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26 Cards in this Set
- Front
- Back
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DATE: tax used to finance civil war
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1861
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DATE: first individual income tax
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1894
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DATE: First corporate income tax
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1909
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DATE: First legal income tax
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1913
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DATE: Revenue act codified
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1939
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Objectives of federal tax
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Raise revenue
Regulate economy Social and political objectives political aims |
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What is the tax structure criteria?
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Certainty - When/how much / where to pay tax
Convenience - due on certain date, easy for taxpayer Economy - costs to collect tax Equality - similarly situated taxpayers taxed the same |
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Tax Evasion
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Using the tax code ILLEGALLY to maximize after tax cash flow
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Tax Avoidance
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Using the tax code LEGALLY to maximize after tax cash flow
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Progressive tax
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As tax base increases the tax rate increases
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Proportional
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As tax base increases the tax rate stays the same
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Regressive
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As tax base increases the tax rate decreases
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closed fact vs open fact
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Closed - find best outcome that already occurred
Open - has not occurred yet |
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what are the basic tax planning issues
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Entity - Who is getting taxed? corp/ individuals
Fundamentals or mechanics - calculations jurisdiction - who can tax me? feds? accounting methods - timing issues compliance - |
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Best strategy to avoid some taxes?
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shifting items,
shifting ordinary income to capital gains would maximize after tax cash flow |
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Tax planning constraints
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1. Substance over form
2. Business purpose 3. Step Transactions 4. Clear reflection of income 5. Reallocation of income |
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total income tax expense =
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current tax expense + deferred tax expense
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what is the conservatism principle?
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A deferred tax liability never requires a valuation allowance because future tax liabilities are always expected to be settled
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What is gross income
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All income from whatever source derived
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realized vs recognized
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realized before recognized
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Cash receipt method
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income recognized in the year received (doctrine of constructive receipt)
EXCEPTIONS: OID's & Loans |
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Accrual method
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Income recognized when earned
(inventory = accrual) All events test 1. occurred that fix the fact of liability 2. liability can be determined w/ reasonable accuracy EXCEPTIONS: 1. prepaid items 2. payments in advance for goods 3. payments in advance for services |
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What are dividends?
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payment to a shareholder with respect to his or her stock.
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Stock dividend
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not included in income
Exceptions: shareholder has the option to receive either cash or stock |
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qualified dividends are taxed at?
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capital gain rates
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What are the 3 types of below market loans?
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Gift loans
Compensation- related loans Corporation- shareholder loans |
