ACIS 3314 Homework 11 AMT Problems
The exemption amount has increased to $51,900 for a single taxpayer, $80,800 if married filing jointly or qualifying
widow(er) or $40,400 if married filing separately.
57.Brooklyn files as a head of household
38. Clyde currently commutes 55 miles to work in the city. He is considering a new assignment in the
suburbs on the other side of the city that would increase his commute considerably. He would like to
accept the assignment, but he thinks it might require
Chapter 12 In class problems
32. Marcus is the CEO of publicly traded ABC Corporation and earns a salary of $1,500,000. Assume ABC has a 35 percent
marginal tax rate.
a. What is ABCs after-tax cost of paying Marcuss salary (excluding FICA taxes)?
47. Annes marginal income tax rate is 30 percent. She purchases a corporate bond for $10,000 and the
maturity, or face value, of the bond is $10,000. If the bond pays 5 percent per year before taxes, what is
Annes annual after-tax rate of return from the
Through November 2009, Tex has received gross income of $120,000. For December, Tex is considering
whether to accept one more work engagement for the year. Engagement 1 will generate $7,000 of revenue at a
cost of $4,000 which is deductible for AGI. In co
How is neutrality a characteristic? Isnt that the purpose of tax?
certainty > I can expect what the tax rate is going to be
Cant make decision if I dont know what the tax system is
sales tax is pretty certain
convenience is the main reason why sales and e
Why do we separate AGI and then deduct more?
What are pass-through entities and gains?
Thus, the lower tax rate on long-term capital gains produces several distortions: (1) It encourages
investments purely for tax purposes that would not make any sense wi
1. What social and/or economic problem is the Presidents tax proposal intended to
Social problem: wealth disparity
more accessible child care
Lower taxes for middle class families
tax code for working americans
Tax cut for middle class but more t
Do we have income? What is incomes? Is it income?
If we have an obligation to repay it, it is not incomes
if it a return on an investment, it is not income
If there are exclusion, then it is not income - eg. interest paid on municipal bonds is not income
The economy grows bottom up > middle class economics > inclusive capitalism ( the new york
Direct spending and tax credits > achieve the same thing
once is directed by the IRS, one is not
discretionary vs. mandatory spending
Debtor, creditor, related person rule
installment > we get some of the money of the sale of property in the year it was purchased, but on all
of it, it is tied to when are we receiving the payments
usually sale of real estate,
contract price > the total a
Sales tax and local tax are not deductible because they are not ordinary for your trade or business, but
only to keep you out of jail
Interest expense > only for capital, you can choose that, so you dont need to do it
tax rate arbitrage
home equity loans
Who Cares About Taxes
- Where should the business locate?
- What is the appropriate mix of debt and equity for the business?
o Would you like to own a home?
What Qualifies as a Tax?
- Payment required (it is
Taxpayer Filing Requirements
o All must file regardless of taxable income
- Estates and Trusts
o Required to file if gross income exceeds $600
o Filing is determined by taxpayers filing status, age, and gro
Tax Exam 2
Deductions Directly Relate to Business
Trade/Business Expenses (For AGI); directly connected to business activity; ordinary, necessary, and reasonable; expense and revenue claimed on Schedule C (Net
income/loss shows up
1. Moving expenses
a. Limited to reasonable expenses associated with moving personal possessions
and traveling to the new residence, including transportation and lodging.
b. Can deduct a mileage rate in lieu of the actual costs of driving personal
Jill only does this because they are in the family
but as far as tax goes, they are different entities
the stocks that are owned by the CEOs family, then they are related parties to the company
CEO and corporations transactions would is disallowed to dedu
Read at least the four articles referenced belowyou can easily find moreand write a paper that
evaluates the proposed Federal gas tax hike in terms of the AICPAs ten guiding principles of good tax
policy as described in its Tax Policy Concept Statement #1
Intemiized deductions > medical expense, etc. etc.
Standard Deduction > if your itemized isn to as much, then you just take the standardized, changes
Recovery of tax benefit items
If we didnt get an income tax benefit from a deduction, then it
The direction of your investment depends on what group of tax clientele you are in
Tax rate arbitrage
- A strategy that finds a way to make profit with no net investment
- The way it does it is through different tax rate
Some of the arbitrage are naturall
sales price + the deduction you get on the loss
you get a deduction for the ordinary tax rate
but your dividends get taxed on capital gains rate
the risk of shares going up or down is being taken by the 46 days
you have to do the 0.08 is the quarterly div
Average Tax Rate = Total Tax / Taxable Income
Effective Tax Rate = Total Tax / Total Income
Future Value = Present Value x (1 + rate)# of years
Future Value (interest) = Investment Amount (1 + After Tax
Rate of Return)# of yrs
Future Value (stock
Tax Exam 2 (Ch. 6,7, 11)
- Deductions Directly Relate to Business
o Trade/Business Expenses (For AGI) ; directly connected to business activity;
ordinary, necessary, and reasonable; expense and revenue claimed on Schedule C
ACIS 3314 Spring, 2013
1. See concept sheet
a Realization concept and Related Party Rule
c Administrative Convenience
d Tax Benefit Rule
b Tax Benefit Rule
c Assignment of Income and Realization
d Assignment o