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Deductions from income including medical expense, state and local taxes, interest, charitable deductions, personal and business - Essay Example

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Running Head: TAX DEDUCTIONS Name: Tutor: Course: Date: University: Types of interests and the IRS rule related to the deductibility Generally, administration costs as well as theft and casualty losses are deductible on Form 706. This is to the extent that is deductible for purposes of income tax on Form number 1041…
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Deductions from income including medical expense, state and local taxes, interest, charitable deductions, personal and business
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Download file to see previous pages Deductions of interest upon tax are categorized into six: Home mortgage (publication 936), Business or trade, Investment (publication 550), Passive activity, Personal and Student loan interests For interest to be deductible upon one’s return of tax, it is determined by how money was borrowed and how such money was utilized. Form 1040’s schedule A upon the tax return shows the kinds of interest one can deduct on the return regarding investment interest, points and home mortgage interest. This is with regards to the Internal Revenue Service. (, 2011) Section of the IRS code that the IRS will use to support its position of disallowing the deduction Section 506 of the House Bill talks about revaluation of gifts and the same House Bill extends its special rule for such gifts as provided by Chapter 14 of gifts in entirety. (, 2011) Starting august 1997, subsequent to Taxpayer Relief Act’s implementation, revaluation of gifts was considered as follows with regards to tax return. After 1997 August, IRS is no longer in a position to revalue gifts and this is following the expiry of the statute of the limitations duration. For this provision to apply, though, the gift’s value must be finally determined. ...
Also the fair market value has to be determined, unless the regulations have not made it a requirement to state the market value of the whole entity if the interest value in that entity is reached without utilizing the entity’s net asset value. An explanation of how the fair market value was reached has to be included, the relation ship existing between the recipient and the donor and lastly, the description of the taxpayer’s position he/she is taking contrary to the regulation of the treasury or a ruling of revenue. (Mitchell, 2008 p6-10) Support that Donald will need to defend his position that the interest is investment related and should be deductable for tax purposes Mitchell gives an example, where the recipient of a gift may challenge a decision reached by IRS. According to the example given by Mitchell, a lady by the name Smith, Grace gave out a gift six years prior to her demise and which was valued at 1,000,000USD ( Assuming that Smith was supposed to pay the IRS a rate of tax on gift of 55%). The statute that governs this gift passed this without carrying out an audit of the return of gift. The IRS went through the return by Smith and decided on the correct value, though. This led to a scenario where the estate was supposed to have a credit for the taxes on the gift that were previously payable of an amount of 825,000USD instead of 550,000USD gift tax that was actually paid upon filing of the return. This would result to an estate tax increasing since such revaluation pushes that estate to an upper bracket of tax. In a case where the estate was in the top-most tax bracket, such a revaluation would not have any impact, though. In case the IRS gives a final notice with regards to the redetermination in accordance ...Download file to see next pagesRead More
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