Session 17 Flashcards
Regressive Taxes
are levied at the same rate regardless to what tax bracket you are in
Progressive Taxes
increase the tax rate as income increases
Alimony payments
are awarding at the end of a divorce and the person making the payments can deduct it
Personal Use of Vacation House
the greater of 14 days or 10% of total days rented to other at fair value
Tax on Dividend Income
Max of 15%
Interest Income Taxed?
Always at ordinary income
Are dividends double taxed?
No, once distributed and reinvested the holder when he sells the entire position isn’t taxed at the new cost basis
Alternative Minimum Tax (AMT) Highlights (5)
1- Accelerated depreciation on property placed in service after 1986
2- Certain cost associated with LP like RD and excess intangible cost
3- Local tax and interest on investments that don’t general income
4- Tax-exempt interest on private purpose mini after August 1986
5-Incentive stock options to the extent that the fair market value of the employer’s stock is in excess of the strike price
Effective Tax rate
is the overall rate of tax you pay on your taxable income
Marginal Tax rate
is the rate you pay on each additional dollar you received as income
Are premium for life insurance tax deductible?
NO
Are Policy Loan from life insurance taxable?
NO
How is a Policy Surrender taxed?
It will be taxed as ordinary income over of the cost basis
How if the sale of the primary residence taxed?
couple first 500,000 of capital gain isn’t touched with taxes and if single 250,000
Double Taxation with dividends
first taxed with the C corp before being paid out and then is taxed with it is payable to the shareholder
Dividend Exclusion Rule
dividends paid from one corp to another are 70% exempt from taxation and for foreign companies they are 30% exempt
When are taxes due for a C corporation?
15th of the fourth month after the fiscal year
Different tax forms for each business
1- Sole Proprietor is the Schedule C
2- Members of LLC and Shareholder of S Corps Schedule K-1
3- C Corp is the Form 1120
Generation Skipping Trust (GST)
is it given from grandparents to grandchild and it has an exclusion of 5.45 million per grandparent and it starts as of when it is funded…so if it wroth 2 million now and in 30 years it is worth 100 million not taxable on the estate
Adjusted Gross Estate (AGE)
certain expenses are deducted from the gross estate like funeral expenses, charitable deductions
Alternative Valuation Date
the executor of an estate may choose to calculate the assets in the estate as of date or death or six month later
How long do you have to pay the estate tax?
NINE MONTHS after death
Taxation of Estate income
will be 39.6% of anything over 12,300
