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a.p Requirement For Filing (Who Must File?)
i.p General Rule: must file if income is = or greater than the sum of
1.p Personal exemption + regular standard deduction (except for MFS) +
additional standard deduction for taxpayers age 65 or over or blind
(except for MFS)
ii.p Exceptions: must file even lower than the GR
1.p Net earnings from SE are $400 or more
2.p Who can be claimed as dependent on another taxpayer͛s return have
unearned income and gross income of $950 (2009) or more
3.p Receive advance payment of earned income credit must file
b.p When to file
i.p April, 15
c.p Filing Status
i.p Single/ End of year test
1.p Single at year end or
2.p Legally separated
ii.p MFS: may file separate return even if one spouse had income. In community
state, most of income, deductions, credit, and etc are split 50/50
iii.p Qualifying Widow(er) (surviving spouse)
1.p For Two years after spouse͛s death








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+
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)
 ) . In
case of remarried, then file MFJ with new spouse
2.p Principal Residence for Dependent Child: must maintain a household
that, for the î"!,# entire taxable year, with the principal place of
abode of a son, stepson, daughter, or stepdaughter (by blood or
adoption). Surviving spouse must be entitled to a dependency
exemption for such individual.
iv.p åead of åousehold: pay lower taxes which will yield larger standard deduction
and ͞wider͟ tax brackets. To qualify:
1.p Not married, legally separated, or is married and has lived apart from
his/her spouse for the last six month of the year at the close of the
taxable year.
2.p Is not a ͞qualifying widower͟
3.p Not a nonresident alien
4.p Maintains a household that, for more than half the taxable year, is the
principal residence of:͟
a.p A son or daughter: a child must a qualifying child, or qualifying
dependent
b.p Father or mother (not required to live with)
c.p Dependent relatives (must live with)
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a.p Personal Exemptions: 2009 is $3650
i.p Person claimed as dependents: if the folk use it, you loose it
 ii.p Married taxpayers
1.p Each spouse receives personal exemption
2.p Spouse as personal exemption on a separate return
ÿp
 



-

a.p Specific items of income and exclusions
i.p Salaries and Wages
1.p Money
2.p Property at FMV (if taxable), if non-taxable then NBV
3.p Cancellation of Debt
4.p Bargain purchases: employer sells to employee at less than FMV, the
difference is the income to employee
5.p Taxable fringe benefits (non statutory): fringe benefit not specially
excluded by law is all included as income. Personal use of company car
is consider income and subject to employment taxes and withholdings.
6.p Partially taxable fringe benefits: portion of life insurance premium: not
taxable up to $50K of employer͛s paid in. anything over $50K will be
taxable based on IRS table which won͛t be everything.
7.p Non-Taxable Fringe Benefits
a.p ,)


: proceeds from life insurance is not
taxable, but interest is taxable
b.p (
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0:
premium payment are excludable from employee͛s income
when paid by employer. Only included as income when:
i.p Reimbursement for medical expenses actually incurred
by the employee or
ii.p Compensation for the permanent loss or loss of use of a
member or function of the body.
c.p '

+
): so minimal is excluded from
income
d.p 



: meals furnished by employer not taxable
e.p #

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: up to
23º34 is exclude from gross income
f.p r
)

: employees of institutions studying
at the undergrad lvl who receive tuition reductions may exclude
the tuition reduction from income. Grad student can exclude
such reduction only if they are engaged in teaching or research
activities and only if the tuition deduction is in addition to the
pay for the teaching or research.
g.p r
)
:
i.p 


: excludable discount is limited
to the employer͛s GP%. Excess is income
ii.p  
: excluded up to 20% of the FMV of
the services. Excess is income
iii.p #-provided parking: up to $230 (2009) per
month is excluded.
iv.p 


: exclude up to $120 (2009) per month
ii.p Interest Income (Schedule B)
1.p Taxable Interest (GR: all interest are taxable)
 a.p Federal bonds
b.p Industrial development bonds
c.p Coporate bonds
d.p Premiums received for opening a saving account (prizes and
awards as FMV)
e.p Part of the proceeds from an installment sales is taxable as
interest
f.p

+)

 1 for late payment of tax
refund is taxable
2.p Tax Exempt Interest ( Reportable but not taxable)
a.p State and local govt bonds/ obligations
b.p Bond of a US Possession
c.p Series EE (US Savings Bond) = Educational Expenses
i.p It is tax exempt when:
1.p Used to pay for higher education, reduced by
tax-free scholarships, of the taxpayer, spouse,
or dependents
2.p There is taxpayer or joint ownership
3.p Taxpayer is 24 or older when used
4.p Acquired after 1989
ii.p Phase-out for MAGI is over ($100650 for MFJ)
d.p Interest on Veterans Administration insurance
3.p Unearned income of the child under 18 ͞kiddie Tax͟: net unearned
income of a dependent child under 18 not providing over half of his/her
own support, under 19 years of age ʹ under 24 if they are full time
student is taxed at his parent͛s higher tax rate.
a.p Add up all the unearned income ʹ child standard deduction (950
for 2009) and ʹ additional $950 for 2009 which is $1900 in total.
4.p Forfeited Interest (adjustment): penalty on withdrawal from savings: it
is deductible as adjustment in the year incurred.
iii.p Dividend Income
1.p Source Determines taxability
2.p Three categories of dividends
a.p Taxable Dividends
i.p Taxable amount (to shareholder receiving)
1.p Cash = amount received
2.p Property = FMV
ii.p Special (lower rate) Tax Rate: in order for qualify
dividend to be taxed at the lower rates of 0, 10, or 15,
rather than the marginal rate (15, 28, 33), the stock
must͛ve been held for the 60 days surrounding the 120
days before dividend is declared.
b.p Tax-Free Distributions
i.p Return of Capital:
ii.p Stock split
iii.p Stock dividend (unless cash or other property option/
taxable FMV)
 iv.p Life insurance dividend ʹ dividends caused by
ownership of insurance with a mutual company
(premium return)
c.p Capital gain distribution: made by a corporation with no gain or
profits, and shareholder have recovered his/her basis, and
excess will be taxed.
iv.p State and local tax refunds: not taxable if the taxes did not result in a tax benefit
in the prior year
1.p Prior year itemized = taxable state or local refund
2.p Prior year used standard deduction = non taxable state or local refund
( 1040 EZ = standard deduction)
v.p Payments Pursuant To A divorce: child support first and then alimony
1.p Alimony/ Spousal Support (income): adjustment @ AGI and includable
2.p Child Support: non deductible, not includable
3.p Property settlements (non-taxable): if payment is made in lump sum or
property, the paying spouse gets not deduction and receiving spouse
doesn͛t get taxed.
vi.p Business Income or Loss (Schedule C or C-EZ): compute on Schedule C and
transferred to Form 1040 as one amount.
1.p Net Business Income or Loss is Taxable
a.p Net Taxable Business Income
i.p Income tax
ii.p Federal SE Tax
1.p An adjustment to income is allowed for ½
(7.65% up to 106800 in 2009) of SE tax paid
2.p Allows the taxpayer to ͞deduct͟ the employer
portion of the SE tax as an adjustment to gross
taxable income
3.p All SE income is subject to 2.9% Medicare tax,
but only up to 1068000 in 2009 is subject to the
12.4% Social security tax (a total of 15.3% on
earnings of less than 106800 in 2009)
b.p Net Taxable Loss: may deduct other sources of income
i.p 2-year back
ii.p 20 forward
vii.p Uniform Capitalization Rules: provide guidelines with respect to capitalizing or
expensing certain costs.
1.p Types of property
a.p Produced for use
b.p Produced for sale
c.p Acquired for resale: retailer͛s inventory. This doesn͛t apply to
(inventory) property acquired for resale if the taxpayer͛s
average gross receipts for the preceding 3 tax years do not
exceed $10M annually. (l
 gross receipt  

$10M,  URC  apply)
 2.p Costs required to be capitalized: DM, DL, and certain indirect costs
includes: utilities, warehousing costs, repairs, maintenance, indirect
labor,͙.etc͙basically factory Oå.
3.p Cost not required to capitalized: SG&A and R&D
viii.p IRA Income
1.p GR (taxable when withdrawn): can͛t start until 59.5 years old. Required
to withdraw by the age of 70.5
2.p Taxation of distribution( benefits)
a.p Regular Tax
i.p Ordinary Income (Traditional Deductible IRA
distributions): taxed as ordinary income
ii.p Distribution/ Benefits from Non-Deductible IRAs
1.p Roth IRA: non taxable
2.p Traditional Non-Deductible IRA

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1.p Corporate Tax Consequences
a.p GR: no gain or loss recognized
b.p Basis of property: it is the greater of
i.p Adjusted NBV (plus gain recognized by the shareholder) 
ii.p Debt assumed by corporation
c.p In case if the FMV > NBV, the basis will be FMV
2.p Shareholder Tax Consequences
a.p No gain or loss recognized if two condition exists:
i.p 80% control
ii.p Boot not involved (received): Cash, Cancellation of Debt (NBV ʹ Liabilities =
Excess liability = Boot (gain))
b.p Basis of common stock ( to shareholder)
i.p Cash ʹ amount contributed
ii.p Property ʹ adjusted basis (NBV)
1.p It is reduced by any debt
2.p Add: taxable boot, debt > basis ʹ to bring stock basis to zero
iii.p Service ʹ FMV (Taxable)

!


3.p Charitable Contribution
a.p 10% of Adjusted Taxable Income Limitation
b.p Before the deduction of
i.p Charitable contribution deduction
ii.p The DRD
iii.p NOL Carry back
iv.p Capital loss carry back
v.p UP production activities deduction
4.p Business losses or casualty losses related to business
a.p Ordinary loss or capital loss
 i.p Partially destroyed: lesser of
1.p Decline in value of the property or
2.p Adjusted basis of property immediately before the casualty
ii.p Fully Destroyed (NBV): loss amount is adjusted basis of property
5.p Organizational Expenditures and Start-up Costs
a.p Deduct up to $5K of organizational expense AND $5000 of start up costs.
b.p Each is reduced by the amount which the organizational expense or start up costs
exceeds $50K, respectively.
c.p Excess is amortized over 180 months
6.p Purchased Goodwill: amortized on SL over 15 years
7.p Capital Gain or Losses
a.p Capital losses deduction not allowed: no $3K deduction like individual. It only used to
offset capital gain
b.p Carryover: 3back/5foward
c.p Taxed as ordinary income
8.p NOL: 2back/20forward
9.p General Business Credit
a.p Formula: net income tax less the greater of
i.p 25% of regular tax liability above $25K or
ii.p Tentative Minimum Tax for the year.
10.pDividend Received Deduction: formula
a.p Gross Income (includes Dividend income)
b.p <Deductions>: not included for charity deduction and DRD)
c.p A
d.p <Charity>: max is 10% of A, not gifts, not political, 5 year carry forward
e.p B
f.p DRD: (1st corp. is taxed, owned 45 days before or after. Income: 100% (80% ~ 100%),
80% (20% ~ 80), 70% (under 20%). Limited to % of B (smaller of the two). Exception: if
taking the full % of dividend income will create or adds to a loss, then take the bigger
half instead)
g.p Taxable income of Loss
h.p Entity which DRD doesn͛t apply
i.p PSC
ii.p PåC
iii.p S Corp
11.pDepreciation
a.p MACRS: Real Estate
i.p Residential Rental Property: 27.5 years SL: apartments, duplex rental homes.
ii.p Non-Residential Real Property: 39 year SL: office buildings and warehouses
iii.p Mid-Month convention: ½ month is taken in the month the property is placed in
service. ½ month is taken for the month in which the property is disposed of.
b.p Expense Deduction of Section 179
i.p May deduct fixed amount of depreciation
ii.p Limit is$250K of new or used property that is acquired during the year
iii.p Max amount is reduced dollar for dollar if the amount placed in service during
the year exceeds $800K
iv.p Deduction not allowed if it creates a loss
v.p SUVs: expense up to $25K.
 12.pSummary of Section 1231, 1245, and 1250 Assets
a.p Section 1231: comprised of depreciable personal and real property used in trade or
business and held over 12 months
i.p Capital Gain Treatment: Long-Term Capital Gain
ii.p Ordinary Loss Treatment: ALL LOSSES ARE SECTION 1231 LOSS TREATED AS
ORDINARY LOSS
b.p Section 1245 ( M&E Gains Only)
i.p Personal properties used in a trade or business for over 12 month (cars)
ii.p Recapture all Accumulated Depre
1.p Less of
a.p Gain recognized or
b.p All accumulated depre recaptured as ordinary income
2.p Any remaining gain is Section 1231 Gain (long Term Capital Gain)
c.p Section 1250 (Buildings Gains Only)
i.p Real properties used in trade or business over 12 month (warehouse)
ii.p Recapture difference between SL and Depreciation taken: When depre taken >
SL Depre -> gain is treated as ordinary
iii.p SL Depreciate Taken: amount taken results in the overall gain being taxed at
25%
iv.p Excess Gain is Section 1231 Gain: any gain in excess of original cost less SL Depre
would be allowed section 1231 long term capital gain




1.p Filing Requirements
a.p Extension Form 7004 for 6 month
b.p Accrual Basis vs. Cash Basis
i.p Cash Basis: individuals, qualified PSC, and taxpayers who average annual gross
receipts DO NOT EXCEED $1M
ii.p Accrual Basis: purchases and sales of inventory, tax shelters, farming
corporations, C corporations, partnerships have C Corp. provided has greater
than $5M of average annual gross receipts for 3 year ending with tax year.
2.p Estimated Payments of Corporate Tax: use annualized income method. Penalty assessed if
amount owed on return is $500 or more.
a.p Small Corporations: lesser of
i.p 100% tax shown on the return for the current year or;
ii.p 100% tax show on the return for the preceding year.
b.p Large Corporations: whose taxable income was more than $1M can do in any of three
ways:
i.p 100% on current statement
ii.p May not use preceding year͛s return.
c.p Corporate AMT: subject to minimum º45
( 


/26470. Same
objective like individual.
i.p Regular Taxable Income: before NOL deduction
ii.p Adjustments (add back or minus)
1.p ,ong Term contracts
2.p nstallment sale dealer
3.p #xcess depreciation (post 1986)
iii.p Preferences (add back)
1.p %ercentage depletion
 2.p %rivate activity ʹ issued post ͛86 tax exempt interest income
3.p %re ͛87 ACRS excess depr
iv.p (djusted current #arnings (ACE) (addback)
1.p uni interest income: tax exempt interest income
2.p ncrease CSV life insurance
3.p on S/L Depreciation: after 1989; excess over alt depre sys life
4.p 'RD: under 20% ownership
v.p <AMT NOL Deduction>
vi.p AMTI
vii.p <AMT Exemption>: $40K ʹ 25% of MTI over $150K
viii.p AMT
ix.p X 20%
x.p Gross AMT
xi.p <Foreign Tax Credit>
xii.p Tentative MT
xiii.p <Regular Tax Liability>
xiv.p Alternative MT
d.p Accumulated Earnings Tax
i.p imposed on regular C crop for retained earning that excess of $250K
ii.p PSC is only $150K limit
iii.p Not on PåCs, tax-exempt corp, or passive foreign investment corp
iv.p Tax rate is 15%
v.p It is an &8
 as a result in case of corporation audit
e.p Personal åolding Company Tax
i.p Formed by high tax bracket taxpayers to channel their investment income by
the low normal tax (15% - 25%)
ii.p Defined as corp more than 50% owned by 5 or fewer individuals (directly or
indirectly) and having 60% adjust ordinary gross income consisting of:
1.p et rent
2.p nterest that is taxable
3.p &oyalties
4.p 'ividends from an unrelated domestic corp.
iii.p Additional Tax Assessed: 15% on PåC for net income not distributed
iv.p Not subject to Accumulated earnings tax
p )(

)p Personal Service Corporation: Flat 35% tax rate. Performing acctg, law, consulting,
engineering, architecture

'+

1.p Dividends Defined: DO NOT NET TåEM TOGETåER, TREAT SEPRATELY
a.p Current E&P (by Y/E) = taxable dividend (1st)
b.p Accumulated E&P (Dist. Date) = Taxable dividend (2nd)
c.p Return of Capital (No E&P) = tax free and reduces basis of common stock (3rd)
d.p Capital Gain Distribution (No E&P/ No Basis) = taxable income as a capital gain (4th)
2.p Corporation Paying Dividend ʹ Taxable Amount
a.p Property dividend:
i.p Distributed appreciated property
 ii.p Recognize gain as if the property had been sold ( FMV Property ʹ NBV = Gain
(goes to E&P))
3.p Stock Redemption: corporation buys back from stock holders
a.p Proportional ʹ taxable dividend income (to shareholder-ordinary income)
b.p Disproportional (substantially disproportionate) ʹ sale by shareholder subject to taxable
capital gain/loss to shareholder

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1.p If liquidated, transaction is subject to double taxation (corporate and shareholder level)
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4.p Tax- Free Reorganization
a.p Mergers of consolidation (typeA)
b.p Stock for Stock ( TypeB)
c.p Stock for assets (typeC)
d.p Dividing corp into separate operating corp (TypeD)
e.p Recapitalization (TypeE)
f.p Mere change in form, identity, place of organization (Type F)
5.p Worthless Stock ʹ Section 1244 Stock (small business stock)
a.p When become worthless, original stockholder can be treated as a ORDINARY LOSS
(FULLY TAX DEDUCTIBLE) , instead of a capital loss, up to $50K ($100K MFJ). Any excess
will be capital loss to offset capital gain up to $3K
b.p 50% exclusion of Gain: holds qualified small business stock for more than 5 year, may
exclude 50% of gain