WGU C237 Taxation I definitions

WGU C237 Taxation I definitions Leave the first rating Students also studied Terms in this set (32) Social SciencesEconomics Finance Save Taxation C237 40 terms Kelly_J59Preview Taxation I c237 21 terms rewards_ambPreview

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D076 -

Teacher Dan Practice questions for this set Learn1 / 7Study using Learn most common gross receipts do not exceed 1mil when cash is received not earned cash, property, or services accounts receivable has no value Horizontal equitysimilarly situated taxpayers should be treated equally Vertical Equitytaxpayers who are not similarly situation should not be treated the same Choose an answer 1cash receipts and disbursements method 2Horizontal equity 3Splitting Income4average tax rate Don't know?

Tax basethe amount to which the tax rate is applied to determine the tax due Marginal tax ratethe tax rate applied to an incremental amount of taxable income that is added to the tax base average tax rateTotal tax liability / amount of taxable income effective tax ratetotal tax liability / total income

Surviving SpouseFor 2 years after spouse death if:

-have not remarried by the end of year -be a us citizen or resident -have qualified to file joint return in year of death -have at least 1 dependent son or daughter living at home during the entire year -pay over half of the expenses of the home Head of Household-be unmarried as of the last day of the tax year, or married to nonresident alien, or abandoned -not be a surviving spouse -be US citizen or resident -pay over half of the costs maintaining household in which a dependent lives for more than half of the tax year Discriminant Function System DIFused to classify returns to be selected for audit Tax brackets10 15 28 33 35 39.6 capital gainis a gain or loss from the sale or exchange of a capital asset capital assetsare assets other than those listed in Sec 1221 Splitting Incomeconsists of creating additional taxable entities, especially corporations in order to reduce an individuals effective tax rate shifting incomethe process of transferring income from one family member to another; such as gifts of stock or bonds to family members who are in lower tax brackets cash receipts and disbursements methodmost common gross receipts do not exceed 1mil when cash is received not earned cash, property, or services accounts receivable has no value constructive receipta cash basis tax payer may report income in the year in which it is actually or constructively received.

Accrual methodgenerally report income in the year it is earned. When all the events have occurred that fix the right to receive the income and when the income can be determined with reasonable accuracy Prepaid Incomegenerally taxable in the year of receipt, even with accrual based accounting *accrual basis tax payers may defer recognizing income in certain cases if the method of account for the sale is the same for tax and financial accounting purposes hybrid methodcombination of cash and accrual Series EE exclusion =[series EE interest] x [Net qualified educational expenses]/ ([series EE interest] + [principal]) Royaltiesproceeds paid to an owner by others who do business under some right belonging to the owner.stock dividendcan not be taxed because they are not realized income; unless given a cash option capital gain dividenda distribution by a regulated investment company (mutual fund) of capital gains realized from the sale of investments in the fund constructive dividenddistributions that are intended to result in a deduction to the corporation and taxable income to the shareholder alimonydeduction to payor; taxable to payee

Must:

be made in cash pursuant to divorce, separation, or written agreement Terminate at death of payee not be designated as anything else be between people living separately child support & property settlementsnot subject to tax or deductible Unearned incomeincome from investments other than work Punitive damagesare always taxable even if physical injury is involved Amount Realized =Cash + FMV + debt assumed by buyer Adjusted Basis =Initial Bases + Capital additions - Capital recoveries Capital RecoveriesDeductions for casualty losses Depreciation & amortization Capital Additionsadd value; prolong life; adapt to a different use