Taxchapter4文档格式.docx

Taxchapter4文档格式.docx

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1.[LO1]Howarerealizedincome,grossincome,andtaxableincomesimilar,andhowaretheydifferent?

Realizedincomeismorebroadlydefinedthangrossincomewhichismorebroadlydefinedthantaxableincome.

Grossincomeisrealizedincomeminusexclusionsanddeferrals.Thatis,grossincomeistheincomethattaxpayersactuallyreportontheirtaxreturnsandpaytaxeson.TaxableincomeisgrossincomeminusallowabledeductionsforandfromAGI.Taxableincomeisthebaseusedtocomputethetaxduebeforeapplicablecredits.

2.[LO1]Aretaxpayersrequiredtoincludeallrealizedincomeingrossincome?

Explain.

No.Realizedincomeisthestartingpointforcomputinggrossincome.However,thetaxlawsallowcertaintypesofincometobepermanentlyexcludedfromtaxationordeferredfromtaxationuntilasubsequenttaxyear.Consequently,taxpayersarenotrequiredtoincludeallrealizedincomeingrossincome.

3.[LO1]Allelseequal,shouldtaxpayersprefertoexcludeincomeordeferit?

Why?

Taxpayersshouldprefertoexcludeincomeratherthandeferincome.Whentheyexcludeincometheyarenevertaxedontheincome.Whentheydeferincome,theyarestilltaxedontheincome,buttheyaretaxedinasubsequenttaxyear.

4.[LO1]CompareandcontrastforandfromAGIdeductions.WhyareforAGIdeductionslikelymorevaluabletotaxpayersthanfromAGIdeductions?

AlldeductionsfromgrossincomeallowedbyCongressareeither“forAGI”or“fromAGI”deductions.ForAGIdeductionsareoftenreferredtoasdeductionsabovetheline,whiledeductionsfromAGIarereferredtoasdeductionsbelowtheline.ThelineisAGI（thelastlineonthefrontpageoftheindividualtaxreturn）.

Thoughbothtypesofdeductionsmayreduceataxpayer’staxableincome,forAGIdeductionsaremorevaluabletotaxpayersbecause

（1）ForAGIdeductionsalwaysreducetaxableincomedollarfordollarwhilefromAGIdeductionsmaybelimitedormaynotprovideanyincrementaltaxbenefit（forexample,taxpayersthatdon’titemizedon’treceiveanytaxbenefitoffromAGIdeductions）.

（2）ForAGIdeductionsreduceAGIwhichmayallowtaxpayerstodeductmoreoftheirfromAGIdeductions（andothertaxbenefits）thataresubjecttoAGIlimitations.FromAGIdeductionsdon’taffectAGI.

5.[LO1]Whatisthedifferencebetweengrossincomeandadjustedgrossincome,andwhatisthedifferencebetweenadjustedgrossincomeandtaxableincome?

Grossincomeismoreinclusivethanisadjustedgrossincome（AGI）.Grossincomeisallincomefromwhateversourcederivedthatisnotexcludedordeferredfromincome.AGIis

grossincomeminusforAGIdeductions.SotheprimarydifferencebetweengrossincomeandAGIistheamountofforAGIdeductions.

Adjustedgrossincomeismoreinclusivethantaxableincome.AGIisgrossincomeminusforAGIdeductions.TaxableincomeisgrossincomeminusforAGIdeductionsminusfromAGIdeductions.Consequently,thedifferencebetweenAGIandtaxableincomeistheamountoffromAGIdeductions.

6.[LO1]Howdotaxpayersdeterminewhethertheyshoulddeducttheiritemizeddeductionsorutilizethestandarddeduction?

Taxpayersgenerallydeductthegreaterof

（1）theapplicablestandarddeductionor

（2）theirtotalitemizeddeductions,afterlimitations.However,taxpayersthatdonotwantbotherwithtrackingitemizeddeductionsmaychoosetodeductthestandarddeductionevenwhenitemizeddeductionsmayexceedthestandarddeduction.

7.[LO1].Whyaresomedeductionscalled“above-the-line”deductionsandothersarecalled“below-the-line”deductions?

Whatisthe“line”?

Thelineisadjustedgrossincome（AGI）.AGIisconsideredthelinebecauseofthesignificanceitplaysintheamountofdeductionsallowedfromAGI.ForAGIdeductionsarecalledabove-the-linedeductionsbecausetheyaredeductedindeterminingAGI.FromAGIdeductionsarecalledbelow-the-linedeductionsbecausetheyaredeductedafterAGIhasbeendetermined.TheyaredeductedfromAGItoarriveattaxableincome.Below-the-linedeductionsmaybesubjecttolimitationsbasedonthetaxpayer’sAGI.

8.[LO1]Whatisthedifferencebetweenataxdeductionandataxcredit?

Isonemorebeneficialthantheother?

Adeductiongenerallyreducestaxableincomedollarfordollar（althoughfromAGIdeductionsmaynotreducetaxableincomedollarfordollar）.Thistranslatesintoataxsavingsintheamountofthedeductiontimesthemarginaltaxrate.Incontrast,creditsreduceataxpayer’staxespayabledollarfordollar.Thus,generallyspeaking,creditsaremorevaluablethandeductions.

9.[LO1]Whattypesofincomearetaxedatratesdifferentthantheratesprovidedintaxrateschedulesandtaxtables?

Qualifyingdividendsandnetlong-termcapitalgains（technicallycallednetcapitalgains）aretaxedatratesdifferentthantheratesembeddedinthetablesorpublishedinthetaxrateschedules.Qualifyingdividendsaregenerallytaxedat15%butcanbetaxedaslowas0%.Long-termcapitalgainsaregenerallytaxedat15%butcanbetaxedaslowas0%andashighas28%.

10.[LO1]Whattypesoffederalincome-basedtaxes,otherthantheregularincometax,mighttaxpayersberequiredtopay?

Ingeneralterms,whatisthetaxbaseforeachoftheseothertaxesonincome?

Inadditiontotheindividualincometax,individualsmayalsoberequiredtopayotherincomebasedtaxessuchasthealternativeminimumtax（AMT）orself-employmenttaxes.Thesetaxesareimposedonataxbaseotherthantheindividual’staxableincome.TheAMTtaxbaseisalternativeminimumtaxableincome,whichisthetaxpayer’staxable

incomeadjustedforcertainitemstomorecloselyreflectthetaxpayer’seconomicincomethandoestaxableincomeThetaxbaseforself-employmenttaxesisthenetearningsderivedfromself-employmentactivities.

11.[LO1]Identifythreewaystaxpayerscanpaytheirincometaxestothegovernment.

Taxpayerscanpaytaxesthrough

（1）incometaxeswithheldfromthetaxpayer’ssalaryorwagesbyheremployer,

（2）estimatedtaxpaymentsdirectlytothegovernment,and（3）taxesthetaxpayeroverpaidinthepreviousyearthatthetaxpayerelectstoapplyasanestimatedpaymentforthecurrentyear.

12.[LO2]EmilyandTonyarerecentlymarriedcollegestudents.CanEmilyqualifyasherparents’dependent?

Dependingonthecircumstances,Emilymayqualifyasadependentofherparents.Ataxpayerwhofilesajointreturnwithhisorherspousemaynotqualifyasadependentofanother,unlessthereisnotaxliabilityonthecouple'

sjointreturnandtherewouldnothavebeenanytaxliabilityoneitherspouse’staxreturniftheyhadfiledseparately.AslongasEmilyandTonymeetthesecriteria,thenEmilywillqualifyasadependentofherparentsassumingshealsomeetsthetesttobeherparents’qualifyingchildorqualifyingrelative.

13.[LO2]Ingeneralterms,whatarethedifferencesintherulesfordeterminingwhoisaqualifyingchildandwhoqualifiesasadependentasaqualifyingrelative?

Isitpossibleforsomeonetobeaqualifyingchildandaqualifyingrelativeofthesametaxpayer?

Whyorwhynot?

Therulesfordeterminingwhoqualifiesasadependentasaqualifyingchildandwhoqualifiesasadependentasaqualifyingrelativeoverlaptosomeextent.Theprimarydifferencesbetweenthetwoare

（1）therelationshiprequirementismoreinclusiveforqualifyingrelativesthanqualifyingchildren,

（2）qualifyingchildrenaresubjecttoagerestrictionswhilequalifyingrelativesarenot,

（3）qualifyingrelativesaresubjecttoagrossincomerestrictionwhilequalifyingchildrenarenot,and

（4）taxpayersneednotprovidemorethanhalfaqualifyingchild’ssupport,thoughthechildcannotprovidemorethanhalfofhis/herownsupport,but,absentamultiplesupportagreement,taxpayersmustprovidemorethanhalfthesupportofaqualifyingrelative.

Anindividualmaynotbeaqualifyingchildandaqualifyingrelativeofthesametaxpayer.Bydefinition,aqualifyingrelativemustbesomeonewhoisnotaqualifyingchild.Consequently,thequalifyingrelativetestsapplyonlywhentheindividualdoesnotpassthequalifyingchildtests.

14.[LO2]Howdotwotaxpayersdeterminewhohasprioritytoclaimthedependencyexemptionforaqualifyingchildofbothtaxpayerswhenneithertaxpayerisaparentofthechild（assumethechilddoesnotqualifyasaqualifyingchildforanyparent）?

Howdoparentsdeterminewhogetstodeductthedependencyexemptionforaqualifyingchildofbothparentswhentheparentsaredivorcedorfileseparatereturns?

Thepriorityinclaimingaqualifyingchildisasfollows:

（1）Theparentofthechild.

（2）Ifbothparentsqualify,thentheparentwithwhomthechildhasresidedwiththelongestduringtheyear.

（3）Ifthechildresideswiththeparentsequallyorthechildresideswithtaxpayerswhoarenotparents（thechildisnotaqualifyingchildofaparent）,thenthetaxpayerwiththehighestAGI.

Inthecaseofdivorcedparentsorparentsfilingseparately,theparentwithwhomthechildhasresidedwiththelongestduringtheyearhaspriorityfortheexemption（thecustodialparent）.However,thecustodialparentcanreleasetheexemptiontothenoncustodialparentaspartofthedivorcedecreeorseparationinstrument.Ifthechildresidesanequaltimewitheachparent（aswouldlikelybethecaseifthemarriedcouplewasfilingseparately）,theparentwiththehigherAGIhaspriority.

15.[LO2]Isabellaprovides30%ofthesupportforherfatherHastingswholivesinanapartmentbyhimselfandhasnogrossincome.IsitpossibleforIsabe