K a separate tax intended to close loopholes what is

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k. A separate tax intended to close loopholes. What is the alternative minimum tax? Review Question 2. Mabel, single, just reached the age of 65 and was somewhat relieved because she remembered hearing of the tax she would save as a 65-year-old sen- ior. What tax savings can Mabel expect? Perhaps none. The only benefit for being 65 years old is an additional standard deduction ($1,350 for unmarried taxpayers for 2008). If Mabel itemizes her deductions rather than claiming the standard deduction, she receives no benefit. If she does not itemize, her standard deduction for 2008 is $6,800 (the basic standard deduction of $5,450 plus the extra $1,350). Review Question 3. Dick and Jane just learned that they are expecting their first child. What tax benefits can they expect after Junior is born? 3–26 TAXABLE ENTITIES, TAX FORMULA, INTRODUCTION TO PROPERTY TRANSACTIONS
Many. First are the dependency exemption deduction ($3,500 for 2008) and the child tax credit ($1,000 for 2008). In addition, Dick and Jane can look forward to a credit for any job-related child care expenses that they pay. Review Question 4. Are deductions of a sole proprietor deductible for or from adjusted gross income? (Hint: see lines 23 through 27 on Page 1 of Form 1040 and Schedule C in Appendix B of this book.) The trade or business expenses of a sole proprietor or someone who is self-employed are deductible for A.G.I. Note that these are not shown as one of the deductions for A.G.I. on Page 1 of Form 1040. Instead, they are netted against the sole proprietor’s income on Schedule C, and this net profit is included in the taxpayer’s total income reported on Page 1 of Form 1040. Review Question 5. A sole proprietor’s income generally is subject to self- employment tax. Is the deduction for one-half of the self-employment tax deducted for or from adjusted gross income? Is it reported on Schedule C or Form 1040? This is a deduction for A.G.I. and is reported as a deduction for A.G.I. on page 1 of Form 1040 (and not Schedule C). INTRODUCTION TO PROPERTY TRANSACTIONS The tax provisions governing property transactions play a very important part in our tax system. Obviously, their major purpose is to provide for the tax treatment of transactions involving a sale, exchange, or other disposition of property. However, the basic rules cover- ing property transactions can also impact the tax liability in other indirect ways. For example, the amount of the deduction granted for a charitable contribution of property may depend on what the tax result would have been had the property been sold rather than donated. As this example suggests, a basic knowledge of the tax treatment of property transactions is helpful in understanding other facets of taxation. For this reason, an overview of property transac- tions is presented here. Chapters 14, 15, 16, and 17 examine this subject in detail.

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