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6
California vs. Texas both 50/50 marital income, but
what owned before marriage belongs exclusively to
that one person in CA
Changed from calendar year end to different
year end
Annualize the income $income x (yr#mo./ #mo.) =
Tax on the annualized income 15% x 1st $50,000 =
25% x 2nd $25,000 =
34% x 3rd $25,000 =
Total the tax
Step 3: Short period tax =
$Total tax x
(#mo./12)
Cash Basis Taxpayer net income
Prepaid rent/interest you will pretend like youre
accrual basis taxpayer
Sales income - Less Expenses:
Other than rent and interest
Portion of prepaid rent before Dec. last day
(rent paid/#mo.)
Interest do not include
= Net Income
~IRA contribution paid in cash c.yr for 2014 is
deductible if for 2013
~Prepayment of interest for 2014 is not deductible
for 2013
Accrual Basis taxpayer net income
All expenses are treated as accrual expense. Prepaid
interest/rent treated as cash basis income
Sales income: Other than rental + Rental
Expenses: Other than rental + Rental (rent
prepaid/#mo.) x mo. elapses
= Net Income
Depreciation
[Cost - Section 179 depr. exp = Depreciable $
- Bonus depr. 50% = Depr $ - Regular depr = Depr $
X MACRS %]
Straight-line
Cost basis/(#yrs x mo./yr) x
#mo. left in c.year
Straight-line MACRS
Cost basis X annual % rates
from straight-line table
Accelerated MACRS
Cost basis X annual % rate
from accelerated
depreciation table
Straight-line Real Property
Use #mo. to find
rate, X cost basis
Asset MACRS Depr. Life
Use asset life
Bonus Depreciation
Can take 50% deduction on cost on new/original use
property placed into service in 2013
Election to expense under Section 179
Deduction