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held for use in, the United States, and if the activities of the U.S. business are a material factor in the realization of the income.Income-shiftingIncome-shifting is the transfer of income from one family member to another who is subject to a lower tax rate or the selection of a form of business that decreases the tax liability for its owners.Individual Retirement Account (IRA)Any individual may contribute 100 percent of earned income, up to $5,500 a year, to an IRA ($11,000 on a joint return, i.e. $5,500 per spouse). Taxpayers over age 50 are allowed to contribute an additional $1,000. The contributions are deductible from gross income, except for individuals who participate in a qualified deferred compensation plan with AGI over a certain level ($59,000 in 2013, and for joint filers, $95,000 in 2013. The investment grows tax-deferred, but all withdrawals constitute gross income. A 10 percent penalty on gross income is levied on pre-age 59½ withdrawals, except on account of disability, death, first-time home purchases (up to $10,000), insurance premiums for the unemployed, deductible medical expenses, as well as withdrawals in the shape of annuities. Withdrawals must start with respect to the year the participant reaches age 70½. An IRA may receive tax-deferred rollovers from other qualified plans, including other IRAs. Distributions from IRAs are not subject to withholding.The Roth IRA began in 1998. Nondeductible contributions to a Roth IRA can be made by individuals with AGI up to $112,000 ($178,000 on a joint return). The income is nevertaxed if the account is more than five years old andthe participant is deceased, disabled, or over 59½ years old. The overall annual limit is $5,500 ($6,500 for taxpayers over age 50) per individual for allcontributions allIRAs (except education IRAs), deductible or not in 2013. No age limit exists for establishing, making contributions to, or accumulating funds in a Roth IRA. The 10 percent penalty provisions are the same as for a regular IRA, but the contributions may be withdrawn first, at any time, for any purpose, without tax or penalty consequences.InheritanceAs distinguished from a bequest or devise, an inheritance is property acquired through laws of descent and distribution from a person who dies without leaving a will. Property so acquired takes as its basis, for gain or loss on later disposition or for depreciation, the fair market value of the property at the date of death of the decedent from whom it is acquired. An inheritance of property does not give rise to taxable income, but the incomefrom an inheritance does. And if the inheritance is of income from property, such income is taxable.Installment methodThe installment method of reporting income allows the profit on an installment sale to be taxed over the period that payments are received. The amount taxed in any year is equal to the payments received times the gross profit ratio (the total gross profit divided by the total contract price). However, the entire amount of any gain recaptured under Code Sec. 1245 or 1250 is reported in the year of sale regardless of whether any payment is received in that first year. Use