StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Internal Revenue Code/Taxable Income - Essay Example

Cite this document
Summary
Professor Subject code Section 1 The concepts in the determination internal revenue Retained income Retained income is a figure used in business to calculate how much money generated or lost during the trading period of time…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94% of users find it useful
Internal Revenue Code/Taxable Income
Read Text Preview

Extract of sample "Internal Revenue Code/Taxable Income"

Download file to see previous pages

For example a company may decide to purchase asset or reduce obligations out of its retained earnings. In most cases retained income does reflect the dividend policy of the company because the board will decide either to reinvest such profit or to pay them out to stockholders. The retained earning I taxable at corporate tax rate as well as pay as you earn (PAYE) on the shareholder share of profit if any. Recognized income This model is the basis of matching and accrual concept. These concepts both takes into account the accounting period in which expenses has been incurred or revenue has been recognized.

According to the principle revenues are recognized when they are realizable that is usually by the time goods are transferred or services are rendered. Therefore it does not matter when cash is received. On the other hand expenses are matched to the period they relate to. Examples are: accrued revenue, and deferred revenue. Return of capital doctrine This doctrine protects some part of investment proceeds from taxation for instance if Mr. Y invested $20,000 there after sold the investment and realized $20,500 only $5,000 would be valid for taxation.

The initial outlay is protected from tax. It can also be called capital gain; however it should not be mistaken with the return on capital which measures the rate of return. Constructive receipt Normally this concept is used to determine the gross income of cash basis tax-payer. Unlike actual receipt this concept does not require the physical ownership of goods which income relates (Murphy, K. & Higgins, 2011). Income is said to successively receive if the money are available to the taxpayer with no significant limitations For instance, if a taxpayer gets imbursement of some sort of pledges this will translate to tax timing reasons.

Tax benefit rule This rule is highly based on how tax credit or tax liability a taxpayer is entitled to is when computing income tax. The deductions done in the preceding year are recovered in subsequent year and are reported as income in the year it is recovered in such a way that a tax benefit is recorded from such deduction. Under this rule the local or state tax refund may not be entirely taxable if the is a claim of unused tax credit. Wherewithal to pay doctrine The doctrine recognizes the period which the taxpayer has the capacity to pay his /her tax on the income earned.

In this case the Review commission does not wait for the dispute to be solved before taxing the income (Cordes, J. 2005). Consequently the delay attracts the risk that the tax will become uncollectible in future. Atypical example; landlords normally require tenants to pay their in advance which is know as prepaid rent. Therefore the tax on such deposit is deferred because some time the rent may be returned to the tenant. Return of capital doctrine mostly favor the taxpayer whereas Wherewithal to pay doctrine is most beneficial to internal revenue service.

Section 2 Itemized deductions are viable expenses which are required by individual taxpayer on their income tax returns in line to diminish their taxable income (Meldman, & Sideman, 2006). Itemized should go beyond the established average deduction before the taxpayer is given any benefit from such deductions. These deductions reflect on social policies by providing incitements such as paying huge medical bills. This come from those who have retired and have high income fro savings and pension fund.

The other deduction is home mortgage interest which is provided to help in stimulating the

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Internal Revenue Code/Taxable Income Essay Example | Topics and Well Written Essays - 750 words”, n.d.)
Retrieved from https://studentshare.org/finance-accounting/1459333-internal-revenue-code-taxable-income
(Internal Revenue Code/Taxable Income Essay Example | Topics and Well Written Essays - 750 Words)
https://studentshare.org/finance-accounting/1459333-internal-revenue-code-taxable-income.
“Internal Revenue Code/Taxable Income Essay Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.org/finance-accounting/1459333-internal-revenue-code-taxable-income.
  • Cited: 0 times

CHECK THESE SAMPLES OF Internal Revenue Code/Taxable Income

Tax Analysis: Itemized Deductions

The main aim of tax reduction is to reduce the taxable income in order to increase tax refund.... The main purpose of standard reduction is the presetting income to allow a deduction on the annual taxable income.... The Itemized Deduction This is the deduction from taxpayers' taxable income that is adjusted to the gross income made up from deductions for money on other goods and services annually.... Deductions on specific items are allowed and they often defined by the internal revenue Services....
6 Pages (1500 words) Essay

Internal Revenue Codes

It also sates that "Any cost which (but for this subsection) could not be taken into account in computing taxable income for any taxable year shall not be treated as a cost described in this paragraph"( IRC 263A) The property can be both produced by the tax payer as well as acquired by him for resale.... There are two internal revenue codes namely 263 and 195 which treat differently expenditures of capital nature.... internal revenue Bulletin (2004) stipulates guidance for capitalization of expenditures....
3 Pages (750 words) Essay

Puerto Rico's Underground Economy And Tax System

income coming from other U.... possessions or Puerto Rico is generally considered as foreign-source income.... tax, which also includes the alternative minimum tax, on particular foreign source income which was associated with their processes in the specified regions.... possessions could vote for under code section 936 to commonly do away with the U....
9 Pages (2250 words) Essay

Strategic Planning and Control

For example, there is the integration of numerous technological platforms fitted into the single device of a smartphone, making it capable of performing most day-to-day complex tasks.... To companies… This is because of the high level of competition associated with the industry, making it necessary for industry players to have a arefully meted plan that makes it possible to forecast their strategic position in the industry within the short to long term basis (Utterback, 2004)....
16 Pages (4000 words) Coursework

Internal Revenue Code Section 482 and Transfer Pricing

"internal revenue code Section 482 and Transfer Pricing" paper focuses on the code that empowers the IRS to adjust various allowances, credits, or loans as well as other deductions while computing the income for the purpose of payment of tax, which mainly incorporates transfer pricing.... 1) further states that IRS and the taxpayers can resolve all the issues related to the transfer pricing under section 482 of the internal revenue code under Income tax regulations, on a prospective basis....
9 Pages (2250 words) Assignment

Tax System in the UK

The current corporation tax (main rate) is 30% on taxable income exceeding £1.... This paper under the title "Tax System in the UK" focuses on the fact that income Tax was introduced in 1799, as a means of paying for the war against the French forces under Napoleon.... income tax is the top contributor to the revenue of the government.... hellip; income tax is charged at various rates on the income earned above the personal allowance, which is £6475 for the year 2009-10....
12 Pages (3000 words) Coursework

Receiving Money for Purposes of Federal Tax Income

For the purpose of United States Fed Inc, under internal revenue code, the $ 300,000 that he has received a fee in the settlement of the compensation claim will be treated as Smith's personal income.... The issue here is: What is the determination regarding reducing the taxable income for both (a) and (b) above.... For the year 2010, this taxable income of Mr.... The issue here is how should the $ 300,000 that John Smith has received for purposes of Federal tax income....
6 Pages (1500 words) Case Study

External and Internal Environments - Wal-Mart Stores

The disposable income of the US population is also expected to increase.... Another major social concern for the country is the rising inequality of income.... United States has been ranked 42 out of 136 nations with respect to the income equality parameter as evaluated by the Gini coefficient (CIA, 2012b)....
8 Pages (2000 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us