copiuta corporate tax

copiuta corporate tax - Competing Objectives Result in a...

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Competing Objectives Result in a Complex Law Structure: Revenue Needs, Economic Considerations, Social Considerations, Equity (Fairness) Considerations, Political Considerations Economic Considerations: Control the economy (e.g., favorable depreciation deductions for purchase of business property), Encourage certain activities (e.g., research and development deductions and credits), Encourage certain industries (e.g., agriculture and natural resources incentives), Encourage small business (e.g., ordinary loss deduction on stock in small business) Social Considerations : Tax-free medical coverage provided by employers to encourage health insurance, Deferred tax treatment of certain retirement funds to encourage saving for retirement, Deduction for charitable contributions to encourage funding of socially desirable programs by private individuals and companies, Disallowed deductions for expenditures against public policy (e.g., illegal bribes, kickbacks) Equity Considerations : Alleviate the effect of double taxation: Deduction for state and local taxes, Credit or deduction for certain foreign taxes, Deduction for dividends received by corporations to prevent triple taxation; Wherewithal to Pay concept: Defers taxation when a taxpayer’s economic position has not changed, Exchange of assets might result in gain but no cash, so some tax may be deferred; Annual accounting periods: In some cases, e.g., start-up businesses, a revenue-generating cycle may be greater than the 12 month maximum tax reporting period, To accommodate this, net operating loss rules allow losses from one year to be used in another year. This minimizes the adverse impact of arbitrary reporting periods; Inflation adjustments are included in tax rate schedules. If earnings increase solely by cost-of living amounts, taxes will not be imposed at higher rates on the increase. Political Considerations : Special interest legislation, Response to public opinion (political expediency), State and local influences Agencies Influencing Tax Law : Internal Revenue Service (IRS) = Works to get Congress to “close loopholes”, Publishes “statutory regulations” authorized by Congress and given force of law, Publishes other regulations which outline the IRS’ position on certain issues Aids to IRS in collecting revenue = Tax Return Audits, Information reporting (W-2s and 1099s), Withholding, Interest and penalty assessments Courts = Judicial concepts : Substance over form, Arm’s length , Continuity of interest, Business purpose Judicial rulings: Some rulings highlight undesirable aspects of present law, which may lead Congress to adopt a change in law Statutory Sources of Tax Law: Internal Revenue Code = Codification of the Federal tax law provisions in a logical sequence = Have had three codes: 1939, 1954, 1986 Arrangement of the Code: Subtitle A—Income Taxes, Chapter 1. Normal Taxes and Surtaxes, Subchapter A. Determination of Tax Liability, Part I. Tax on Individuals Sections 1 to 5 (Various Titles), Part II. Tax on Corporations Sections 11 to 12 (Various Titles) Example Code Citation : § 2(a)(1)(A)=> §
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