be included (A) in or excluded (B) from gross income for the 2012 tax year. 1. Alimony | | 2. Lottery winnings | | 3. Life insurance proceeds received upon the death of a family member | | 4. Child support payments | | 5. Reimbursement of hospital expenses from a health insurance plan | | 6. Municipal bond interest | | 7. Unemployment compensation | | 8. Scholarships for tuition and books | | 9. Wages | | 10. Farm income | | 11. Inheritances | | Which of the following
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Memo to File Date: February 09‚ 2012 Re: Reducing Dr. Kevorkian’s tax liability from passive investments before year’s end. Facts: In 2010 Dr. Kevorkian had the following transactions: He has active income‚ from medical practice of $150‚000 (active income). He expects to receive $10‚000 in interest and dividends (portfolio income). He invests $100‚000 in Limited‚ a limited partnership (passive income). Limited lost money and Dr. Kevorkian’s share of the loss is $15‚000. In 2011 Dr. Kevorkian
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07 Individual Income Tax Computation and Tax Credits True / False Questions 1. Both the width (or range) of the tax brackets (the amount of income taxed at a particular rate) in the tax rate schedules and the range of the tax rates in the tax rate schedules (the difference between the lowest tax rate and the highest tax rate) vary by filing status. True False 2. The tax rate schedules are set up to tax lower levels of income at higher tax rates than higher levels of income. True False
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The earned income tax is used for individuals who make less than $54k a year. This credit is one of the most overlooked tax break‚ according to many experts. The IRS estimate 26 million people received about $65.6 billion under this tax credit last year. The average amount received was more than $2‚400 but it can be worth more than $6‚000. Most people who qualified for the tax break do not apply for it. It’s huge. Especially for low income households‚ most people who applied couldn’t believe
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recorded the following receipts. Salaries ($60‚000 for Lance‚ $41‚000 for Wanda) $101‚000 Interest income City of Albuquerque general purpose bonds $1‚000 Ford Motor Company bonds 1‚100 Ally Bank certificate of deposit 400 2‚500 Child support payments from John Allen 7‚200 Annual gifts from parents 26‚000 Settlement from Roadrunner Touring Company 90‚000 Lottery winnings 600 Federal income tax refund (for tax year 2011) 400 Wanda previously was married to John Allen. When they divorced several years ago
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According to Accounting Theory: Contemporary Accounting Issues by Evans‚ accountants have developed two alternative approaches to accounting for income taxes‚ which are the cash method and the allocation method. The cash method is described as a simple and direct approach. The amount of income taxes actually paid for the year is reported on the Income Statement. The amount comes from the firm ’s income tax return and fit is not adjusted in any way. Therefore‚ the firm ’s actual transaction to
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only deductions allowed are those specifically provided for by statute‚ rulings‚ etc. 2. Mitch is in the 28% tax bracket. He may receive a different tax benefit for a $2‚000 expenditure that is classified as a deduction from AGI than he will receive for a $1‚000 expenditure that is classified as a deduction for AGI. a. True b. False ANSWER: True RATIONALE: The value of the tax benefit to Mitch for the deduction from AGI may be less than that for the deduction for AGI. The value of the deduction
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Chapter 08 Business Income‚ Deductions‚ and Accounting Methods True / False Questions 1. The Internal Revenue Code authorizes deductions for trade or business activities if the expenditure is "ordinary and necessary". True False 2. Business activities are distinguished from personal activities in that business activities are motivated by the pursuit of profits. True False 3. The phase "ordinary and necessary" has been defined to mean that an expense must be essential and indispensable
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FEDERAL INCOME TAX FORMULA Gross Income - Above the Line Deductions____ Adjusted Gross Income - Itemized or Standard Deduction - Exemptions_________________ Taxable Income x Applicable Marginal Tax Rates for Each Bracket Tax Liability - Tax Credits_________________ = TAX OWED ABRIDGED INCOME TAX ACCOUNTING I. Gross Income [§ 61] — A. Wages‚ Salaries‚ and Tips B. Interest Income C. Dividend Income D. Other (Net) Income—Reduced by Deductible Expenses 1. State & Local
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DEDUCTIONS - A SEC. 34. Deductions from Gross Income. - Except for taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship where no deductions shall be allowed under this Section other than under subsection (M) hereof‚ in computing taxable income subject to income tax under Sections 24 (A); 25 (A); 26; 27 (A)‚ (B) and (C); and 28 (A) (1)‚ there shall be allowed the following deductions from gross income; (A) Expenses. - (1) Ordinary and Necessary
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