Solutions to Homework Assignments: Chapter 4

32. Which of the following amounts must be included in the gross income of the recipient?

i. The gross income information from Jessie Robinson's W-2 form. TIP: This is the amount from question 7b above.

* What are the differences between the following components of taxable income? Provide at least one example of each.

people with financial gain and not those on a lower income based. This gives them less

is generally applied to taxpayers. In particular, explain how the Code’s definition of income is different than other potential definitions of income, such as the economic concept of income, and use an example to illustrate the difference between the two systems. Explain how the Code approaches whether or not particular items should be included in income and how

Tax deductions reduce taxable income; their value thus depends on the taxpayer’s marginal tax rate, which rises with income. Tax credits directly reduce a person’s tax liability and hence have the same value for all taxpayers with tax liability at least equal to the credit. In addition, some credits are refundable; they are not limited by the taxpayer’s tax liability.

Which of the following amounts must be included in the gross income of the recipient?

Once a gain or loss is recognized, a taxpayer must determine how the recognized gain or loss affects the taxpayer’s tax liability. The character depends on a combination of two factors: purpose or use of the asset and holding period. The purpose or use of the asset is important because the law does not treat all assets equally. The general use categories are: (1) trade or business, (2) for the production of income (rental activities), (3) investment, and (4) personal. Based on these criteria, we can categorize an asset into one of three groups: (1) ordinary, (2) capital, or (3) section 1231. Characterizing the gain or loss is important because all gains and losses are not equal. Ordinary gains and losses are taxed at ordinary income rates, regardless of the holding

4) Explain the differences between statutory and ordinary income. Give examples of either category in your answer.

1(a) As a result of a recent court settlement for a client John earned $300,000 for his law practice LLC. He wants to minimize his tax liability and understand how the IRS will treat this money earned. He lease’s office space for $3,500 per month. He wants to know the advantages in leasing office space versus purchasing the building.

After EGTRRA: tax rates are as follows 50 percent in 2002; 49 percent in 2003; 48 percent in 2004; 47 percent in 2005; 46 percent in 2006; 45 percent in 2007-2009. The estate

Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers' tax obligations. Congress created the AMT in 1969, targeting

Note: There are not an hearable issues because their income, according to his information verbally provided to me, is what is coded in the system (DHR). There is no discrepancies also on what the caseworker narrated. Below is the portion extracted from ACCESS of the income calculation:

Be informed and dispel the anomalies surrounding tax depreciation to make it a tool of financial

Capital gains – An individual is subject to capital gains tax on the sale of real property at a rate of 6% of the gross sales price or current fair market value, whichever is higher. An individual is also subject to capital gains tax on the sale of shares not traded on the stock exchange at a rate of 5% of the net gain not exceeding PHP 100,000, and 10% on the excess.