Chapter 3 Review Flashcards Preview

HS321 CFP Income Taxation > Chapter 3 Review > Flashcards

Flashcards in Chapter 3 Review Deck (8)
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1
Q

What are 15 items that are specifically included in gross income under the
Internal Revenue Code?

A

• compensation for services, including fees, commissions, fringe benefits, and
similar items
• gross income derived from business
• gains derived from dealings in property
• interest
• rents
• royalties
• dividends
• alimony and separate maintenance payments
• annuities
• income from life insurance and endowment contracts
• pensions
• income from discharge of indebtedness
• distributive share of partnership gross income
• income in respect of a decedent
• income from an interest in an estate or trust

2
Q

How is the tax concept of income differentiated from the tax concept of
capital?

A

Income is taxable return of capital is not

3
Q

Don purchases stock at $30 a share. The price per share goes up to $50 in
one week. Has he realized income? Explain.

A

No he has not, only when he sells it will he

4
Q

Does your client, Mrs. Eidson, have income when interest earned on her life
insurance policy dividends is credited to her policy account? Explain

A

Interest earned on dividends is taxable. Interest on the dividends are taxable. Accumulated dividends at interest even though they did not take it, it is taxable.

5
Q

Under what circumstances will an employee be taxed on compensation under
the economic-benefit theory?

A

They will be taxed on the benefit they receive of value. it you did not do anything for a service rendered you dont get taxed

6
Q

Paul is the sales manager for the Freeman Corporation. The company pays
premiums on a $100,000 whole life policy owned by Paul insuring his life.
Paul has named his wife as beneficiary. What is the relevant income tax
concept and its implications to Paul?

A

It is taxable because it is part of compensation it is a taxable event. Employer irrevocable beneficiaries not taxable.

7
Q

Describe the principle of assignment of income.

A

Assignment of income you can assign interest or income but you still will be on a pre taxed basis

8
Q

John Jones, an agent for Podunk Mutual, assigns his renewal commissions
to his 25-year-old daughter, Jane. In this situation, explain who the taxpayer
is for income tax purposes as well as the principle of tax law that applies
here.

A

John pays the taxes assignment of income doctrine