Week1.LectureNotes.127A.F07

Week1.LectureNotes.1 - Individual Taxation MGMT 127A WEEK ONE Fall 2007 I COURSE STRUCTURE A Introduction of Professor/Students B Syllabus 1

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Individual Taxation – MGMT 127A WEEK ONE – Fall 2007 I. COURSE STRUCTURE A. Introduction of Professor/Students B. Syllabus: 1. Description 2. Exams/Grades 3. Research Assignment II. INTRODUCTION TO TAXATION A. General Tax Concepts 1. Deduction versus Credit 2. Amount Realized versus Amount Recognized 3. Tax Avoidance vs. Tax Evasion 4. Revenue neutrality ("Pay as you go") B. History of Taxation 1. 1861 : Introduced to pay for civil war (not a very significant tax) 2. Pre-1913 : No real individual taxation….government income primarily obtained from: Custom duties Excise Taxes (certain utilities/consumables: e.g. Alcohol 3. Late 1800’s : 1895, USSC Declared federal income tax unconstitutional - because Constitution required proportional taxation among states: difficult to administer. However, corporate tax was constitutional. 4. 1913 : We amended our Constitution to add Sixteenth Amendment – power to levy income tax. 5. Revenue Act of 1913 : Flat Tax of 1% on Corporations, 2-6% on Individuals But VERY HIGH EXEMPTIONS ( $ 3000) 5. 1940’s : Mass tax to finance the war….now most people had to pay.
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6. Incrementalism : Since 40’s only incremental changes have been adopted by Congress – no wholesale revisions C. American Institute of Certified Public Accountant's (AICPA) Suggestion on Federal tax Policy 1. Simple 2. Neutral in its effect on business decisions 3. Not reduce economic growth 4. Clear and easily understood 5. Minimize non-compliance D. TAX BASE & TAX RATE: what gets taxed and what percentage is applied 1. Tax Base : Amount on which taxes are to be determined income FMV on property 2. Tax Rate : Percentage applied to Tax Base. This rate can be: a. Progressive : rate increases as base increases ( like our individual taxation system ) b. Proportional : flat tax --- same for all income level c. Regressive : rate decreases as base increases (e.g. corporate tax rates, which go up to 39%, then fall to 35% over 18.3 million) E. TYPES OF TAXES: 1. STATE INCOME TAXES : Many states have (not all…Nevada, Florida, Texas, etc.) mildly progressive based on Federal Adjusted Gross Income (we’ll learn what AGI is later) Sometimes referred to as FRANCHISE TAX ( In California: Franchise Tax Board) 2. Unified Transfer Taxes : These use to be separate now combined, in a sense a. Donor ("giver") pays the tax
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b. During taxpayer’s lifetime, keep track of all gifts made (based on Fair Market Value usually – applicable exclusions). c.
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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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Week1.LectureNotes.1 - Individual Taxation MGMT 127A WEEK ONE Fall 2007 I COURSE STRUCTURE A Introduction of Professor/Students B Syllabus 1

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