History of U.S. Income Taxes:
1. First enactment of an income tax?
A. Massachusetts Bay Colony - 1634, or
B. Civil War (both sides) - 1861
- repealed after the Civil War
2. Federal government financed its operations primarily with tariffs unti
CONSOLIDATION AS OF THE DATE OF ACQUISITION
ANSWERS TO QUESTIONS
Q4-1 An adjusting entry is recorded on the company's books and causes the balances
reported by the company to change. Eliminating entries, on the other hand, are not
recorded on th
THE REPORTING ENTITY AND CONSOLIDATED FINANCIAL STATEMENTS
ANSWERS TO QUESTIONS
Q3-1 Underlying the preparation of consolidated financial statements is the notion that
the consolidated financial statements present the financial position and the
Tax credits have been used by Congress as policy tools.
1. R & D credit
2. Energy credit
The most important thing to know about tax credits is that they are more important than
1. A tax credit reduces yo
Alternative Minimum Tax
The purpose of the Alternative Minimum Tax (AMT) is to levy a minimum amount of tax upon
individuals (and C corporations) who would pay little or no tax using the regular tax rules, even
though they earn a significant
Certain Itemized Deductions
In general, personal expenses are not deductible.
However, chapter 10 is primarily concerned with expenses that are essentially personal in nature
but which are deductible "due to legislative grace."
Deductible Employee Expenses
Employee expenses fall into one of the following categories:
Some of the above are not limited to employees. For example, transportation
Depreciation, Amortization, and Depletion:
The key to correctly depreciating assets for taxation is classification!
1. The applicable system of depreciation or cost recovery is dependent upon the date the property
is placed in service.
A. If t
1. Generally, if a taxpayer sells a goods or services on credit and the account receivable later
becomes worthless, a bad debt deduction is permitted using the "specific charge-off method"
(a.k.a. "direct write-o
Tax Consequences of Renting a First/Second Home*
(A.k.a. Rental of a Vacation Home)
at all during
for 15 or
more days for
Were the personal
use days more
than the greater
of 14 days or 10
Deductions and Losses: In General
In most cases, a deduction for AGI is more beneficial than a deduction from AGI.
1. A deduction for AGI can always be taken, but a deduction from AGI can be lost if the
taxpayer does not itemize (i.e. the
This chapter discusses exclusions from income specifically created by Congress. Most of these
exclusions can be found in Sections: 101-150.
Many of the topics from prior chapters are revisited in this chapter.
1. Generally, gifts are ex
Concepts of Income:
1. Economic income - the amount that an individual could consume during a
period and be as well off at the end of the period as he/she was at the beginning of
The economic definition of income would include unrea
Refer to Figure 1-2 for the formula for the Federal Income tax for individuals.
Income (Broadly conceived): includes all of the taxpayer's income.
a. Includes both taxable and nontaxable income.
b. Similar to gross receipts, but does not includ
Tax Law Origination (How a tax law is created!)
Tax bill is introduced on the
Floor of the House of
New tax law
Tax bill dies
Tax bill is considered,
amended, and voted on by the
House Ways and Mean
Republic Act No. 6981
April 24, 1991
AN ACT PROVIDING FOR A WITNESS PROTECTION,
SECURITY AND BENEFIT PROGRAM AND FOR
a) to testify before and provide information to all
appropriate law enforcement officials concerning all