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Ch3 outline - o Unemployment Compensation o Social Security...

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ACCT 3221 – CH 3 – GROSS INCOME: INCLUSIONS AND EXCLUSIONS Gross Income – Permitted Deductions = Total Income When to Record Income o Must be economic benefit o Transaction must have reached a conclusion o Income cannot be tax-exempt Cash Method of Accounting o Cash Method: record income when received, not earned Taxable Components of Gross Income o Form 1099-INT o Interest on U.S. Savings Bonds o Dividends Taxation of Dividends Form 1099-DIV Qualified Dividends: o Made from the earnings and profits of payer corporation o Are from domestic corporations or qualified foreign corporations o State and Local Tax Refunds If taxpayer deducted state or local taxes as an itemized deduction on Sch. A in the prior year, must report the refund as income in year it was received. (Tax Benefit Rule) Taxable amount is lesser of: Amount received Amount deducted on Sch. A Amount by which the itemized deductions exceed the standard deduction
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Unformatted text preview: o Unemployment Compensation o Social Security Benefits Exclude s.s. benefits from taxation for lower-income individuals but tax up to 85% of benefits for taxpayers with higher income If provisional income (MAGI) exceeds certain thresholds, 50% of s.s. benefits are taxable o Other Income Jury duty pay Prizes and awards Forgiveness of debt Certain insurance proceeds • Items Excluded from Gross Income o Nontaxable Employee Fringe Benefits No-additional-cost services (unused hotel rooms, airline seats) Discounts Working condition fringe benefits Qualified transportation fringe benefits Moving expense reimbursements De minimis benefits o Other Nontaxable Income Scholarships and Fellowships Life Insurance Proceeds Gifts and Inheritances Compensation for Sickness or Injury Child support...
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