ACC 287 Lecture Notes - Lecture 6: Progressive Tax, Tax Bracket, Capital Asset
broad principle tat provides guidance on the income tax treatment of transactions
Construct
mechanism that has been developed to implement a concept
Doctrine
construct that has been developed by the courts
Construct & Doctrine
interpretive devices necessary to apply a concept
Ability-to-Pay Concept
a tax should be based on the amount that the taxpayer can afford to pay, relative to other taxpayers
-income base is a net income number
-progressive tax rate structure
Administrative Convenience Concept
items may be omitted from the tax base whenever the cost of implementing a concept exceeds the
benefit of using it
-cost: time and effort for taxpayers to accumulate the information, government ensuring compliance
-benefit: tax revenue
Arm's-Length Transaction Concept
-all parties to the transaction have bargained in good faith and for their individual benefit, not for the
benefit of the transaction group
-transactions not made at arm's length are generally given no tax effect or are not given the intended
tax effect
Common Related Party Relationships
1. Individuals and their families (include a spouse, brothers, sisters, lineal descendants, and ancestors)
2. Individuals and a corporation/partnership if the individual owns more than 50%
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3. A corporation and a partnership if the same person owns more than 50% of both the corporation and
partnership
Constructive Ownership Rules
stat the relationships within which an individual is deemed to indirectly own an interest actually owned
by another person/entity
Pay-as-you-go Concept
a tax should be collected as close as possible to the time in which the income is earned
-withheld amounts from pay check sent to govt.
Entity Concept
according to the entity concept, each tax unit must keep separate records and report the results of its
operations separate and apart from other tax units.
Taxable Entities
taxable entities are thse that are liable for the payment of tax. that is, taxable entities must pay a tax
based on their taxable income.
-individuals
-regular (C) corporations
-estates
-some trusts
Conduit Entities
nontaxable reporting entity, the tax attributes of which (income, deductions, losses, credits) flow
through to its owner(s) for tax purposes
-S Corporation
-Partnership
Trusts
-mixture of taxable (taxed on income retained in trust) and conduit (not taxed on income distributed;
beneficiary is) entities
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Broad principle tat provides guidance on the income tax treatment of transactions. Construct mechanism that has been developed to implement a concept. Doctrine construct that has been developed by the courts. Construct & doctrine interpretive devices necessary to apply a concept. Ability-to-pay concept a tax should be based on the amount that the taxpayer can afford to pay, relative to other taxpayers. Administrative convenience concept items may be omitted from the tax base whenever the cost of implementing a concept exceeds the benefit of using it. Cost: time and effort for taxpayers to accumulate the information, government ensuring compliance. All parties to the transaction have bargained in good faith and for their individual benefit, not for the benefit of the transaction group. Transactions not made at arm"s length are generally given no tax effect or are not given the intended tax effect.
