Who is the taxpayer?
February 13, 2011
Nolo Press Pages 318 to 327
Chapter 3 pages 11 to 12 (Special limitations on Standard Deduction for Dependents);
Chapter 3 pages 31-33 (Kiddie tax)
Chapter 4: Sections 4.3, 4.5, 4.6, 4.7, 4.8
Page 25-26; Expenditure for a taxpayer’s benefit
40, 43, 44, 50
12, 13, 14, 15, 30a, 40, 43, 44
Pages 4-34 to 4-37
Non-taxable benefits are better than taxable income:
Home ownership, fringe benefits (health insurance, accidenc insurance,
dependent care assistance, educational assistance, group term life insurance, employee
retirement plans, lodging on the business premises, moving expense reimbursements,
achievement awards, commuting benefits, employee discounts on goods or services, low
cost fringe benefits, cafeteria plans)
You have $100,000 which you could use to buy bonds or to buy a home that
you will live in.
The bonds yield 5 percent per year and the house appreciates 5 percent
Which do you prefer?
Are fringe benefits deductible by the employer?
Long-term capital gains are better than ordinary income
Ordinary losses are better than capital losses
Paying taxes later is better than paying taxes now (generally)
See example 52
on page 4-37
E.G. Deferred compensation
It is better to shift income to a taxpayer in a lower tax bracket (by gift, sale, or
See example 53 on page 4-38
Better to shift deductions to a higher tax bracket taxpayer
Who is the taxpayer (who pays the tax?)
Irwin earns salary of $2000 per week for 50 weeks during the year.
He is single and has a
five-year old child, Steve.
Irwin tells his employer to pay him $1800 per week and to pay his son the
other $200 per week.
He files his tax return, reporting $90,000 salary on his tax return and $10,000
income on his son’s tax return.
If the father is audited by the IRS will his tax be recalculated? How?
Substance versus form