chapter3(2) - Chapter 3 Taxable Entities, Tax Formula,...

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1 Chapter 3 Chapter 3 Taxable Entities, Tax Formula, Introduction to Property Transactions
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2 Taxable Entities Income is taxed to  the individual Entity Taxable? Individuals (not “person”) Proprietorships (no) Yes Corporations Yes Estates and Trusts (fiduciaries) Yes No S-Corporations No Primary Business Forms Sole proprietorships S-Corporations Corporations
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3 Taxable Entities Individuals Citizens and resident aliens Nonresident aliens (30% flat tax, generally) Sole proprietorship business Partnerships S-Corporations Distributions of taxable income from estates and trusts
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4 Corporations Taxation of Corporations General Qualifying Nonprofit Corporations Corporate Tax Formula Income (broadly conceived) Less: Exclusions Equals: Gross Income Less: Deductions Equals: Taxable Income Times: Tax Rates Equals: Gross Tax Less: Equals: Tax Due (or Refund)
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5 Fiduciary Taxpayers Fiduciary Taxpayers includes trusts and estates taxed on undistributed income distributed income taxed to distributee
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6 Tax Formula for Individuals Income (broadly conceived) - Exclusions = Gross Income - Deductions for AGI = AGI - the larger of: (a) itemized deductions or (b) the standard deduction - personal & dependency exemptions = Taxable Income Tax on taxable income - Credits - Prepayments = Taxes payable or refund due
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7 Exclusions What is an exclusion? Examples Gross Income What is Gross Income? How is it reported?
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8 Deductions for AGI Examples: Alimony paid Deductions related to a trade or business of a self-employed person, i.e., proprietorships Deductions related to property held for production of income, rents, royalties Losses on sale or exchange of property Reimbursed employee business expenses (reported on TP’s W-2) Unreimbursed employee business expenses are deductible from AGI Moving expenses Many others
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9 Deductions from AGI (Use larger of standard deduction or itemized deductions) ITEMIZED DEDUCTIONS Certain medical expenses Income and property taxes (but not sales taxes) Interest paid/incurred, except: NO personal interest other than for a primary or secondary residence Charitable contributions Casualty and theft losses Miscellaneous deductions Unreimbursed travel, transpiration, outside business expenses (salespersons), most employee business expenses Others
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This note was uploaded on 11/17/2011 for the course ACCY 312 taught by Professor Vare during the Fall '11 term at University of Illinois at Urbana–Champaign.

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chapter3(2) - Chapter 3 Taxable Entities, Tax Formula,...

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