Tax Note
Gross Income-What is taxable income?1.There must be economic benefit2.The income must be realized (value change+ transaction done)3.The income must be recognized.-Gross income defined (not all-inclusive)1.compensation.包括fees, commissions, fringe benefits2.Gross income derived from business/Distributive share of partnership gross income3.Gains derived from dealings in property4.Interest5.Rents6.Royalties7.Dividends8.Alimony and separate maintenance payments9.Annuities/Pensions10.Income from life insurance and endowment contracts捐赠合同11.Income from discharge of indebtedness12.Income in respect of a decedent死者收入13. Income from an interest in an estate or trust(不一定是现金形式，也可以是service或property。如果是indirect benefits的话，如果这个benefit是为了business needs的，则可以被exclude)-To whom is income taxable? Allocating income between married:1.Under common law, joint income is income from jointly owned property.2.Under community income is considered to belong equally to the spouses3.earnings of a minor child are taxed to child regardless of the state’s property law system
-Three accounting methods1.cash method:当年收钱当年交税/一定要是constructive receipt，就是可以随时支取而没有限制，e.g A check received after banking hours/Interest credited to a bank savings account等，都需要report income2.Accrual Method: report income in the year it is earned.有一个例外就是prepaid income，无论cash还是accrual都要在收到的当年或者第二年收税。3.Hybrid Method: combination of the cash and accrual methods有关买卖的用accrual method，其他收入用cash method，通常由一些small businesses that maintain inventories使用。-Items of Gross Income(Sec.61 用Form 1040)1.Compensation:salaries, wages, fees, commissions, tips, bonuses, specialized forms of compensationExclusion:*有一些fringe benefits: group term life insurance premiums, health and accident insurance premiums, employee discounts, contributions to retirement plans and education benefits*foreign-earned income2.Business income:如果是provide service，则gross business income is total amount received.如果是非服务业，gross business income is total sales less the cost of goods sold= gross profit3. Gain from dealings in property*sales price-the cost of property*loss不能直接offset gross income，而是deduction for AGI, 而且一年所减上限3000刀