美华人才学校 学员用书 电子教辅《税收筹划原理》

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1、美华管理人才学校美华管理人才学校 学学员用书员用书 电子教辅税电子教辅税收筹划原理收筹划原理Types of Taxes and the Jurisdictions That Use ThemnLearning ObjectivesDefine the terms tax, taxpayer, incidence, and jurisdiction.Express the relationship between tax base, rate, and revenue as a formula.Describe the taxes levied by local governments, st

2、ate governments, and the federal government.Explain why different jurisdictions compete for revenues from the same taxpayer.Identify the reasons why governments modify their tax systems.Describe the three primary sources of federal tax law.Types of Taxes and the Jurisdictions That Use ThemnSome Basi

3、c TerminologyTaxnA payment to support the cost of governmentTaxpayernAny person or organization required by law to pay a tax to a governmental authorityIncidencenThe ultimate economic burden represented by the tax.JurisdictionnThe right of a government to levy tax on a specific person or organizatio

4、nTypes of Taxes and the Jurisdictions That Use ThemnSome Basic TerminologyThe Relationship between Base, Rate and Revenue Tax (T) = Rate (r) Base (B)Types of Taxes and the Jurisdictions That Use ThemnSome Basic TerminologyTransaction or Activity-Based TaxesnA tax can be event or transaction based so

5、 that the tax is triggered only when an event occurs or a transaction takes place.Earmarked TaxesnA tax can be described as activity based when it is imposed on the cumulative result of an ongoing activity.Types of Taxes and the Jurisdictions That Use ThemnThe Pervasive Nature of TaxationLocal Taxes

6、nReal Property TaxesnPersonal Property TaxesState TaxesnRetail Sales, Uses, and Excise TaxesnPersonal Income TaxesnCorporate Income TaxesFederal TaxesnHistory of the Income TaxnEmployment and Unemployment TaxesnOther Federal TaxesTypes of Taxes and the Jurisdictions That Use ThemTypes of Taxes and t

7、he Jurisdictions That Use ThemnTaxes Imposed by Foreign JurisdictionsValue-added tax (VAT)nJurisdictional CompetitionExplain why different jurisdictions compete for revenues from the same taxpayerTypes of Taxes and the Jurisdictions That Use ThemnDynamic Nature of TaxationTax Base ChangesnLegalized

8、GamblingnSales Tax ExpansionTax and the Political ProcessTypes of Taxes and the Jurisdictions That Use ThemnSources of Federal Tax LawStatutory AuthoritynInternal Revenue Code of 1986Administrative AuthoritynTreasury regulationsnInternal Revenue Service (IRS)nInternal Revenue Bulletins (IRBs)nCumula

9、tive Bulletins (CBs)Judicial AuthorityTypes of Taxes and the Jurisdictions That Use ThemnConclusionChapter TWOTax Policy Issues: Standards for a Good TaxTax Policy Issues: Standards for a Good TaxnLearning ObjectivesExplain the concept of sufficiency of a good tax.Differentiate between the income ef

10、fect and the substitution effect.Describe the characteristics of a convenient tax.Contrast the classical and the modern concepts of tax efficiency.Define horizontal and vertical equity.Differentiate between a regressive, a proportionate, and a progressive rate structure.Explain the difference betwee

11、n marginal and average tax rates.Discuss distributive justice as a tax policy objective.Tax Policy Issues: Standards for a Good TaxnStandards for a Good TaxA good tax should be sufficient to raise the necessary government revenues.A good tax should be convenient for the government to administer and

12、for people to pay.A good tax should be efficient in economic terms.A good tax should be fair.Tax Policy Issues: Standards for a Good TaxnTaxes Should be SufficientA tax is sufficient if it generates enough funds to pay for the public goods and services provided by the government.Tax Policy Issues: S

13、tandards for a Good TaxnTaxes Should be SufficientThe National DebtHow to Increase Tax RevenuesStatic versus Dynamic ForecastingTax Policy Issues: Standards for a Good TaxnTaxes Should be SufficientBehavioral Responses to Rate ChangesnIncome EffectnSubstitution EffectnSupply-Side EconomicsTax Policy

14、 Issues: Standards for a Good TaxnTaxes Should Be ConvenientFrom the governments viewpoint, a good tax should be convenient to administer.From the taxpayers viewpoint, a good tax should be convenient to pay.Tax Policy Issues: Standards for a Good TaxnTaxes Should Be EfficientThe Classical Standard o

15、f EfficiencynAn efficient tax shall be neutral in its effect on the free market.Taxes as an Instrument of Fiscal PolicynIn the Keynesian schema, tax system is a primary tool of fiscal policy.Tax Policy Issues: Standards for a Good TaxnTaxes Should Be EfficientTaxes and Behavior ModificationnIncome T

16、ax PreferencenThe Tax Expenditures BudgeTax Policy Issues: Standards for a Good TaxnTaxes Should Be FairAbility to PaynIn the tax policy literature, ability to pay refers to the economic resources under a persons control.Tax Policy Issues: Standards for a Good TaxnTaxes Should Be FairHorizontal Equi

17、tynIf a tax is designed so that persons with the same ability to pay (as measured by the tax base) owe the same amount of tax, that system can be described as horizontally equitable.Tax Policy Issues: Standards for a Good TaxnTaxes Should Be FairHorizontal EquitynTaxable Income and Ability to PaynAn

18、nual versus Lifetime Horizontal EquitynTax Preference and Horizontal EquityTax Policy Issues: Standards for a Good TaxnTaxes Should Be FairVertical EquitynA tax system is vertically equitable if persons with a greater ability to pay owe more tax than persons with a lesser ability to pay.Tax Policy I

19、ssues: Standards for a Good TaxnTaxes Should Be FairVertical EquitynRegressive TaxesnIncome Tax Rate StructuresnMarginal and Average Tax RatesTax Policy Issues: Standards for a Good TaxnTaxes Should Be FairDistributive JusticeTax Policy Issues: Standards for a Good TaxnTaxes Should Be FairMarginal r

20、ateAverage rate10Tax rates (percent)2050100Taxable income（$000）Tax Policy Issues: Standards for a Good TaxnTaxes Should Be FairMarginal rateAverage rate5101612%Tax rates (percent)2050100Taxable income（$000）Tax Policy Issues: Standards for a Good TaxnTaxes Should Be FairThe Perception of InequityTax

21、Policy Issues: Standards for a Good TaxnConclusionChapter ThreeTaxes as Transaction CostsTaxes as Transaction CostsnLearning ObjectivesCompute the tax cost of an income item and the tax savings from a deduction.Integrate tax costs and savings into NPV calculationsIdentify the uncertainties concernin

22、g future tax costs and savings.Explain why tax minimization may not be the optimal business strategy.Explain why bilateral tax planning is important in private market transactions.Distinguish between arms-length and related party transactions.Taxes as Transaction CostsnThe Role of Net Present Value

23、in Decision MakingQuantifying Cash FlowsTaxes as Transaction CostsnThe Role of Net Present Value in Decision MakingThe Concept of Present ValuenPresent ValuenPresent Value of an AnnuitynPresent Value Tables($1 for n periods)Taxes as Transaction CostsnThe Role of Net Present Value in Decision MakingT

24、he Issues of RiskTaxes as Transaction CostsnThe Role of Net Present Value in Decision MakingA Net Present Value ExampleTaxes as Transaction CostsEngagement1Engagement2Current year: Cash revenues $150,000 $200,000 Cash expenses (90,000) (65,000) Net cash flow $60,000 $135,000Next year: Cash revenues

25、$150,000 $125,000 Cash expenses (10,000) (65,000) Net cash flow $140,000 $60,000Present value of current year cash flow $60,000 $135,000Present value of next year cash flow (cash flow .909 discount factor) 127,260 54,540NPV $187,260 $189,540Taxes as Transaction CostsnTaxes and Cash FlowsnTax CostsnT

26、ax SavingsThe Significance of Marginal Tax RateTaxes as Transaction CostsnTaxes and Cash FlowsNet Present Value Example RevisitedTaxes as Transaction CostsEngagement1 Engagement2Current year: Taxable revenues $150,000 $200,000 Deductible expenses (90,000) (65,000) Before-tax cash flow/taxable income

27、 $60,000 $135,000 Income tax cost at 40% (24,000) (54,000) After-tax cash flow $36,000 $81,000Next year: Taxable revenues $150,000 $125,000 Deductible expenses (10,000) (65,000) Before-tax cash flow/taxable income $140,000 $60,000 Income tax cost at 40%(56,000) (24,000) After-tax cash flow $84,000 $

28、36,000Present value of current year cash flow $36,000 $81,000Present value of next year cash flow (after-tax cash flow .909 discount factor) 76,356 32,724NPV $112,356 $113,724Taxes as Transaction CostsnTaxes and Cash FlowsNet Present Value Example RevisitednDifferent Tax Treatment across Transaction

29、snDifferent Tax Rates over TimeTaxes as Transaction CostsEngagement1 Engagement2Current year: Taxable revenues $150,000 $200,000 Deductible expenses (90,000) (48,750) Nondeductible expenses -0- (16,250) Before-tax cash flow $60,000 $135,000 Income tax cost: Taxable income $60,000 $151,250 .40 .40 Ta

30、x cost (24,000) (60,500) After-tax cash flow $36,000 $74,500Next year: Taxable revenues $150,000 $125,000 Deductible expenses(10,000) (48,750) Nondeductible expenses -0- (16,250) Before-tax cash flow $140,000 $60,000 Income tax cost: Taxable income $140,000 $76,250 .40 .40 Tax cost(56,000) (30,500)

31、After-tax cash flow $84,000 $29,500Present value of current year cash flow $36,000 $74,500Present value of next year cash flow (after-tax cash flow .909 discount factor) 76,356 26,816 NPV $112,356 $101,316Taxes as Transaction CostsEngagement1 Engagement2Current year: Taxable revenues $150,000 $200,0

32、00 Deductible expenses (90,000) (65,000) Before-tax cash flow/taxable income $60,000 $135,000 Income tax cost at 40% (24,000) (54,000) After-tax cash flow $36,000 $81,000Next year: Taxable revenues $150,000 $125,000 Deductible expenses (10,000) (65,000) Before-tax cash flow/taxable income $140,000 $

33、60,000 Income tax cost at 25%(35,000) (15,000) After-tax cash flow $105,000 $45,000Present value of current year cash flow $36,000 $81,000Present value of next year cash flow (after-tax cash flow .909 discount factor) 95,445 40,905NPV $131,445 $121,905Taxes as Transaction CostsnTaxes and Cash FlowsT

34、he Uncertainty of Tax ConsequencesnAudit RisknTax Law UncertaintynMarginal Rate UncertaintyTaxes and Cash FlowsnStructuring Transactions to Reduce TaxesAn Important CaveatTransactional MarketsnPrivate Market TransactionsnThe Arms-Length PresumptionnPublic Market TransactionsnFictitious Markets: Rela

35、ted Party TransactionsTaxes and Cash FlowsnConclusionChapter FourMaxims of Income Tax PlanningMaxims of Income Tax PlanningnLearning ObjectivesDifferentiate between tax avoidance and tax evasion.List the four variable that determine the tax consequences of a transaction.Explain why an income shift o

36、r a deduction shift can improve NPV.Identify the circumstances in which a tax deferral strategy may not improve NPV.Contrast the tax character of ordinary income and capital gain.Distinguish between an explicit tax and an implicit tax.Summarize the four tax planning maxims.Describe the three legal d

37、octrines that the IRS uses to challenge tax planning strategies.Maxims of Income Tax PlanningnTax AvoidanceNot EvasionLegitimate means reducing taxes are described as tax avoidance;Illegal means the same end constitute tax evasion.Maxims of Income Tax PlanningnWhat Makes Income Tax Planning Possible

38、?1. The entity variable: Which entity undertakes the transaction?2. The time period variable: During which tax year or years does the transaction occur?3. The jurisdiction variable: In which taxing jurisdiction does the transaction occur?4. The character variable: What is the tax character of the in

39、come from the transaction?Maxims of Income Tax PlanningnThe Entity VariableIncome ShiftingDeduction ShiftingConstraints on Income ShiftingnAssignment of Income DoctrineIncome must be taxed to the entity that renders the service or owns the capital with respect to which the income is paid.Maxims of I

40、ncome Tax PlanningnThe Time Period VariableMaxims of Income Tax PlanningYear 0Year 1Revenues $120 $180Expenses (40) (80)Income tax cost: Taxable income $80 $100 .35 .35 Tax cost (28) (35)After-tax net cash flow $52 $65Present value of year 0 cash flow $52Present value of year 1 cash flow（$65.893 dis

41、count factor） 58NPV $110Maxims of Income Tax PlanningYear 0Year 1Revenues $120 $180Expenses (40) (80)Income tax cost: Taxable income 0 $180 .35 .35 Tax cost -0- (63)After-tax net cash flow $80 $37Present value of year 0 cash flow $80Present value of year 1 cash flow（$65.893 discount factor） 33NPV $1

42、13Maxims of Income Tax PlanningnThe Time Period VariableIncome Deferral and Opportunity CostsMaxims of Income Tax PlanningYear 0Year 1Revenues $40 $260Expenses (40) (80)Income tax cost: Taxable income -0- $180 .35 Tax cost -0- (63)After-tax net cash flow -0- $37Present value of year 0 cash flow -0-

43、Present value of year 1 cash flow（$65.893 discount factor） 104NPV $104Maxims of Income Tax PlanningYear 0Year 1Revenues $120 $180Expenses (120) -0- Income tax cost: Taxable income -0- $180 .35 Tax cost -0- (63)After-tax net cash flow -0- $117Present value of year 0 cash flow -0- Present value of yea

44、r 1 cash flow（$65.893 discount factor） 104NPV $104Maxims of Income Tax PlanningnThe Time Period VariableIncome Deferral and Rate ChangesMaxims of Income Tax PlanningYear 0 Year 1 Year 2 Year 3Without income Taxable income $30,000 -0- -0- -0- Tax cost at 35% $10,500 -0- -0- -0- NPV of tax costs $10,5

45、00With deferral: Taxable income-0- $10,000 $10,000 $10,000 Tax cost at 35% -0- $3,500 $3,500 $3,500 Discount factors .917 .842 .772 $3,210 $2,947 $2,702 NPV of tax costs $8,859Maxims of Income Tax PlanningYear 0 Year 1 Year 2 Year 3Taxable income -0- $10,000 $10,000 $10,000Tax cost at 45% -0- $4,500

46、 $4,500 $4,500Discount factors .917 .842 .772$4,127 $3,789 $3,474Actual NPV of tax costs $11,390Maxims of Income Tax PlanningActual NPV of tax costs$11,390NPV of tax cost without deferral （10，500）$890Maxims of Income Tax PlanningnThe Jurisdiction VariableMaxims of Income Tax PlanningFirm Y Firm ZBef

47、ore-tax cash/income $5,000 $5,000State income tax cost (200) (500)Federal taxable income $4,800 $4,500Federal tax cost (Taxable income39%) (1,872) (1,755)After-tax cash flow $2,928 $2,745Maxims of Income Tax PlanningnThe Character VariableMaxims of Income Tax PlanningOrdinary Capital Tax-Exempt Inco

48、me Gain IncomeBefore-tax cash/income $1,000 $1,000 $1,000Tax cost (350) (150) -0-After-tax cash flow $650 $850 $1,000Maxims of Income Tax PlanningnThe Character VariableDetermining the Value of Preferential RatesMaxims of Income Tax PlanningOrdinary Income Capital GainBefore-tax cash/income $1,000 $

49、1,000Tax cost (28% regular rate) (280) (150)After-tax cash flow $720 $850Maxims of Income Tax PlanningnThe Character VariableConstraints on ConversionImplicit TaxesMaxims of Income Tax PlanningCorporate Municipal Bond Interest Bond InterestBefore-tax cash/income $2,000 $2,000Tax cost (28% regular ra

50、te) (660) -0-After-tax cash flow $1,340 $2,000Maxims of Income Tax PlanningCorporate Municipal Bond Interest Bond InterestBefore-tax cash/income $2,000 $1,600Tax cost (660) -0-After-tax cash flow $1,340 $1,600Maxims of Income Tax PlanningCorporate Municipal Bond Interest Bond InterestBefore-tax cash

51、/income $2,000 $1,300Tax cost (660) -0-After-tax cash flow $1,340 $1,300Maxims of Income Tax PlanningnDeveloping Tax Planning StrategiesAdditional Strategic ConsiderationsTax Legal DoctrinesMaxims of Income Tax PlanningnConclusionChapter FiveTax ResearchTax ResearchnLearning ObjectivesUnderstand and

52、 apply the six steps of the tax research process.Identify primary sources of tax law.Utilize secondary sources of tax law to locate primary authorities.Tax ResearchnDeveloping Tax Research SkillsThe Tax Research ProcessnUnderstand the clients transaction and get the facts.nIdentify the tax issues, p

53、roblems, or opportunities suggested by the facts and formulate specific research questions.nLocate relevant tax law authority.nAnalyze relevant authority and answer the research questions.nRepeat steps 1 through 4 as many times as necessary.nDocument your research and communicate your conclusions.Ta

54、x ResearchStep 1Get the factsStep 2Identify the issuesStep 3Locate authorityStep 4Analyze authorityStep 5Communicate conclusionsStep 5Repeat steps 1 through 4Tax ResearchnStep1: Get the FactsnStep2: Identify the IssuesTax ResearchnStep3: Locate AuthorityPrimary AuthoritiesSecondary AuthoritiesStrate

55、gies for Locating Relevant AuthoritynUsing the Topical IndexnUsing the Table of ContentsnKeyword SearchingTax ResearchType of AuthorityCitation(s)ExplanationInternal Revenue CodeSection 1250 (d) (1)Sec. 1250 (d) (1)1250 (d) (1)Three alternative citations to the first paragraph, subsection d of Secti

56、on 1250.Treasury RegulationsReg. Sec. 1. 267-5 (b)Reg. 1. 267-5 (b)Reg. 1. 267-5 (b)Three alternative citations to the fifth subpart of the regulations under Section 267.Revenue RulingsRev. Rul. 89-257, 1989-1 C.B. 221Citation to the 257th revenue ruling issued in 1989, appearing in the first volume

57、 of the 1989 cumulative bulletin, page 221.Revenue ProceduresRev. Proc. 2002-32, 2002-1 C.B. 959Citation to the 32nd revenue procedure issued in 2002, appearing in the first volume of the 2002 cumulative bulletin, page 959.U.S. Tax Court memorandum decisionsJack D. Carr, T.C. Memo 1985-19Jack D. Car

58、r, PH TCM 85019Jack D. Carr, 49 TCM 507.Three alternative citations to a Tax Court memorandum decision. The first is published by the U.S. government, the second by RIA (formerly Prentice Hall), and the third by CCHU.S. Tax Court regular decisionsTeleservice Co. of Wyoming Valley, 27 T.C. 722 (1957)

59、Citation to a regular Tax Court decision, published by the U.S. governmentU.S. District Court decisionsMontgomery Engineering Co. v. U.S., 64-2 USTC 9618 (D.Ct. N.J., 1964)Montgomery Engineering Co. v. U.S., 13 AFTR2d (D.Ct. N.J., 1964)Montgomery Engineering Co. v. U.S., 203 F. Supp. 838 (D.Ct. N.J.

60、, 1964)Three alternative citations to a 1964 district court case for New Jersey. The first is published by CCH, the second by RIA, and the third by West.U.S. Courts of AppealsLengsfield v. Comm., 57-1 USTC 9437 (CA-5, 1957)Lengsfield v. Comm., 50 AFTR 1683 (CA-5, 1957)Lengsfield v. Comm., 241 F.2d 5

61、08 (CA-5, 1957)Three alternative citations to a 1957 case before the Fifth Circuit Court of Appeals. The first is published by CCH, the second by RIA, and the third by West.U.S. Supreme CourtU.S. v. The Donruss Co., 69-1 USTC 9167 (USSC, 1969)U.S. v. The Donruss Co., 23 AFTR2d 69-418 (USSC, 1969)U.S

62、. v. The Donruss Co., 89 S.Ct. 501 (USSC, 1969)Three alternative citations to a 1969 case before the Supreme Court. The first is published by CCH, the second by RIA, and the third by West.Tax ResearchnStep3: Locate AuthoritySecondary AuthoritiesStrategies for Locating Relevant AuthoritynUsing the To

63、pical IndexnUsing the Table of ContentsnKeyword SearchingTax ResearchnStep4: Analyze AuthoritynStep5: Repeat Steps 1 Through 4nStep6: Communicate Your ConclusionsTax ResearchnConclusionsChapter SixTaxable Income from Business OperationsTaxable Income from Business OperationsnLearning ObjectivesDescr

64、ibe the relationship between business operating cycle and taxable year.Identify the permissible methods of accounting for tax purposes.Explain why tax policy objectives affect the taxable income computation.Apply the cash method of accounting to compute taxable income.Contrast the principles of cons

65、ervatism reflected by GAAP and by the tax law.Differentiate between a permanent and a temporary book/tax difference.Explain the difference between tax expense per books and tax payable.Apply the tax accounting rules for prepaid income and accrued expenses.Explain how the NOL deduction smooths taxabl

66、e income over time.Taxable Income from Business OperationsnBusiness Profit As Taxable IncomeTaxable income=gross income-allowable deductionsTaxable Income from Business OperationsThe Taxable YearChanging a Taxable YearTaxable Income from Business OperationsThe Taxable YearAnnualizing Income on a Sho

67、rt-Period ReturnTaxable Income from Business Operations12-Month Year12-Month Year7-Month Year7-Month YearTaxable income$ 120,000$ 70,000Tax on: First $50,000 at 15%$ 7,500$ 7,500 Next $25,000 at 25% 6,250 5,000 Next $25,000 at 34% 8,500 Next $20,000 at 39% 7,800Total tax $ 30,050 $ 12,50012-month ye

68、ar: $30,050 tax $120,000 taxable income=25.04%7-month year: $12,500 tax $70,000 taxable income=17.86%Taxable Income from Business Operations7-Month Year7-Month YearTaxable income$ 70,000Multiplied by inflation factor(12 months 7 months) 1.7143Annualized income $120,000Tax on annualized income $ 30,0

69、50Multiplied by deflation factor(7 months 12 months) .5833Total tax $ 17,528$17,528 tax$70,000 taxable income=25.04%Taxable Income from Business OperationsnMethods of AccountingThe Policy ObjectivesnTax PreferencesTaxable Income from Business OperationsnMethods of AccountingThe Cash MethodnThe Cash

70、Method and Cash FlowsnConstructive ReceiptnPrepaid Expenses and the InterestnMerchandise InventoriesnLimitations on Use of the Cash Method by CorporationsTaxable Income from Business OperationsnMethods of AccountingThe Accrual MethodnContrasting Perspectives on Income MeasurementnPermanent versus Te

71、mporary DifferencesnTax Expenses versus Tax PayablenTemporary Book/Tax Accounting DifferencesAccrued ExpensesRelated Party AccrualsBusiness Bad DebtsTaxable Income from Business OperationsnNet Operating LossesThe Problem of Excess DeductionsSolution: The NOL DeductionnValuing an NOL DeductionnGiving

72、 Up an NOL CarrybacknAccounting for NOLsTaxable Income from Business OperationsnConclusionsChapter SixTaxable Income from Business OperationsTaxable Income from Business OperationsnLearning ObjectivesDescribe the relationship between business operating cycle and taxable year.Identify the permissible

73、 methods of accounting for tax purposes.Explain why tax policy objectives affect the taxable income computation.Apply the cash method of accounting to compute taxable income.Contrast the principles of conservatism reflected by GAAP and by the tax law.Differentiate between a permanent and a temporary

74、 book/tax difference.Explain the difference between tax expense per books and tax payable.Apply the tax accounting rules for prepaid income and accrued expenses.Explain how the NOL deduction smooths taxable income over time.Taxable Income from Business OperationsnBusiness Profit As Taxable IncomeTax

75、able income=gross income-allowable deductionsTaxable Income from Business OperationsThe Taxable YearChanging a Taxable YearTaxable Income from Business OperationsThe Taxable YearAnnualizing Income on a Short-Period ReturnTaxable Income from Business Operations12-Month Year12-Month Year7-Month Year7-

76、Month YearTaxable income$ 120,000$ 70,000Tax on: First $50,000 at 15%$ 7,500$ 7,500 Next $25,000 at 25% 6,250 5,000 Next $25,000 at 34% 8,500 Next $20,000 at 39% 7,800Total tax $ 30,050 $ 12,50012-month year: $30,050 tax $120,000 taxable income=25.04%7-month year: $12,500 tax $70,000 taxable income=

77、17.86%Taxable Income from Business Operations7-Month Year7-Month YearTaxable income$ 70,000Multiplied by inflation factor(12 months 7 months) 1.7143Annualized income $120,000Tax on annualized income $ 30,050Multiplied by deflation factor(7 months 12 months) .5833Total tax $ 17,528$17,528 tax$70,000

78、taxable income=25.04%Taxable Income from Business OperationsnMethods of AccountingThe Policy ObjectivesnTax PreferencesTaxable Income from Business OperationsnMethods of AccountingThe Cash MethodnThe Cash Method and Cash FlowsnConstructive ReceiptnPrepaid Expenses and the InterestnMerchandise Invent

79、oriesnLimitations on Use of the Cash Method by CorporationsTaxable Income from Business OperationsnMethods of AccountingThe Accrual MethodnContrasting Perspectives on Income MeasurementnPermanent versus Temporary DifferencesnTax Expenses versus Tax PayablenTemporary Book/Tax Accounting DifferencesAc

80、crued ExpensesRelated Party AccrualsBusiness Bad DebtsTaxable Income from Business OperationsnNet Operating LossesThe Problem of Excess DeductionsSolution: The NOL DeductionnValuing an NOL DeductionnGiving Up an NOL CarrybacknAccounting for NOLsTaxable Income from Business OperationsnConclusionsChap

81、ter SevenProperty Acquisitionsand Cost Recovery DeductionsProperty Acquisitionsand Cost Recovery DeductionsnLearning ObjectivesDecide if a business expenditure should be deducted or capitalized.Define the terms tax basis and adjusted basis.Explain how leverage can reduce the after-tax cost of assets

82、.Compute cost of goods sold for tax purposes.Understand the MACRS framework.Apply the Section 179 expensing election.Incorporate depreciation deductions into the NPV computation.Explain how the cost of purchased intangibles is recovered through amortization.Distinguish between cost depletion and per

83、centage depletion.Property Acquisitionsand Cost Recovery DeductionsnDeductible Expense or Capitalized Cost?Capitalization means that an expenditure is recorded as an asset on the balance sheet rather than as a current expense.Property Acquisitionsand Cost Recovery DeductionsnDeductible Expense or Ca

84、pitalized Cost?Repairs and Cleanup CostsDeductions of Capital Expenditures as SubsidiesProperty Acquisitionsand Cost Recovery DeductionsnThe Critical Role of Tax BasisBasis, Cost Recovery, and Cash FlowCost BasisnLeveraged Cost BasisProperty Acquisitionsand Cost Recovery DeductionsnIntroduction to C

85、ost Recovery MethodsnInventories and Cost of Goods SoldThe Unicap RulesExamples of indirect costs that must be capitalized to the extent they relate to a firms production or resale function include:Officers compensationPension, retirement, and other employee benefitsRents paid on buildings and equip

86、ment used in a manufacturing processPremiums paid to carry property insurance on production assetsCost recovery deductions for production assetsProperty Acquisitionsand Cost Recovery DeductionsnInventories and Cost of Goods SoldComputing Cost of Goods SoldnFIFO: first-in, first-outnLIFO: last-in, fi

87、rst-outProperty Acquisitionsand Cost Recovery DeductionsnDepreciation of Tangible Business AssetsBook and Tax Concepts of DepreciationnModified Accelerated Cost Recovery System (MACRS)Property Acquisitionsand Cost Recovery DeductionsnDepreciation of Tangible Business AssetsThe MACRS FrameworknRecove

88、ry PeriodsProperty Acquisitionsand Cost Recovery DeductionsMACRS Recovery PeriodAssets Included3 yearsSmall manufacturing tools, racehorses and breeding hogs, special handling devices used in food manufacturing5 yearsCars, trucks, buses, helicopters, computers, typewriters, duplicating equipment, br

89、eeding and dairy cattle, and cargo containers7 yearsOffice furniture and fixtures, railroad cars and locomotives, most machinery and equipment10 yearsSingle-purpose agricultural and horticultural structures, assets used in petroleum refining, vessels, barges, and other water transportation equipment

90、, fruit- or nut-bearing trees and vines.15 yearsLand improvements such as fencing, roads, sidewalks, bridges, irrigation systems, and landscaping; telephone distribution plants; pipelines; billboards; and service station buildings20 yearsCertain farm buildings25 yearsCommercial water utility propert

91、y, municipal sewers27.5 yearsResidential rental real property (duplexes and apartments)39 yearsNonresidential real property (office buildings, factories, and warehouses)50 yearsRailroad grading or tunnel boreProperty Acquisitionsand Cost Recovery DeductionsnDepreciation of Tangible Business AssetsTh

92、e MACRS FrameworknDepreciation MethodsnDepreciation ConventionsnIRS Depreciation TablesProperty Acquisitionsand Cost Recovery DeductionsYearRecovery Period3-Year5-Year7-Year10-Year15-Year20-YearDepreciation Rate133.3320.0014.2910.005.003.750244.4532.0024.4918.009.507.219314.8119.2017.4914.408.556.67

93、747.4111.5212.4911.527.706.177511.528.939.226.935.71365.768.927.376.235.28578.936.555.904.88884.466.555.904.52296.565.914.462106.555.904.461113.285.914.462125.904.461135.914.462142.954.461154.462164.461174.462184.461194.462204.461212.231MACRS for Business Personalty (Half-Year Convention)Property Ac

94、quisitionsand Cost Recovery DeductionsMACRS TablesYearInitial BasisTable PercentageMACRS Depreciation138,00020.007,600238,00032.0012,160338,00019.207,296438,00011.524,378538,00011.524,378638,0005.762,18838,000Property Acquisitionsand Cost Recovery DeductionsYearMonth Placed in Service123456789101112

95、Depreciation Rate（）（）13.4853.1822.8792.5762.2731.9701.6671.3641.0610.7580.4550.1522-273.6363.6363.6363.6363.6363.6363.6363.6363.6363.6363.6363.636281.9702.2732.5762.8793.1823.4583.4583.6363.6363.6363.6363.636290.0000.0000.0000.0000.0000.0000.1520.4550.7581.0611.3641.667MACRS for Residential Real Pro

96、perty (27.5-year property)Property Acquisitionsand Cost Recovery DeductionsMACRS for Nonresidential Real Property (39-year property)YearMonth Placed in Service123456789101112Depreciation Rate（）（）12.4612.2472.0331.8191.6051.3911.1770.9630.7490.5350.3210.1072-392.5642.5642.5642.5642.5642.5642.5642.564

97、2.5642.5642.5642.5644001070.3210.5350.7490.9631.1771.3911.6051.8192.0332.2472.461Property Acquisitionsand Cost Recovery DeductionsnDepreciation of Tangible Business AssetsThe MACRS FrameworkMACRS and FMVProperty Acquisitionsand Cost Recovery DeductionsnDepreciation of Tangible Business AssetsLimited

98、 Depreciation for Passenger AutomobilesSection 179 Expensing ElectionPurchase versus Leasing DecisionProperty Acquisitionsand Cost Recovery DeductionsnAmortization of Intangible AssetsOrganizational and Start-Up CostsLeasehold Costs and ImprovementsPurchased IntangiblesnBook/Tax Difference for Goodw

99、illComprehensive Example of a Lump-Sum PurchaseProperty Acquisitionsand Cost Recovery DeductionsnDepletion of Natural ResourcesPercentage DepletionProperty Acquisitionsand Cost Recovery DeductionsnConclusionChapter EightProperty DispositionsProperty DispositionsnLearning ObjectivesDistinguish betwee

100、n gain or loss realization and recognition.Apply the installment sale method of accounting.Explain why the tax law disallows losses on related party sales.Identify the two components of the capital gain or loss definition.Apply the limitation on the deduction of capital losses.Apply the Section 1231

101、 netting process.Incorporate the recapture rules into the Section 1231 netting process.Describe the tax consequences of dispositions other than sales or exchanges.Property DispositionsnComputation of Gain or Loss RecognizedSales and ExchangesAmount realized on disposition（Adjusted tax basis of prope

102、rty）Realized gain or (loss)Property DispositionsnComputation of Gain or Loss RecognizedSales and ExchangesAmount realized on disposition（Adjusted tax basis of property）Realized gain or (loss)Recognized gain or (loss)Property DispositionsnComputation of Gain or Loss RecognizedSales and ExchangesnReli

103、ef of Debt as Amount RealizednTax-Free Recovery of Basis and Cash FlownTaxation of Inflationary GainsProperty DispositionsnComputation of Gain or Loss RecognizedSeller-Financed SalesnInstallment Sale MethodnSellers Basis in Purchasers NoteDisallowed Losses on Related Party SalesnOffset of Gain by Pr

104、eviously Disallowed LossProperty DispositionsnTax Character of Gains and LossesCapital Asset DefinedProperty DispositionsnTax Character of Gains and LossesCapital Loss LimitationRecognized capital gains(Recognized capital losses)(Net loss) (Net gain)Nondeductable Taxable incomeProperty Dispositionsn

105、Tax Character of Gains and LossesCapital Loss LimitationnLoss Carrybacks and CarryforwardsnBook/Tax differences for Nondeductible Capital LossTaxation of Capital GainsProperty DispositionsnTax Character of Gains and LossesCapital Asset Definition RevisitedCapital assets(Every asset except)Noncapital

106、 assetsBusiness inventoriesBusiness accounts receivableBusiness suppliesReal or depreciable business propertiesCreative assets (artistic compositions, etc.)U.S. government publicationsCommodities derivativesHedging transaction propertiesProperty DispositionsnDispositions of Noncapital AssetsInventor

107、ynReal EstateBusiness Accounts Receivable and SuppliesProperty DispositionsnDispositions of Noncapital AssetsSection 1231 AssetsRecognized gains and (losses)Section 1231 Netting Process(Net loss)Net gain(Ordinary loss)Capital gainProperty DispositionsnDispositions of Noncapital AssetsSection 1231 As

108、setsnRecapture of Prior Year Ordinary LossesRecognized gains and (losses)Section 1231 Netting ProcessNet gainRecaptureOrdinary income (Prior year losses)Capital gainProperty DispositionsnDispositions of Noncapital AssetsDepreciation RecaptureRecognized gains and (losses)RecaptureOrdinary income(Depr

109、eciation/amortization)Section 1231 Netting ProcessProperty DispositionsnDispositions of Noncapital AssetsDepreciation RecapturenFull Recapture RuleProperty DispositionsAssumption 1Assumption 2Assumption 3Assumption 4Amount realized$100,000$ 90,000$ 105,000$ 48,000Cost of asset $ 100,000Depreciation

110、(40,000)Adjusted basis(60,000)(60,000)(60,000)(60,000)Gain (loss) recognized$ 40,000$ 30,000$ 45,000$ 12,000Section 1245 recapture$ 40,000$ 30,000$ 40,000$-0-Section 1231 gain (loss) -0- -0- 5,000(12,000)$ 40,000$ 30,000$ 45,000$(12,000)Property DispositionsnDispositions of Noncapital AssetsDeprecia

111、tion RecapturenFull Recapture RulenPartial Recapture Rule for RealtynTwenty Percent Recapture by CorporationsnSummaryComprehensive ExampleProperty DispositionsRecognized GAIN on Sale or Exchange of Section 1231 AssetRecapture RuleTangible personaltySection 1245 recapture of depreciationPurchased int

112、angiblesSection 1245 recapture of amortizationNondepreciable realty landNo recaptureDepreciable realty buildings placed in service before 1987Section 1250 recapture of excess accelerated depreciation and 20% recapture by corporationsDepreciable realty buildings placed in service after 198620% recapt

113、ure by corporationsProperty DispositionsnOther Property DispositionsAbandonment and WorthlessnessForeclosuresCasualties and TheftsProperty DispositionsnConclusionChapter EightProperty DispositionsProperty DispositionsnLearning ObjectivesDistinguish between gain or loss realization and recognition.Ap

114、ply the installment sale method of accounting.Explain why the tax law disallows losses on related party sales.Identify the two components of the capital gain or loss definition.Apply the limitation on the deduction of capital losses.Apply the Section 1231 netting process.Incorporate the recapture ru

115、les into the Section 1231 netting process.Describe the tax consequences of dispositions other than sales or exchanges.Property DispositionsnComputation of Gain or Loss RecognizedSales and ExchangesAmount realized on disposition（Adjusted tax basis of property）Realized gain or (loss)Property Dispositi

116、onsnComputation of Gain or Loss RecognizedSales and ExchangesAmount realized on disposition（Adjusted tax basis of property）Realized gain or (loss)Recognized gain or (loss)Property DispositionsnComputation of Gain or Loss RecognizedSales and ExchangesnRelief of Debt as Amount RealizednTax-Free Recove

117、ry of Basis and Cash FlownTaxation of Inflationary GainsProperty DispositionsnComputation of Gain or Loss RecognizedSeller-Financed SalesnInstallment Sale MethodnSellers Basis in Purchasers NoteDisallowed Losses on Related Party SalesnOffset of Gain by Previously Disallowed LossProperty Dispositions

118、nTax Character of Gains and LossesCapital Asset DefinedProperty DispositionsnTax Character of Gains and LossesCapital Loss LimitationRecognized capital gains(Recognized capital losses)(Net loss) (Net gain)Nondeductable Taxable incomeProperty DispositionsnTax Character of Gains and LossesCapital Loss

119、 LimitationnLoss Carrybacks and CarryforwardsnBook/Tax differences for Nondeductible Capital LossTaxation of Capital GainsProperty DispositionsnTax Character of Gains and LossesCapital Asset Definition RevisitedCapital assets(Every asset except)Noncapital assetsBusiness inventoriesBusiness accounts

120、receivableBusiness suppliesReal or depreciable business propertiesCreative assets (artistic compositions, etc.)U.S. government publicationsCommodities derivativesHedging transaction propertiesProperty DispositionsnDispositions of Noncapital AssetsInventorynReal EstateBusiness Accounts Receivable and

121、 SuppliesProperty DispositionsnDispositions of Noncapital AssetsSection 1231 AssetsRecognized gains and (losses)Section 1231 Netting Process(Net loss)Net gain(Ordinary loss)Capital gainProperty DispositionsnDispositions of Noncapital AssetsSection 1231 AssetsnRecapture of Prior Year Ordinary LossesR

122、ecognized gains and (losses)Section 1231 Netting ProcessNet gainRecaptureOrdinary income (Prior year losses)Capital gainProperty DispositionsnDispositions of Noncapital AssetsDepreciation RecaptureRecognized gains and (losses)RecaptureOrdinary income(Depreciation/amortization)Section 1231 Netting Pr

123、ocessProperty DispositionsnDispositions of Noncapital AssetsDepreciation RecapturenFull Recapture RuleProperty DispositionsAssumption 1Assumption 2Assumption 3Assumption 4Amount realized$100,000$ 90,000$ 105,000$ 48,000Cost of asset $ 100,000Depreciation (40,000)Adjusted basis(60,000)(60,000)(60,000

124、)(60,000)Gain (loss) recognized$ 40,000$ 30,000$ 45,000$ 12,000Section 1245 recapture$ 40,000$ 30,000$ 40,000$-0-Section 1231 gain (loss) -0- -0- 5,000(12,000)$ 40,000$ 30,000$ 45,000$(12,000)Property DispositionsnDispositions of Noncapital AssetsDepreciation RecapturenFull Recapture RulenPartial Re

125、capture Rule for RealtynTwenty Percent Recapture by CorporationsnSummaryComprehensive ExampleProperty DispositionsRecognized GAIN on Sale or Exchange of Section 1231 AssetRecapture RuleTangible personaltySection 1245 recapture of depreciationPurchased intangiblesSection 1245 recapture of amortizatio

126、nNondepreciable realty landNo recaptureDepreciable realty buildings placed in service before 1987Section 1250 recapture of excess accelerated depreciation and 20% recapture by corporationsDepreciable realty buildings placed in service after 198620% recapture by corporationsProperty DispositionsnOthe

127、r Property DispositionsAbandonment and WorthlessnessForeclosuresCasualties and TheftsProperty DispositionsnConclusionChapter NineNontaxable ExchangesNontaxable ExchangesnLearning ObjectivesCompute the substituted basis of property received in a nontaxable exchange.Compute gain recognized when boot i

128、s received in a nontaxable exchange.Identify properties that qualify for like-kind exchange treatment.Describe the effect of the relief and assumption of debt in a like-kind exchange.Explain the tax consequences of the exchange of property for equity in a corporation or partnership.Describe the tax

129、consequences of a wash sale.Nontaxable ExchangesnTax Neutrality for Asset ExchangesnA Generic Nontaxable ExchangeExchanges of Qualifying PropertyNontaxable ExchangesFirm AFirm BQualifying propertyQualifying propertyNontaxable ExchangesFirm AFirm BFMV $ 200,000Bs basis $ 185,000FMV $ 200,000As basis

130、$ 140,000Nontaxable ExchangesA Generic Nontaxable ExchangeThe Substituted Basis RuleNontaxable ExchangesFirm AFirm BFMV $ 192,000Bs basis $ 185,000FMV $ 200,000As basis $ 140,000+ $ 8,000 cashNontaxable Exchanges Basis of property surrenderedBasis of qualifying property acquired Alternate method: FM

131、V of qualifying property acquired Deferred gain or Deferred loss Basis of qualifying property acquiredNontaxable ExchangesA Generic Nontaxable ExchangeThe Effect of Boot Basis of qualifying property surrendered+ Gain recognized-FMV of boot receivedBasis of qualifying property acquiredNontaxable Exch

132、angesA Generic Nontaxable ExchangeThe Effect of Boot Basis of qualifying property surrendered+ FMV of boot paidBasis of qualifying property acquiredNontaxable ExchangesA Generic Nontaxable ExchangeBook/Tax Difference from Nontaxable ExchangeNontaxable ExchangesFirm AFirm BFMV $ 192,000Bs basis $ 185

133、,000FMV $ 200,000As basis $ 230,000+ $ 8,000 cashNontaxable ExchangesA Generic Nontaxable ExchangeSummaryAmount realized on disposition(Adjusted tax basis of property)Realized gain or (loss)Deferred gain or (loss)Like-kind exchangeInvoluntary conversionFormation of business entityWash saleRecognized

134、 gain or (loss)Nontaxable ExchangesnLike-Kind ExchangesnLike-Kind PersonaltynLike-Kind RealtyNontaxable ExchangesArizona FirmNew York FirmFMV $ 925,000Basis $ 485,000FMV $ 800,000Basis $ 500,000Manhattan apartmentTuscon land+ $125,000 cashNontaxable ExchangesnLike-Kind ExchangesExchanges of Mortgage

135、d PropertiesNontaxable ExchangesABC Inc.XYZ PartnershipFMV $ 500,000Basis $ 413,000FMV $ 730,000Basis $ 295,000St. Louis office+ $230,000 mortgageChicago mallNontaxable ExchangesnInvoluntary ConversionsnFormations of Business EntitiesNontaxable ExchangesJ&K Inc.60 shares of stockMr. JiangMs. Kirt40

136、shares of stockFMV $375,000Basis $305,000FMV $250,000Basis $150,000Nontaxable ExchangesnFormations of Business EntitiesCorporate FormationsnTax Consequences to the CorporationPartnership FormationsnWash SalesNontaxable ExchangesnConclusionChapter TenThe Choice of Business EntityThe Choice of Busines

137、s EntitynLearning ObjectivesExplain the advantage of start-up losses in a passthrough entity.Calculate after-tax cash flow from passthrough entities and taxable corporations.Describe how families can use partnerships or S corporations to shift income.Define the term constructive dividend.Explain why

138、 individuals no longer can use corporations as tax shelter.Explain the purpose of the accumulated earnings tax and the personal holding company tax.Apply the tax rates to income earned by a controlled corporate group.The Choice of Business EntitynTax Planning with Passthrough EntitiesTax Benefits of

139、 Start-Up LossesThe Choice of Business EntityTax Savings and CostsPassthrough EntityYear(Deduction)or Taxable Income Tax Savings or (Cost)Discount FactorPresent Value of Tax Savings or (Cost)0$（300,000）$105,000 $105,000 1（120,000）42,000 .95239,984 2530,000 （185,500）.907（168,249）$（38,500）$（23,265）The

140、 Choice of Business EntityCorporationYear(NOL Carryforward)or Taxable Income Tax Savings or (Cost)Discount FactorPresent Value of Tax Savings or (Cost)0$（300,000）-0- -0-1（120,000）-0- -0- 2110,000 $（38,500）.907$ （34,920）$（38,500）$（ 34,920 ）The Choice of Business EntitynTax Planning with Passthrough E

141、ntitiesAvoiding a Double Tax on Business IncomeIncome Shifting among Family MembersnStatutory RestrictionsnTransaction CostsnNontax ConsiderationsThe Choice of Business EntitynPartnership or S Corporation?Contrasting CharacteristicsnCosts of Entity Formation and OperationnFlexibility of Income and L

142、oss-Sharing ArrangementnSubchapter K versus Subchapter SnSelf-Employment TaxnOwner LiabilityThe Choice of Business EntitynPartnership or S Corporation?Two Planning CasesnTax Planning with Closely Held CorporationsGetting Cash out of the CorporationnConstructive DividendsnThin Capitalization The Choi

143、ce of Business EntitynTax Planning with Closely HeldDecline of the Corporate Tax ShelternA Historical PerspectivenThe Current EnvironmentPenalty Taxes on Corporate AccumulationsnAccumulated Earnings TaxnPersonal Holding Company TaxControlled Corporate GroupsThe Choice of Business EntityCorporation A

144、Corporation BCorporation ACorporation BControlControlBrother-sister controlled groupControlParent-subsidiary controlled groupThe Choice of Business EntitynConclusionChapter 11Jurisdictional Issues in Business TaxationJurisdictional Issues in Business TaxationnLearning ObjectivesDefine the term nexus

145、.Apportion corporate taxable income among states according to UDITPA.Explain the significance of a permanent establishment.Compute a foreign tax credit.Compare the tax consequences of a foreign branch and a foreign subsidiary.Compute a deemed paid foreign tax credit.Explain the tax consequences of s

146、ubpart F income earned by a CFC.Describe the role of Section 482 in the international transfer pricing area.Jurisdictional Issues in Business TaxationnState and Local TaxationState tax（$900，000 taxable income5%）$45，000Federal tax（$855，000 taxable income34%）290，700Total income tax$335，700 $335，700$90

147、0，000 before-tax income =37.3%Jurisdictional Issues in Business TaxationnState and Local TaxationConstitutional Restrictions on State JurisdictionnThe Issue of NexusApportionment of Business IncomeSales factor + Payroll factor + Property factor 3 =State apportionment percentageTax Planning Implicati

148、onsJurisdictional Issues in Business TaxationnTax Consequences of International Business OperationsIncome Tax TreatiesU.S. Jurisdiction to Tax Global IncomeJurisdictional Issues in Business TaxationnForeign Tax CreditLimitation on the Annual CreditnExcess Credit Carrybacks and CarryforwardsnCross-Cr

149、editingJurisdictional Issues in Business TaxationnForeign Tax CreditForeign source income$200，000U.S. tax rate.34$68，000Foreign tax credit（57，000）U.S. tax on foreign source income$11，000Jurisdictional Issues in Business TaxationnOrganizational Forms for Overseas OperationsBranch Offices and Foreign

150、PartnershipsDomestic SubsidiariesForeign SubsidiariesnDividends from Foreign SubsidiariesnDeemed Paid Foreign Tax CreditJurisdictional Issues in Business TaxationnDeferral of U.S. Tax on Foreign Source IncomeControlled Foreign CorporationsnSubpart F IncomenInvestment of CFC Earnings in U.S. ParentTr

151、ansfer Pricing and Section 482Jurisdictional Issues in Business TaxationnConclusionChapter 12Compensation and Retirement PlanningCompensation and Retirement PlanningnLearning ObjectivesDistinguish between employees and independent contractors.List the factors determining reasonable compensation for

152、a shareholder/employee.Identify the most common nontaxable employee fringe benefits.Describe the tax consequences of stock options.Compare the after-tax wealth accumulated in a qualified and a nonqualified retirement plan.Distinguish between defined-benefit and defined-contribution plans.Explain why

153、 employers use nonqualified deferred-compensation plans.Describe the tax benefit of a Keogh plan to a self-employed individual.Describe the tax consequences of IRA contributions and withdrawals.Compensation and Retirement PlanningnThe Compensation TransactionnEmployee or Independent Contractor?Tax C

154、onsequences of Worker ClassificationWorker Classification ControversynThe Firms ViewpointnThe IRS ViewpointCompensation and Retirement PlanningnWage and Salary PaymentsnTax Consequences to EmployeesnTax Consequences to EmployersReasonable CompensationnClosely Held CorporationnS CorporationsnFamily M

155、embers as EmployeesForeign Earned Income ExclusionCompensation and Retirement PlanningnEmployee Fringe BenefitsnHealth and Accident InsurancenGroup Term Life InsurancenDependent Care Assistance ProgramsnOther Nontaxable Fringe BenefitsCompensation and Retirement PlanningnEmployee Fringe BenefitsFrin

156、ge Benefits and Self-Employed IndividualsCompensation Planning with Fringe BenefitsnCafeteria PlansnNegotiating with Nontaxable Fringe BenefitsCompensation and Retirement PlanningnEmployee Stock Options753028Option periodDate of exercise$90,000 Bargain elementTax Consequences of Mr. Bells Stock Opti

157、on Compensation and Retirement PlanningnEmployee Stock OptionsBoot/Tax DifferenceIncentive Stock OptionsCompensation and Retirement PlanningnEmployment-Related ExpensesMoving ExpensesnRetirement PlanningTax Advantages of Qualified Retirement PlansPremature WithdrawalsCompensation and Retirement Plan

158、ningnTypes of Qualified PlansEmployer-Provided PlansnDefined-Benefit PlansnDefined-Contribution PlansnChanging Times for Qualified PlansnNonqualified Deferred-Compensation PlansCompensation and Retirement PlanningnTypes of Qualified PlansKeogh Plans for Self-Employed IndividualsIndividual Retirement

159、 AccountsnDeduction of IRA ContributionsCompensation and Retirement PlanningIf AGI is less than:$ 83,000 (Married filing jointly)$ 52,000 (Single or head of household)IRA Contributions are fully deductibleIf AGI is more than:$ 103,000 (Married filing jointly)$ 10,000 (Married filing separately)$ 62,

160、000 (Single or head of household)IRA contributions are nondeductibleIf AGI is between:$ 83,000 and $ 103,000 (Married filing jointly)-0- and $ 10,000 (Married filing separately)$ 52,000 and $ 62,000 (Single or head of household)IRA contributions are partially deductible. The deduction is phased out

161、proportionally as AGI increases through the phaseout rage.Compensation and Retirement PlanningnTypes of Qualified PlansIndividual Retirement AccountsnIRA Deduction for NonparticipantsnWithdrawals from IRAsnRoth IRAsCompensation and Retirement PlanningnConclusionChapter 13Investment and Personal Fina

162、ncial PlanningInvestment and Personal Financial PlanningnLearning ObjectivesDetermine the tax consequences of interest and dividend income.Explain how life insurance policies and annuity contracts defer income.Compute gain or loss recognized on security transactions.Compute the tax on short-term and

163、 long-term capital gains.Describe the tax benefit of qualified small business stock and Section 1244 stock.Determine the deduction for investment interest expense.Apply the passive activity loss limitation.Compute a taxable gift by applying the annual and lifetime exclusions.Determine a decedents ta

164、xable estate.Investment and Personal Financial PlanningnBusiness versus Investment ActivitiesnInvestments in Financial AssetsDividend and Interest IncomeTax-Exempt InterestnState and Local BondsnU.S. Debt ObligationsInvestment and Personal Financial PlanningnInvestments in Financial AssetsDeferred I

165、nterest IncomenMarket DiscountnOriginal Issue DiscountLife Insurance Policies and Annuity ContractsnLife Insurance PoliciesnAnnuity ContractsnNontax ConsiderationsInvestment and Personal Financial PlanningnGains and Losses from Security TransactionsComputing Gains and LossesnTracking Security Basisn

166、Identifying Basis on SalenWorthless Securities and Nonbusiness Bad DebtsnNontaxable Exchanges of SecuritiesInvestment and Personal Financial PlanningnTax Consequences of Capital Gains and LossesNetting Capital Gains and LossesPreferential Rates on Long-Term Capital GainsnUnrecaptured Section 1250 Ga

167、inPolicy Reasons for a Preferential RateCapital Loss LimitationInvestment and Personal Financial PlanningnInvestments in Small Corporate BusinessQualified Small Business StockSection 1244 StockInvestment and Personal Financial PlanningnInvestment ExpensesInvestment Interest ExpensenNet Investment In

168、comenInvestment in Real PropertyUndeveloped LandRental Real EstateInvestment and Personal Financial PlanningnInvestments in Passive ActivitiesPassive Activity Loss LimitationnRental ActivitiesnDispositions of Passive ActivitiesPlanning with Passive Activity LossesnSale of the Passive ActivitynPurcha

169、se of a PIGInvestment and Personal Financial PlanningnWealth Transfer PlanningThe Transfer Tax SystemStructure of the Gift and Estate TaxesInvestment and Personal Financial PlanningnWealth Transfer Planning4541Tax rates (percent)199519992007Year$ 1 million taxable gift$ 1 million taxable gift$ 1 mil

170、lion taxable giftInvestment and Personal Financial PlanningnWealth Transfer PlanningAnnual Gift Tax ExclusionLifetime Gift Tax ExclusionIncome Tax Consequences of Gifted PropertynKiddie TaxInvestment and Personal Financial PlanningnWealth Transfer PlanningThe Taxable EstatenEstate Tax ExclusionnBasi

171、s of Property Transferred at DeathFor Estates of Decedents Dying in:Exclusion2002 and 2003$ 1,000,0002004 and 20051,500,0002006, 2007, and 20082,000,00020093,500,000Investment and Personal Financial PlanningnConclusionChapter 14Tax Consequences of Personal ActivitiesTax Consequences of Personal Acti

172、vitiesnLearning ObjectivesIdentify personal receipts that are taxable income.Describe the tax consequences of divorce settlements.Identify personal expenses and losses that result in itemized deductions.Describe the tax treatment of revenues and expenses from a hobby.Compute the itemized deduction f

173、or home mortgage interest.Describe the preferential treatment of gain from the sale of a personal residence.Identify itemized deductions that are limited or disallowed for AMT purposes.Tax Consequences of Personal ActivitiesnGross Income From Whatever Source DerivedPersonal ReceiptsLegal Settlements

174、nDivorceGovernment Transfer PaymentsnSocial SecurityGains on Sales of Personal AssetsTax Consequences of Personal ActivitiesnPersonal ExpensesMedical ExpensesLocal, State, and Foreign Tax PaymentsCharitable ContributionsTax Subsidies for EducationTax Consequences of Personal ActivitiesnPersonal Loss

175、esLosses on Sales of Personal AssetsCasualty and Theft LossesHobby and Gambling LossesTax Consequences of Personal ActivitiesnTax Consequences of Home OwnershipHome Mortgage Interest DeductionVacation HomesExclusion of Gain on Sale of Principle ResidenceTax Consequences of Personal ActivitiesnItemiz

176、ed Deductions as AMT AdjustmentsCertain personal itemized deductions are limited or disallowed in the computation of alternative minimum taxable income (AMTI)nMedical expenses are deductible only to the extent they exceed 10 percent of AGI.nThe itemized deduction for tax payments is disallowed.nMiscellaneous itemized deductions (including investment and employment-related expenses) are disallowed.nQualified residence interest paid on home equity debt is disallowed.Tax Consequences of Personal ActivitiesnConclusions