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A327 Mid-Term
Midterm
59
Accounting
Undergraduate 4
02/07/2015

Additional Accounting Flashcards

 


 

Cards

Term
4 areas taxation resides
Definition
Accounting, Laws, Economics and Finance, and Ethics
Term
During the 1970's how high did the US Marginal Tax rate get?
Definition
70% in 1975
Term
3 components of SW Framework
Definition
A set of algebraic equations, subjective and other factors not included in the equations, and descriptions of rules and concepts
Term
3 major components of the Federal Budget Expenditures
Definition
Social Security/Unemployment (33%)
Medicine/Healthcare (27%)
Military (16%)
Term
How big of a deficit did the Federal Gov't budget for 2015?
Definition
600 Billion
Term
Definition of efficient tax planning
Definition
The process of identifying tax strategies that maximize after-tax profitability in a legal and ethical manner
Term
3 ways to measure after-tax profitability
Definition
FV of After-tax cash flows
Present value of After-tax cash flows
Internal Rate of Return of After-tax cash flows
Term
3 parties involved in taxes
Definition
Buyer
Seller
Tax Collector
Term
Items excluded from Taxable income
Definition
Interest from municipal bonds, federal taxes
Term
SW Framework themes
Definition
All parties, All tax costs, and All nontax costs and benefits
Term
"Implicit taxes in dollars"
Definition
Taxes paid indirectly in the form of lower BTCF on tax-favored investments
Term
ATCF Shortcut
Definition
Change in BTCF x (1 - t) when the change in TI = the change in BTCF
Term
Marginal investor
Definition
Investor who is indifferent between alternative investments
Term
Adjusted basis
Definition
The same as book value
Term
Realized gain/loss
Definition
The accounting gain or loss (difference between sale price and adjusted basis) - not always affecting tax liability
Term
Recognized gain/loss
Definition
The amount of gain or loss that appears on the tax return - increase or decrease tax liability
Term
How are federal income taxes treated on the tax return?
Definition
Not deductible
Term
Why does depreciation fluctuate between income statements and tax returns?
Definition
Straight-line depreciation is used for book purposes where accelerated depreciation is used for tax purposes
Term
Average Tax Rate
Definition
Tax / Taxable Income
Term
4 steps to SW problem solving framework
Definition
Identify all alternatives
Evaluate each
Select optimal alternative based on evaluation
Monitor and modify the plan if necessary
Term
How the do the rankings of calculating FV vs. r compare?
Definition
Will always be the same
Term
When is the tax character determined?
Definition
Immediately after the transaction and before any netting takes place
Term
6 types of tax characters
Definition
Ordinary income/loss
Short-term capital gain/loss
Long-term capital gain/loss
Taxable interest income
Dividend income
Itemized deductions
Term
What rate is ordinary income taxed at?
Definition
t
Term
What rate are STCG/L taxed at?
Definition
t
Term
What rate are LTCG/L taxed at?
Definition
g (not t)
Term
What rate is dividend income taxed at?
Definition
g (not t)
Term
Two types of capital assets
Definition
Investment assets
Personal Assets
Term
Investment asset
Definition
Asset expected to rise in value held by an individual or a business - depends on the motive of who is holding
Term
What assets are not included in the investment asset category?
Definition
Inventory and assets utilized in an active trade or business
Term
Personal Assets
Definition
Not used for business or investments
Term
When an investment assets realizes a gain or loss, what should you do?
Definition
Recognize it and tax at g (shield if loss)
Term
When a personal asset realizes a gain what should you do? What about for a loss?
Definition
Recognize the gain and tax at g
Do not recognize the loss
Term
When inventory realizes a gain or loss, what should you so?
Definition
Recognize it and tax at t (shield if loss)
Term
How should corporations deal with multipole capital gains and losses?
Definition
Net them all together
Net capital gain is taxed as ordinary income (t)
Term
How far back are Net capital losses carried back and forward?
Definition
Carry back 3 years
Carry forward 5 years
Term
How are net capital gains treated?
Definition
Taxed as ordinary income in the current year
Term
What should be done with a Negative Taxable income?
Definition
Treat as a Net Operating Loss and carry back 2 years and/or carry forward 20 years
Term
Adjusted Gross Income
Definition
A subtotal of all income earned during a year
Term
What is the relationship between g and t
Definition
g is always less than t
Term
How high do ordinary deductions on all capital loss go up to?
Definition
$3,000
Term
How do individuals carry over capital losses?
Definition
Carry forward for as long as needed
Term
What tax rate is applied to LTCL and STCL for the tax shield?
Definition
Either g or t depending on the netting process
Term
Relative advantage of Raw Land
Definition
Taxed at g, deferral
Term
Relative advantage of SPDA
Definition
Deferral
Term
Relative advantage of Mutual fund
Definition
Taxed at g
Term
With respect to g, how do Mutual funds and SPDAs compare?
Definition
If g>0
At shorter n, mutual fund r > SPDA r
At longer n, SPDA r > Mutual fund r
Term
What are the implications if g=0?
Definition
Mutual fund r > SPDA r
Raw land r = R
Term
With what type of dollars are deductible pension fund deposits made?
Definition
Before-tax dollars
Term
With a constant t, what happens to the r of deductible pension funds?
Definition
remains the same
Term
With a declining marginal tax rate, what happends to the r of deductible pension funds?
Definition
r>R
r falls as the period increases, but remains greater than R
Term
With a rising marginal tax rate, what happends to the r of deductible pension funds?
Definition
r<R
As n increases, r increases but remains smaller than R
Term
Ranking of savings vehicle r's
Definition
Lowest - Savings Account
MF and SPDA depend on n
Next highest - Raw Land
Highest - Roth IRA
Term
Characteristics of savings accounts
Definition
Initial investment is not deductible, annual taxation, tax rate is ordinary (t not g)
Term
Characteristics of mutual funds
Definition
Initial investment is not deductible, annual taxation, tax rate is capital gains (g)
Term
Characteristics of raw land
Definition
Initial investment is not deductible, Deferred taxation, tax rate is capital gains (g)
Term
Characteristics of Single Preferred Deferred Annuity
Definition
Initial investment is not deductible, Deferred taxation, tax rate is ordinary (t)
Term
Characteristics of Deductible Pension (401k)
Definition
Initial investment IS deductible, Deferred taxation, tax rate is ordinary (t)
Term
How do capital gains and losses affect taxable income?
Definition
They do not, they are taxed separately
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