Ch 5 - Before we start Before we start Switch off your cell...

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Unformatted text preview: Before we start Before we start Switch off your cell phone Switch off your cell phone Sign the attendance sheet Sign the attendance sheet Get ready for a quiz Get ready for a quiz Principles of Taxation Principles of Taxation Based on Based on Principles of Taxation for Business and Investment Planning Principles of Taxation for Business and Investment Planning by Sally M. Jones by Sally M. Jones Instructor: Instructor: Oksana Alexandrovna Korneo, MBA Oksana Alexandrovna Korneo, MBA o_korneo@kimep.kz o_korneo@kimep.kz Office #307, Dostyk Building Office #307, Dostyk Building Taxable Income from Taxable Income from Business Operations Business Operations Business Profit as Taxable Income Business Profit as Taxable Income Taxable income Taxable income- gross income minus allowable deductions. Gross income Gross income- all income from whatever source derived. Firms can deduct: most of routine operating expenses various state, local and foreign taxes incurred in carrying on the business activities the cost of assets acquired for long-term use in their business (such as depreciation) The federal income tax is imposed on net profit net profit rather than gross receipts The Taxable Year The Taxable Year A firm must measure its taxable income every year and pay it on annual basis annual basis . Calendar year Calendar year January through December Fiscal year Fiscal year any 12-month period ending on the last day of any month except December A firm could use calendar or fiscal year as its taxable year taxable year . The choice of a calendar or fiscal year is usually dictated by the firmss operating cycle. Changing a Taxable Year Changing a Taxable Year As a general rule, a new business entity establishes its taxable year by filing an initial tax return on the basis of such year After establishing a taxable year, a firm can't change its year unless it formally requests and receives permission to do so from the IRS Corporation B, a calendar year taxpayer since 1985, recently developed a new line of business with an annual operating cycle ending in midsummer. The corporation requests and receives permission from the IRS to change to a fiscal year ending July 31. To move from a calendar year to a fiscal year, the corporation files a return for the period January 1 through July 31, a period of only seven months. Corporation B's returns for future years win reflect a 12-month taxable year running from August 1 through July 31. Jan 1 Jan 1 Dec 31 Dec 31 July 31 July 31 July 31 July 31 Short period return Annualizing Income on a Short-Annualizing Income on a Short-Period Return Period Return Corporation in the previous example generates $10,000 monthly income ....
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This note was uploaded on 12/14/2011 for the course ECONOM 110 taught by Professor Tuturukov during the Spring '11 term at London College of Accountancy.

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Ch 5 - Before we start Before we start Switch off your cell...

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