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7 Cards in this Set
- Front
- Back
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Gross Income
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any accession to wealth, clearly realized, over which the taxpayer has complete dominion. All income, from whatever source derived.
Exclusions: personal inj damages, scholarships, loans, child support, divorce prop settlement. |
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Accounting Methods
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1) Cash Method: GI reported when taxpayer actually/constructively receives it. Constructive: when set aside for taxpayer/credited to acct/otherwise available to taxpayer.
2) Accrual Method: GI reported when all things occurred fixing taxpayer's obligation to pay, amt can be det. w/reas accuracy, and economic perf occurs. Most businesses use it, generally faster than cash method. 3) Installment Method: prop sold in series of payments. S can wait until payments received to report gain. Each payment is part gain/part return of basis. |
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Like-Kind Exchanges
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No gain/loss recognized if business/investment prop is exchanged for other business/investment prop of "like kind" w/prop given up.
-"like kind": used in business or held for invesment. -Disqualified: personal-use assets, stocks/bonds/notes, inventory. -BOOT: $ or non-like-kind prop exchange: Gain recognized is lesser of RG or Boot Amt. |
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Capital Gain
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Capital Gains taxed at lower rate, limits on Capital losses/yr.
Capital Gain/Loss: -dividends on Corp. stock or -Gain/Loss on Sale/Exchange of Capital Asset |
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Personal Exemption
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taxpayer, spouse, dependent: $3500/person.
"Dependent" is either Qualifying Child (lives >1/2 yr and doesn't provide >1/2 own support) or Qualifying Relative (relative or member of household w/certain support reqs). |
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Profit-motivated vs. Personal
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includes:
-Travel: transportation, lodging, meals w/in limits. -Work clothes: not adaptable to general wear. -Education: deductible only if maintaining/improving skills needed for job already has. |
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Business/Investment Deductions
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-Deduct all "ordinary & necessary" expenses incurred in carrying on trade/business or carrying on any profit-oriented activty (investment).
-Rent/supplies/salaries/taxes/utilities/etc. -Losses: losses on prop trans deductible IF incurred in trade/business/profit. Personal-use only deductible for casualty losses. |
