Definition of liquidating dividend


Accounting methods: unsophisticated taxpayers use accrual accounting A.Accrual Method: unearned income: received service income: provided advance payments: can be deferred accrued expenses: claimed when liability becomes certain B.Cash Method: Prepaid expenses are prorated for cash basis taxpayers if recognition of the total expense in the current year would distort taxable income. Hybrid Method: required for taxpayers where sales of inventory constitute a substantial source of income taxable bonds: amortize and deduct tax exempt bonds: amortize, but no deduction Interest is accrued on bonds purchased between interest dates, and the portion earned prior to the purchase is treated as a return of capital. Bond Discounts: Cash basis taxpayers can defer the original issue discount on US savings bonds (series EE bonds — not series H) until maturity Individuals can elect to amortize discounts on bonds purchased in the secondary market (straight-line method is allowed). the owner of the bond is at least 24 years old The interest is excluded in proportion to the educational expenses of the taxpayer, spouse, or dependent phased-out for 2008 when modified AGI exceeds $67,100 ($100,650) for single (filing joint) status VI.



– Loss basis = lower of FMV at date of gift and adjusted basis of the donor (a built-in gain can be transferred, but not a built-in loss) – increased for the portion of any gift tax paid by the donor due to appreciation in the property D. Damages received for emotional distress, employment or age discrimination, or injury to reputation: taxable; Attorney’s fees and other suit: deductible, limited to the income included. Employer Purchased Policies Medical expense reimbursements and workman’s compensation payments are excluded Reimbursement for loss of wages: taxable Disability insurance benefits: taxable III.Holding Period: gain basis is used, period includes that of the donor; loss basis is used, start from the date of gift. Inheritances – Basis: fair market value at the date of death, or the FMV on the alternate valuation date (six months after the date of death) if that date is selected by the executor as the valuation date – Holding Period: long-term F. Alimony Taxed to the recipient and the payor is granted a deduction Payments to a former spouse that do not qualify as alimony are treated as a division of property: nontaxable to the recipient and nondeductible by the payor. Definition: Any payment that is not specifically identified, is presumed to satisfy child support obligations before other obligations C. Fringe Benefits A.a group-term policy of $50,000 face value Over 50,000: taxable, rate based on table (related to age) Accelerated death benefits excluded if the insured taxpayer is terminally or chronically ill C.Special front loading rules require recapture of deductions and income if alimony payments decline more than $15,000 over the first 3 years after the divorce. Health insurance premiums: nontaxable Self-employed individuals can deduct 100% of premium for self, spouse, and dependents with limit of net earnings from self-employment D.Accountable Plans: The employer must require the employee to accept lodging as a condition of employment to be excluded from income G.



Definition of liquidating dividend comments


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