Definitions and Regs Flashcards

1
Q

Gross Income (§61)

A

All income from whatever source derived.

*The form of compensation does not matter.

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2
Q

Adjusted Gross Income (§62)

A

This is gross income minus deductions.

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3
Q

Above the Line Deductions are ___…

A

…Used to determine AGI

  • business expenses (listed in §62)
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4
Q

Below the Line Deductions are used ___…

A

…after AGI is determined

  • other expenses. If this is greater than standard deduction, then itemize (§63) and don’t take the standard deduction.
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5
Q

Standard Deduction is ___…

A

…a dollar amount set by Congress that a TP may elect to use in lieu of itemizing their personal deductions.

*TP is entitled to deduct the full amount specified regardless of what personal expenses the taxpayer actually incurred.

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6
Q

Personal Exemptions set out in (§151) are

A

deductions allowed in addition to standard and itemized deductions for each taxpayer or dependent included on the tax return that meets the requirements set out in §151 and §152.

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7
Q

Taxable Income is ___…

A

…the income after standard deductions or itemized

deductions are taken from AGI.

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8
Q

Tax Credit vs. Tax Deduction

A

A credit reduces tax liability dollar for dollar and the

deduction reduces the taxable income in relation to tax bracket.

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9
Q

Rate Scale

A

Graduating progressive statutorily provided brackets for calculating tax liability from taxable income

  • Personal Income is a Graduating Progressive Tax Rate with a Max Marginal Tax Bracket of 39.6%
  • Corporate Income is a Disappearing Graduated Tax Rate with a Max Tax Bracket of 35%
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10
Q

Witholding Tax is___…

A

…the amount taxes that an employer withholds from an employees pay and deposits with the Treasury Department on behalf of the employee throughout the year.

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11
Q

Tax Basis is the___…

A

… cost or value of an asset when acquired by the TP that is used in calculating the capital gain or loss upon disposition.

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