Federal Taxation Outline

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Chapter 3 3.1 Tax Formula Income (Gross receipts, taxable and nontaxable, except return of capital or receipt of borrowed funds) Less: Exclusions Gross Income Less: Deductions for AGI AGI Less: Greater of itemized/standard deduction Less: Personal/dependent exemptions Taxable Income Less: Tax Credits Tax Due/Refund Deductions for AGI (above the line deductions) * Expenses incurred in a trade or business * One half of self-employment tax paid * Unreimbursed moving expense * Contributions to traditional IRAs and other retirement plans * Fees for college tuition and related expenses * Contributions to…show more content…
Tiebreaker rules: If a child is claimed as a qualifying child by two or more taxpayers in a given year, the child will be the qualifying child of: * The parent * If more than one taxpayer is the child’s parent, the one with whom the child lived for the longest time during the year, or, if the time was equal, the parent with the highest AGI * If no taxpayer is the child’s parent, the taxpayer with the highest adjusted gross income (AGI). Qualifying Relative * Relationship Test: Any relative, lineal ascendants, collateral ascendants, in-laws OR the individual must live in the taxpayer’s household for the entire year (temporary absences, such as illness, education, business or military service are ignored if it is reasonable to assume the person will return to the household) ***(ex-spouse can be member of household only in year following divorce)*** * Gross Income Test: The individual’s gross income for the calendar year in which the taxpayer’s tax year begins must be less than the exemption amount for the year, $3,800 for 2012. * Support Test: Over half of the individual’s total support for that calendar year must have been furnished by the taxpayer. 1. Exceptions to this test a. Multiple Support Agreements * Sometimes no one provides more than half the support of a person. Multiple support means that two or more people together provide more than half the dependent's support. * Any person who contributes more than

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