WGU C237 Taxation I

WGU C237 Taxation I Leave the first rating Students also studied Terms in this set (77) Western Governors UniversityD 102 Save Taxation 1 Pre-Assesment 69 terms RaphaelMan7 Preview Taxation C237 (Pre-assessment guid...66 terms adam_puente96 Preview WGU C723 Quantitative Analysis for ...114 terms JessicaLynnWahl Preview Taxatio 40 terms Kel Describe the history of taxation in the USunconstitutional 1895 Sources of Tax Law-Legislative Branch- Internal Revenue Code (Top)

• Congressional Committee Reports

Describe the criteria of an equitable tax structure Equity Is it Fair Simplicityunderstandability Economyminimal compliance and administrative costs - Convenience no burden of records and compliance CertaintyStability and certainty of amount of taxes Regressivedecreases as tax base increases Proportionalflat tax Progressivetax increases as tax base increases Gross IncomeTotal income - Exclusions Taxable incomeGross income-Deductions-Exemptions Income before tax creditsTaxable income x tax rate

Total tax liabilityIncome before tax credits-tax credits balance due or refundtotal tax liability - Prepayments Distinguish between various types of taxesState Tax Local Income Franchise Tax Wealth transfer tax Gift tax Federal Estate tax Property tax Federal excise tax - customs Sales Tax Identify different types of entities that are subject to taxation in the US -Tax paying entities Individuals C Corps -Flow through Entities sole proprietorship Partnerships S Corps LLC LL Partnerships Trusts Describe the administrative procedures of the IRS Enforcement procedures - verify accuracy and audit Statute of limitations - 3 years; up to 6 years if off by 25%; no limit for civil fraud Describe various components of a tax practice Tax Compliance and Procedure Tax Research Tax Planning and Consulting Financial planning Define each component of the individual income tax formula Income Exclusion - any nontaxable income Deductions - for AGI - expenses connected with business; from AGI - personal expenses Adjusted Gross Income Itemized Deductions and Standard Deductions Personal exemption Taxable Income Tax Rates and Gross Tax Credit and prepayments - some credits are refundable Identify three conditions that must be met for income to be taxable Economic benefit Realization of Income Recognition of Income Identify the primary accounting methods for individual tax purposes cash receipts and disbursements method accrual method hybrid method

Define gross income in accordance with IRC Sec 61a all income from whatever source derived, including (but not limited to) the listed items of income. or income reduced by exclusions Explain tax planning strategies individuals can use to minimize their tax liabilities Shifting Income Maximizing Itemized Deductions MFJ vs MJS Splitting Income Identify terms that the IRS does not define as income Unrealized Income Self-Help Income Rented value use of personal property Gross sale price of property Identify various types of major statutory exclusions from gross income Gifts and Inheritance Life Insurance Welfare Certain scholarships qualified adoption expenses person injury payments discharge from indebtedness

• Identify the difference between a realized gain and a

recognized gain Realized G/L - Amount Realized - Adjusted Basis Recognized gain = amount actually reported on tax =< Realized xss=removed xss=removed xss=removed xss=removed xss=removed>

Lobbying and Political contributionsnot deductible; unless at the local level when involved directly in the taxpayers business Startup businessCurrent ded = lessor of Actual amounts spent or $5000 with phase out for amounts over $50,000. Rest must be capitalized and amortized over 180 months starting in month business begins explain the restrictions applied to expense deductions not allowed unless specifically allowed must meet criteria before an expenditure can be deducted (ex. medical threshold) Overall limitation for wealthy taxpayers for itemized deductions

Capitalization vs expensemust capitalize if:

• Provides permanent improvement that increases value
• Restores property to normal usage

Regular maintainence is a deduction Identify the time period when an expense becomes a deduction Determine deductions from Adjusted gross income itemized deduction vs standard deductions

• Identify the times of medical expenses that qualify as

itemized deductions Diagnose, cure, Treat, prevent long-term care Medical care insurance Transportation Affects structure or function of the body Describe the limits on the amount of qualified medical expenses that can be deducted auto mileage - 23.5 cents per mile meals - 50% lodging $50 per night/$50 for companion if necessary

10% AGI

Identify the types of taxes and interest that qualify as itemized deductions S&L, Foreign real property taxes S&L, personal property based on value S&L Foreign Income S&L Sales tax if elected S&L Taxes for T orB or income property Identify examples of deductible charitable contributions Govt's 501c3 org War Veterans Post Churches Schools Hospitals Certain private operating foundations Describe the limits on the amount of qualified contributions that can be deducted 20% - capital gain to private 30% - capital gain property 50% - public charity Can be carried over for 5 years