims the higher of a Standard Deduction or Itemized Deductions. (1) STP = $ 5,350 (2007) (2) MTP = $ 10,700 (double) (3) Additional SD: For elderly (65 or older) or blind they get an additional SD of… (a) $ 1,050 for married taxpayers (b) $ 1,300 for single taxpayers (c) OR – if over 65 AND blind: get 2 std deductions (4) Dependent: If a TP is claimed for exemption on another TP’s tax return ( e.g. Mom claims her college age son as a dependent, but son also works and has to file a return ) – dependent’s SD is… 2
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THE HIGHER OF $ 850 –or– $ 300 + earned income ( but not to exceed standard deduction amount ) BUT…an elderly or blind person still gets additional
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This note was uploaded on 06/21/2010 for the course MANAGEMENT 127a taught by Professor Gadner during the Spring '08 term at UCLA.

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Week2.LectureNotes.127A.F07 - MGMT 127A WEEK TWO Fall 2007...

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