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Wwek3dicussions - Case Study Example

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Following the 1913 income tax amendments, the Congress has been extending statutory tax exclusions over time based on specific terms that income is received. A statutory exclusion is created, enacted and regulated by the statute, that is, the law that has been written and passed…
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Wwek3dicussions
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Tax Exclusions and Capital Gains and Losses Tax Exclusions and Capital Gains and Losses Following the 1913 income tax amendments, the Congress has been extending statutory tax exclusions over time based on specific terms that income is received. A statutory exclusion is created, enacted and regulated by the statute, that is, the law that has been written and passed by the legislative body of a nation. In other cases, statutory exclusions arise from litigation whereby the government attempts to tax something as income. Some of these statutory income exclusions include the employee fringe benefits exclusions and the exclusions benefiting industries (Owsley & McKinley, 2014).
Some benefits may be excluded by the statutes from an employee’s income such as the on- premise eating facilities. Even though fringe benefits are treated as being part of the taxable wages, there also includes individual fringe benefits that are expected. Thus, the IRS should retain these exclusions in the tax code (Lieuallen, 2011). There is also a major gain to offering the benefits is that one can still take a business deduction for his or her cost regardless of whether the employees do not have to pay taxes. The fringe benefits may include qualified employee discounts as well as adequate transportation fringe benefits among others.
In addition, some of these taxable income exclusions benefit particular industries as per the exclusions benefiting industries such the insurance industry. The proceeds from a life insurance that are paid when someone dies are not taxable. Another good example is the timber industry; the incomes generated from the sale of timber are not considered as gross income, but they are treated as capital gain thus being subject to capital gains tax (Karayan, Swenson & Neff, 2010).
Permanent amendments were made to the federal estate tax laws in the late 2013, whereby according to the new law individuals whose estates were taxable through at the states or federal level could have the following options put in place to reduce their tax bill (United States & Dickinson, 2013).
One of the options is to spend assets; it is the easiest and quickest approach to reducing the estate value. Using of advanced estate planning techniques may also be another way of eliminating the potential estate tax (Geisler, 2013). The option of gifting through a family limited company may offer estate tax reduction as well as the protection of assets. Finally, the creation of the charitable trust, such as the charitable remainder trust, can give the clients a charitable income deduction in instances when the trust is funded.
References
Geisler, G. G. (2013). Federal income tax laws that cause individuals’ marginal and statutory tax rates to differ. Journal Of Accounting Education, 31(4), 430-460. doi:10.1016/j.jaccedu.2013.08.001
Karayan, J. E., Swenson, C. W., & Neff, J. W. (2010). Strategic corporate tax planning. Hoboken, N.J: J. Wiley.
Lieuallen, G. G. (2011). Basic federal income tax. Austin: Wolters Kluwer Law & Business.
Owsley, J., & McKinley, J. (2014). Comparing the Foreign Earned Income Exclusion and the Foreign Tax Credit. CPA Journal, 84(6), 42-45.
United States., & Dickinson, M. B. (2013). Federal income tax code and regulations: Selected sections. Chicago, IL: CCH. Read More
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