ITT: Federal Income Tax

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Totalimmortal
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Re: ITT: Federal Income Tax

Postby Totalimmortal » Thu Oct 31, 2013 11:56 am

echooo23 wrote:Another request for practice tests. Please PM me if you have any! Fed Tax. Ugh!
This please. :)

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brotherdarkness
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Re: ITT: Federal Income Tax

Postby brotherdarkness » Thu Oct 31, 2013 12:34 pm

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Last edited by brotherdarkness on Fri Jun 27, 2014 8:47 pm, edited 1 time in total.

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Jsa725
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Re: ITT: Federal Income Tax

Postby Jsa725 » Thu Oct 31, 2013 12:48 pm

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wiz
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Re: ITT: Federal Income Tax

Postby wiz » Thu Oct 31, 2013 12:53 pm

Jsa725 wrote:
brotherdarkness wrote:
Totalimmortal wrote:
echooo23 wrote:Another request for practice tests. Please PM me if you have any! Fed Tax. Ugh!
This please. :)


+1

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Danger Zone
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Re: ITT: Federal Income Tax

Postby Danger Zone » Thu Oct 31, 2013 1:23 pm

Plus one.

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SemperLegal
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Re: ITT: Federal Income Tax

Postby SemperLegal » Sun Nov 03, 2013 5:58 pm

Quick question:

The E&E says that for qualified employee discounts of goods the following rule applies:
1. The discount cannot exceed the employers profit margin for a representative period.

My notes, and old outlines have an additional rule:
1. The sale of the actual item cannot exceed cost.

Which is right?

E.g.

A Corp has $100,000 in sales, and its inventory costs are $50,000. However its markup on Widget is only $2 dollars (cost $7, sold to public for $5). Is the lowest price that A Corp can charge employees without them having taxable income $5 or $3.50?

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stillwater
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Re: ITT: Federal Income Tax

Postby stillwater » Sun Nov 03, 2013 6:02 pm

SemperLegal wrote:Quick question:

The E&E says that for qualified employee discounts of goods the following rule applies:
1. The discount cannot exceed the employers profit margin for a representative period.

My notes, and old outlines have an additional rule:
1. The sale of the actual item cannot exceed cost.

Which is right?

E.g.

A Corp has $100,000 in sales, and its inventory costs are $50,000. However its markup on Widget is only $2 dollars (cost $7, sold to public for $5). Is the lowest price that A Corp can charge employees without them having taxable income $5 or $3.50?


the language uses the term "aggregate" so its talking about the aggregate price of the property sold less the aggregate cost of the property. so you aren't looking at the overall business figures for the entire inventory, just of "property sold." the code language seems to indicate you only care about the particular item when viewed in aggregate.
Last edited by stillwater on Sun Nov 03, 2013 6:03 pm, edited 1 time in total.

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Tiago Splitter
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Re: ITT: Federal Income Tax

Postby Tiago Splitter » Sun Nov 03, 2013 6:03 pm

SemperLegal wrote:Quick question:

The E&E says that for qualified employee discounts of goods the following rule applies:
1. The discount cannot exceed the employers profit margin for a representative period.

My notes, and old outlines have an additional rule:
1. The sale of the actual item cannot exceed cost.

Which is right?

E.g.

A Corp has $100,000 in sales, and its inventory costs are $50,000. However its markup on Widget is only $2 dollars (cost $7, sold to public for $5). Is the lowest price that A Corp can charge employees without them having taxable income $5 or $3.50?

I assume you mean the cost is $5 and the normal price is $7. In this case, the least they can charge the employee is $5. The sale of the item cannot exceed cost is the opposite of the rule--the sale cannot be below the cost to the employer. Or put another way, if they discount the item below $5 for the employee everything below $5 is taxable income.

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stillwater
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Re: ITT: Federal Income Tax

Postby stillwater » Sun Nov 03, 2013 6:06 pm

Tiago Splitter wrote:
SemperLegal wrote:Quick question:

The E&E says that for qualified employee discounts of goods the following rule applies:
1. The discount cannot exceed the employers profit margin for a representative period.

My notes, and old outlines have an additional rule:
1. The sale of the actual item cannot exceed cost.

Which is right?

E.g.

A Corp has $100,000 in sales, and its inventory costs are $50,000. However its markup on Widget is only $2 dollars (cost $7, sold to public for $5). Is the lowest price that A Corp can charge employees without them having taxable income $5 or $3.50?

I assume you mean the cost is $5 and the normal price is $7. In this case, the least they can charge the employee is $5. The sale of the item cannot exceed cost is the opposite of the rule--the sale cannot be below the cost to the employer. Or put another way, if they discount the item below $5 for the employee everything below $5 is taxable income.


this is correct. the code is just worded stupidly. thus, if the inventory was retailed priced at $7 for 1,000 widgets and the cost was $5,000 to the retailer ($5 per unit), the accetpable discount would be $2 per and anything above that discount would be income to the taxpayer.

also, this 132 provision is subject to the 132(j)(1) non-discrimination gloss, so it needs to be equally offered to highly compensated employees and rank and file.

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SemperLegal
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Re: ITT: Federal Income Tax

Postby SemperLegal » Sun Nov 03, 2013 6:15 pm

I wasn't sure if aggregate meant over the employers entire inventory, or just the item in question. Sounds like the latter, which means my notes are only slightly wrong.


Thanks all

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brotherdarkness
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Re: ITT: Federal Income Tax

Postby brotherdarkness » Sun Nov 03, 2013 7:12 pm

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SemperLegal
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Re: ITT: Federal Income Tax

Postby SemperLegal » Sun Nov 03, 2013 7:19 pm

I think its still good, with a significant phaseout from 65k-80k

`American Taxpayer Relief Act of 2012' wrote:Public Law 112-240
112th Congress ...

(a) In General.--Subsection (e) of section 222 is amended by
striking ``December 31, 2011'' and inserting ``December 31, 2013''.


This is the last year, but it will be effective on the day of the final

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brotherdarkness
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Re: ITT: Federal Income Tax

Postby brotherdarkness » Sun Nov 03, 2013 7:28 pm

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brotherdarkness
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Re: ITT: Federal Income Tax

Postby brotherdarkness » Fri Nov 08, 2013 12:33 am

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Tiago Splitter
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Re: ITT: Federal Income Tax

Postby Tiago Splitter » Fri Nov 08, 2013 12:41 am

brotherdarkness wrote:Can someone explain the eating facility de minimis fringe to me? It seems that it is de minimis if it's on the employer's premises and if the revenue of the cafeteria exceeds the costs. How could revenue exceed cost if employees are getting free food? Do non-employees need to eat there too, and pay enough to recoup the cost of the free employee food plus generate a profit?

According to this link, the meals are deemed paid for but excludable from the employees income, and the employer can still count the regular cost as "revenue."

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brotherdarkness
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Re: ITT: Federal Income Tax

Postby brotherdarkness » Fri Nov 08, 2013 12:47 am

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stillwater
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Re: ITT: Federal Income Tax

Postby stillwater » Fri Nov 08, 2013 10:09 am

brotherdarkness wrote:
Tiago Splitter wrote:
brotherdarkness wrote:Can someone explain the eating facility de minimis fringe to me? It seems that it is de minimis if it's on the employer's premises and if the revenue of the cafeteria exceeds the costs. How could revenue exceed cost if employees are getting free food? Do non-employees need to eat there too, and pay enough to recoup the cost of the free employee food plus generate a profit?

According to this link, the meals are deemed paid for but excludable from the employees income, and the employer can still count the regular cost as "revenue."


Thank you! Logically inane, so it's perfect in the context of the fed income tax. I assume employers cannot deduct the cost for the meals? Or can they, subject to the 50% limitation?


i think 50% applies to entertainment costs. also, i think for the whole de minimis scheme to work it has to be only occasional (and it seems like that word is relatively undefined).

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Danger Zone
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Re: ITT: Federal Income Tax

Postby Danger Zone » Fri Nov 08, 2013 10:12 am

LOL THIS CLASS

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brotherdarkness
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Re: ITT: Federal Income Tax

Postby brotherdarkness » Fri Nov 08, 2013 4:53 pm

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Tiago Splitter
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Re: ITT: Federal Income Tax

Postby Tiago Splitter » Fri Nov 08, 2013 5:16 pm

brotherdarkness wrote:
stillwater wrote:i think 50% applies to entertainment costs.


The 50% applies to both deductions for meal expenses and deductions for entertainment expenses (§274(n)).

One of the exceptions to 274(n) is de minimis fringes under 132(e).

I think the eating facility thing just happened to be put under the de minimis fringe section. It isn't actually de minimis in the sense that it's small, it's just not included as income to employees and just got tossed in under that subsection.

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Jsa725
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Re: ITT: Federal Income Tax

Postby Jsa725 » Fri Nov 15, 2013 2:02 pm

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stillwater
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Re: ITT: Federal Income Tax

Postby stillwater » Fri Nov 15, 2013 6:50 pm

federal income tax makes me SICK

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brotherdarkness
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Re: ITT: Federal Income Tax

Postby brotherdarkness » Fri Nov 15, 2013 6:55 pm

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brotherdarkness
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Re: ITT: Federal Income Tax

Postby brotherdarkness » Sat Nov 16, 2013 5:42 pm

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Jsa725
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Re: ITT: Federal Income Tax

Postby Jsa725 » Sun Nov 17, 2013 12:22 pm

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