Class 1b - Gross Income

Class 1b - Gross Income - TaxationoftheBusinessEntity...

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Taxation of the Business Entity  Online Lecture Series Gross Income of a Business Presented by Akore Berliner, CPA
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What is Gross Income? Includes  ALL income from whatever source  derived, unless specifically  excluded  under  the Code Be cautious - Open to interpretation includes taxable and nontaxable Income Similar to “gross receipts” Does not include:  a return of capital or receipt  borrowed funds
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Form of Gross Income Not always cash! Can be in the form of:  Cash “In-kind” cash equivalents  (i.e., property or services) income is equal to FMV of property or services
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Recognized vs. Realized Income Realized income is  not currently taxed i.e., Economic Appreciation  (no property disposition) Recognized Income  is currently taxed i.e., Sale of Property  (proceeds are collected) Realized income becomes recognized 
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Gross Income Sources Personal Services  – employment or self employment taxable to the person who performs the  services Income from Property  –  sale or rental of property taxable to the owner of the property Income from Investments  Taxable in year of allocation Can have income but no cash or property  received Assignment of income is not permitted
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C4-6 Accounting Methods  There are 3 primary methods of accounting  for tax purposes, which determine  when  income is Recognized 1. Cash receipts and disbursements method 2. Accrual method 3. Hybrid method
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C4-7 Cash Receipts Method Income is recognized in the year it is actually or 
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Class 1b - Gross Income - TaxationoftheBusinessEntity...

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