Chapter 7 v2 - Income Taxation: Chapter 7 Deductions...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Income Taxation: Chapter 7
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Deductions Authorized by General Sections of the IRC Positive Criteria (allows deduction): Sec. 162: Expenses of carrying on a T/B, Sec. 212: Expenses for production of income, Sec. 165: Losses, and Sec. 172: NOL. Negative Criteria (disallows deduction): Sec. 262: Personal, living and family expenses, Sec. 263: Capital expenditures, and Sec. 265: Expenses & interest relating to tax exempt income.
Background image of page 2
Trade or Business Expenses vs. Expenses for the Production of Income Sec. 162 Requirements: T/B Related: Intention to make a profit Entrepreneurial/personal effort required No hobbies Ordinary and Necessary ( Are the expenses ?) Reasonable in amount Paid/incurred during the year
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Reasonable Compensation Shareholder/Employees of C-Corporations prefer salary rather than dividends (pre-Tax Act of 2003) Payments of salary are not double taxed Salary payments are only for services rendered If salary is deemed in excess of services the excess is disallowed as deduction to corporation Deemed “Dividend” to S/H (JGTRRA currently taxes Dividends at 15%)
Background image of page 4
Limitation on Deduction for Executive Compensation “Publicly Held Corporations” Maximum Deduction of $1,000,000 of “Compensation” to certain employees Covered Employees CEO plus Any of four most highly paid officers “Applicable Employee Remuneration” Includes: Cash and benefits / Excludes: Commissions; performance related pay if approved by shareholders; payment to a qualified retirement plan
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Current Requirements for Educational Deductions Educational expenses are deductible if undertaken to: maintain or improve skills Note: no deduction for meeting minimum job requirements general education (nonspecific to job) education that qualifies TP for new job or meet express requirement of employer or law in order to keep job or rate of pay
Background image of page 6
Current Requirements for Educational Deductions Travel denied as a form of education Travel Deductible to educational event Qualified Higher Education Deduction for AGI ($3,000: 2002/03; $4,000: 2004- 09) From AGI if Employee--tuition, fees, typing, books, supplies, and qualifying
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Qualified Higher Education Expense -As of 2002, individuals are able to deduct certain expenses for qualified educational expenses for AGI: tuition and fees for Year Maximum Deduction 2002/03 $3,000 2004-09 $4,000* Deduction is FOR AGI (phased-out @ $130,000 for MFJ and $65,000 for others in 2002/03) Deduction is FOR AGI (phased-out @ $160,000 for MFJ and $80,000 for others in 2004-09) *Reduced Deduction of $2,000 for AGI levels between $130,000 and $160,000 (MFJ) and $65,000 to $80,000 (others)
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/06/2011 for the course ACE 346 taught by Professor Peter during the Spring '11 term at University of Illinois, Urbana Champaign.

Page1 / 28

Chapter 7 v2 - Income Taxation: Chapter 7 Deductions...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online