T12S-Chp-02-1-Income-Tax-Concepts-2012

T12S-Chp-02-1-Income-Tax-Concepts-2012 - Chapter 2Income...

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Chapter 2- Income Tax Concepts Instructor PowerPoint Slides Updated-January 7, 2012 Howard Godfrey, Ph.D., CPA Professor of Accounting ©Howard Godfrey-2012
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Part-1. General Concepts (ability to pay, administrative convenience, arms-length, pay-as-you-go) Part-2. Accounting Concepts (entity, assignment of income, annual accounting period, accounting method, tax benefit rule, substance-over-form) Part-3. Income Concepts (all inclusive, legislative grace, capital recovery, realization, claim of right, constructive receipt, wherewithal to pay) Part-4. Deduction Concepts (legislative grace, business purpose, capital recovery)
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General Concepts Ability-to-Pay Admin. Convenience Arm's-Length Trans. Pay-as-You-Go
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Part-1. General Concepts: Ability to pay. Should a person’s tax liability be based on income or ability to pay? Suppose an individual has a salary of $100,000, and has uninsured medical expenses of $80,000 . Should the income tax liability be related to $100,000 or $20,000 ?
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administrative convenience Michael coaches a little league baseball team. He uses his employer’s copy machine (with employer consent) to makes 15 copies of the team’s schedule to give to the players. Does Michael include the cost (or value) of the copies in his
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Part-1. General Concepts: arms-length. Susan purchased a lot for investment purposes. She paid $10,000 for the lot. Three years later she sold the lot to her daughter for its current value of $8,000 . May Susan deduct the loss?
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Part-1. General Concepts: pay-as-you-go. Thomas earns a salary of $200,000 and $40,000 was withheld from his paycheck for federal income tax. Sally earns interest income of $200,000 per year, but does not have any income tax withheld. How (when) will Sally per her
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Entity Acct. Period Acct. Concepts
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stock of Big Corporation, which is a C corporation. Ben earned a salary of $200,000 from Big Corp. Big Corp. had net income of $100,000 in 2012 . Ben received dividends of $1,000 from Big. Corp. Ben paid $30,000 on 1-1-2012 for a 25% interest in BCD partnership, which owns rental property. BCD’s revenue of $90,000 & expenses was $50,000. No salary or guaranteed payment was made to any partner.
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Ben's Ben paid $60,000 for Big Corp. stock on 1-1-12. Return Big Corp. paid salary to Ben $200,000 ? Ben's ownership of Big Corp. 5% Big Corporation's net income $100,000 ? Ben's dividend from Big Corp. $1,000 ? Ben paid $30,000 for capital in BCD Ptshp on 1-1. BCD Partnership Rent Revenue $90,000 BCD Partnership expenses $50,000 BCD Partnership net income $40,000 Ben's ownership of BCD Ptshp 25% ? Ben's withdrawal from BCD $4,000 Ben's Adjusted Gross Income ? Ignore deduction for self-employment tax Ben's basis in corporation at 12-31-2012? ? Ben's basis in partnership at 12-31-2012?
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This note was uploaded on 03/09/2012 for the course ACCT 4220 taught by Professor Burton during the Spring '08 term at UNC Charlotte.

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T12S-Chp-02-1-Income-Tax-Concepts-2012 - Chapter 2Income...

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