CSUDH - College of Business and Public Policy - SYLLABUS ACC. 333, Federal Income Taxation I Spring 2018 (draft 1/4/2018)

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1 CSUDH - College of Business and Public Policy - SYLLABUS ACC. 333, Federal Income Taxation I Spring 2018 (draft 1/4/2018) Day/Time Sec. Time Room Class # Monday/Wednesdays (01) 10:00-11:15 a.m. SBS B Instructor: Richard Malamud Office Location: SBS C-311 Office Hours: Mon. & Wed. 8:15-9:45 am and by appointment Phone Number: (310) Address: RMALAMUD@CSUDH.EDU Website: Catalog: Federal income tax individuals & sole proprietorships. Prerequisite: ACC 230 Catalog Issues: You are responsible for all issues addressed in the catalog including, but not limited to, add and drop dates, policy against plagiarism, cheating, etc. Academic Integrity: Cheating or plagiarism in connection with an academic program or class at a campus is subject to discipline as provided in Sections through of Title 5, California Code of Regulations. Please see the University Catalog for further information. Statement on Disabled Students Services: Students with verified disabilities are eligible for a variety of support services from the Student Disability Resource Center. Information regarding special facilities and services available to students with a disability may be obtained from the Director of the center. Office. Phone (voice) or (TDD). Required Textbook: Pearson s Federal Taxation 2018, Comprehensive, comprehensive ?xid=psed (website for book) ISBN (formerly Prentice Hall s Federal Taxation) Edition 31: ISBN-13: (print) there are other options. Pope, Rupert & Anderson. You can use the corporate book. Alternatives - if you can t afford the textbook there are some alternatives that aren t as good as the textbook but cover most of the same materials (but are not up to date) 1. A prior year version of the same book (formerly Prentice Hall s Federal Taxation (2017 or 2016), individual or comprehensive 2. IRS Pub ($ 0), 3. CCH U.S. Master Tax Guide 2017 or ($10 - $87.00) Course Goal: To introduce concepts of federal income taxation of individuals. Student Leaning Objectives 1. Identify what goes into taxable income formula, 2. Differentiate between the filing status and exemptions, 3. Identify and calculate the personal and dependency 1

2 exemptions, 4. Calculate taxpayer s gross income, adjusted gross income and taxable income, 5. Calculate the proper depreciation deduction, 6. Identify the proper tax forms for various income or deductions and calculations, 7. Identify the proper court to bring a refund action, 8. Prepare a basic income tax return Drops: It is the student s responsibility to drop the class, even if you don t attend class. Course Expectations: You are expected to read the assigned material prior to class. You are expected to attend class and ask questions. The university standard is 2 hours of outside work for every class hour. Attendance Policy: Attendance is highly recommended. Computer/Information Literacy Expectations for Students enrolled in this class: Students in this class are expected to: 1) use the university system Toromail, 2) use Blackboard to get handouts, 3) take the tests online using BlackBoard. If you don t have access to a computer, please use one in the labs at CSUDH. Statement on expected behavioral standards: Behavior that persistently or grossly interferes with classroom activities is considered disruptive behavior and may be subject to disciplinary action. Such behavior inhibits other students' ability to learn and an instructor's ability to teach. The instructor may require a student responsible for disruptive behavior to leave class pending discussion and resolution of the problem and may also report a disruptive student to the Student Affairs Office (WH A-410, ) for disciplinary action. Due Dates: Except for unusual cases, there will be no make ups for tests. Dates will be announced in class. If you are not in class, you are responsible for finding out about test dates. Grading: THIS IS NOT AN INTERNET OR ONLINE COURSE! There will be four 35 question multiple choice Black Board exams. Each question will count as one point. There will also be two tax returns. They will extra credit, between 1 and points each. Information will be given in class only no s. The class grade will be based on a curve to prevent group test taking and cheating. Scores, information and Tests will be on Blackboard: All test scores will be on Black Board. Anyone who wants information about their grades should see me during office hours or before or after class. Why you are prohibited from working together on tests - If I find out that you worked together, you will receive a 0 and that test will not be dropped, plus possible cheating consequences based on University Policy. Your grade is based on a class curve. So, if you give answers to another student, that will hurt your grade as the curve will adjust up. There is no backtracking to avoid cheating (working together). Tests questions will be random, one at a time, everyone gets the same questions. Memo & Tax Returns: None at this time. I reserve the right to add up to two of each 5 points each. Exams/Tests: All exams will be on Black Board, multiple choice 35 questions. Tests are one hour open book but you will be given at least 75 minutes to complete the test. 2

3 Please make sure you take the test on a good computer with good Internet connections. Test BlackBoard compatibility in advance. Tests may be curved so they are about equal to each other (either up or down). The actual dates of the exams will be announced in class. Late tests will only be allowed for medical or other emergencies communicated on a timely basis before we go over the exam answers in class. It is your responsibility to make sure you have BlackBoard access and can run the test software. Drop: You can drop one test, but must take all four tests in order to drop one and get at least a 10 on each one to drop it. Class Participation: I reserve the right to give up + or - of up to 5 points; but this is rare. Grading Curve: The grades will be ranked. The goal is a class curve with an average GPA of about 2.5 to 2.9 depending on the quality of the work. The grade will be a curve based on the performance of the class. If I teach two sections, the curve will be based on both classes. Additional Information: Hints for a better grade: Classroom time will be used to reinforce and clarify what you have already tried to learn before coming to class. You are not expected to understand everything assigned, but you are expected to have read it. You should: 1) do all of the assigned reading before class and take the quizzes, 2) attend class, listen, take notes, participate, and ask questions. Late Exams: See Above s: You are responsible for s sent via Black Board to the campus account. Please forward the campus Toro Mail if you don t check it regularly. Textbook Chapters: - Table of Contents Individuals Test 1 Chapter 1: Chapter 1: Chapter 2: Chapter 14: Test 2 Chapter 3: Chapter 4: Test 3 Chapter 7: Chapter 6: Test 4 Chapter 10: Chapter 9: Chapter 5: Chapter 8: Chapter 12: An Introduction to Taxation Middle of the book - Tax research Determination of Tax Special Tax Comp. Methods, Tax Credits, and Payments of Tax Gross Income: Inclusions Gross Income: Exclusions Itemized Deductions Deductions and Losses Depreciation, Cost Recovery, Amortization, and Depletion Employee Expenses and Deferred Compensation Property Transaction: Capital Gains and Losses Losses and Bad Debts Property Transactions: Nontaxable Exchanges 3

4 Class Schedule - subject to change:all TEST DATES ARE SUBJECT TO CHANGE Detailed Class Schedule: (subject to change) Homework problems are not to be turned in, they are for in class discussion only will be discussed in class. They are not turned in. Except for the research and tax return problems, homework will not be collected. TENTATIVE Acc. 333 Spring 2018 Day Date. Readings/Test/Days off Pub.17 In class Problems Mon. 1/22 Introduction Wed. 1/24 1 Intro to Tax PAGE 2-11, only 26,30,32,33 Mon. 1/29 1 Middle of Book Corp. chpt. 1-1, ,10,23 Wed. 1/31 2 Determiniation 137-3,4,7,11,18,33,34 Mon. 2/5 37,39,43,44,48,67 Wed. 2/7 Mon. 2/12 14 Special Tax Calcs pages 1-11, 14-15, 18-19, , 5,6,46,66 Wed. 2/14 TEST 1 online - TBA Mon. 2/19 President's Day Holiday No class Wed. 2/21 3 Gross Income: Inclusions ,38,42,45,47,53,55 Mon. 2/26 Wed. 2/28 4 Gross Income: Exclusions 15,16,21,30,34,36 Mon. 3/5 39,42,44,53 Wed. 3/7 Exam 2 Chapters 3 & 4 TBA Mon. 3/12 6 Deductions and Losses ,15,21,35,39,51, Wed. 3/14 Mon. 3/19 7 Itemized Deductions 1-4,7,26,38,42 Wed. 3/21 42,47,51,61 Mon. 3/26 Spring Break Wed. 3/28 Spring Break Mon. 4/2 Review and Exam 3 TBA Wed. 4/4 10 Depreciation ,7,10,29,44 Mon. 4/9 9 EE Expenses pages 1-6, 40, 44 Part 3 4,5,20,26, Wed. 4/11 5 Property Cap. Gainpages 1-20, pg ,6,15,34,44,48,53,71 Mon. 4/16 Wed. 4/18 8 Losses / Bad Debt pages 1-12,14-20,24-27,29,32 5,9,13,15,30,41,42,59 Mon. 4/23 12 Non Taxable Exchapages 1-6, ,9,27,38,45,49,50 Wed. 4/25 Mon. 4/30 Review Exam 4 Wed. 5/2 Exam 4 TBA Mon. 5/7 Wed. 5/9 Last day of class Mon. 5/14 Finals - review test 4 4

5 CHAPTER 2 FLOWCHART SUMMARY- Copied by permission but I can t remember from who. 5

6 Selections from Motley Fool website Your Complete Guide to the 2018 Tax Changes, Here's how the U.S. tax system is changing for 2018 and beyond. By Matthew Frankel Dec 30, 2017 at 6:52AM The 2018 tax brackets Marginal Tax Rate Single Married Filing Jointly Head of Household Married Separately Filing 10% $0-$9,525 $0-$19,050 $0-$13,600 $0-$9,525 12% $9,525-$38,700 $19,050-$77,400 $13,600-$51,800 $9,525-$38,700 22% $38,700-$82,500 $77,400-$165,000 $51,800-$82,500 $38,700-$82,500 24% $82,500-$157,500 $165,000-$315,000 $82,500-$157,500 $82,500-$157,500 32% $157,500-$200,000 $315,000-$400,000 $157,500-$200,000 $157,500- $200,000 35% $200,000-$500,000 $400,000-$600,000 $200,000-$500,000 $200,000- $300,000 37% Over $500,000 Over $600,000 Over $500,000 Over $300,000 Data source: Joint Explanatory Statement of the Committee of Conference. 6

7 Marginal Tax Rate Single Married Filing Jointly Head of Household Married Filing Separately 10% $0-$9,525 $0-$19,050 $0-$13,600 $0-$9,525 15% $9,525-$38,700 $19,050-$77,400 $13,600-$51,850 $9,525-$38,700 25% $38,700-$93,700 $77,400-$156,150 $51,850-$133,850 $38,700-$78,075 28% $93,700-$195,450 $156,150-$237,950 $133,850-$216,700 $78,075-$118,975 33% $195,450-$424,950 $237,950-$424,950 $216,700-$424,950 $118,975-$212,475 35% $424,950-$426,700 $424,950-$480,050 $424,950-$453,350 $212,475-$240, % Over $426,700 Over $480,050 Over $453,350 Over $240,025 NOTE: You now loose the personal exemption of $ 4,150 per person. Tax Filing Status Previous Standard Deduction (Set to take effect in 2018) New Standard Deduction Single $6,500 $12,000 Married Filing Jointly $13,000 $24,000 Married Filing Separately $6,500 $12,000 Head of Household $9,350 $18,000 Long-Term Gains Rate Capital Single Taxpayers Married Filing Jointly Head of Household Married Filing Separately 0% Up to $38,600 Up to $77,200 Up to $51,700 Up to $38,600 15% $38,600-$425,800 $77,200-$479,000 $51,700-$452,400 $38,600-$239,500 20% Over $425,800 Over $479,000 Over $452,400 Over $239,500 Tax Filing Status 2017 AMT Exemption Amount 2018 AMT Exemption Amount Single / Head of Household $54,300 $70,300 Married Filing Jointly $84,500 $109,400 Married Filing Separately $42,250 $54,700 From Journal of Accountancy, Alistair M. Nevius, What the tax reform bill means for individuals, December 17, 2017 on the www. H.R. 1, known as the Tax Cuts and Jobs Act, which both houses of Congress passed on Dec. 20, contains a large number of provisions that affect individual taxpayers. Tax rates see above - Estates and trusts 7

8 Taxable income over But not over Is taxed at $0 $2,550 10% $2,550 $9,150 24% $9,150 $12,500 35% $12,500 37% Special brackets will apply for certain children with unearned income. [comment by Malamud: the rates will be those of the estates and trusts. Previously it was the parent s rates.] The system for taxing capital gains and qualified dividends did not change under the act, except that the income levels at which the 15% and 20% rates apply were altered (and will be adjusted for inflation after 2018). For 2018, the 15% rate will start at $77,200 for married taxpayers filing jointly, $51,700 for heads of household, and $38,600 for other individuals. The 20% rate will start at $479,000 for married taxpayers filing jointly, $452,400 for heads of household, and $425,800 for other individuals. Standard deduction: The act increased the standard deduction through 2025 for individual taxpayers to $24,000 for married taxpayers filing jointly, $18,000 for heads of household, and $12,000 for all other individuals. The additional standard deduction for elderly and blind taxpayers was not changed by the act. [Plus the additional amount for being 65 or older and for being blind.] Personal exemptions: The act repealed all personal exemptions through The withholding rules will be modified to reflect the fact that individuals can no longer claim personal exemptions. [So why does it still matter? Because there is a child credit of $2,000 for each dependent (formerly exemption) and a $500 credit for other depedents] Pass-through income deduction individuals will be allowed to deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship, as well as 20% of qualified real estate investment trust (REIT) dividends, qualified cooperative dividends, and qualified publicly traded partnership income. (Special rules would apply to specified agricultural or horticultural cooperatives.) A limitation on the deduction is phased in based on W-2 wages above a threshold amount of taxable income. The deduction is disallowed for specified service trades or businesses with income above a threshold. For these purposes, qualified business income means the net amount of qualified items of income, gain, deduction, and loss with respect to the qualified trade or business of the taxpayer. These items must be effectively connected with the conduct of a trade or business within the United States. They do not include specified investment-related income, deductions, or losses. Qualified business income does not include an S corporation shareholder s reasonable compensation, guaranteed payments, or to the extent provided in 8

9 regulations payments to a partner who is acting in a capacity other than his or her capacity as a partner. Specified service trades or businesses include any trade or business in the fields of accounting, health, law, consulting, athletics, financial services, brokerage services, or any business where the principal asset of the business is the reputation or skill of one or more of its employees. The exclusion from the definition of a qualified business for specified service trades or businesses phases out for a taxpayer with taxable income in excess of $157,500, or $315,000 in the case of a joint return. For each qualified trade or business, the taxpayer is allowed to deduct 20% of the qualified business income for that trade or business. Generally, the deduction is limited to 50% of the W-2 wages paid with respect to the business. Alternatively, capital-intensive businesses may get a higher benefit under a rule that takes into consideration 25% of wages paid plus a portion of the business s basis in its tangible assets. However, if the taxpayer s income is below the threshold amount, the deductible amount for each qualified trade or business is equal to 20% of the qualified business income for each respective trade or business. Child tax credit The act increased the amount of the child tax credit to $2,000 per qualifying child. The maximum refundable amount of the credit is $1,400. The act also created a new nonrefundable $500 credit for qualifying dependents who are not qualifying children. The threshold at which the credit begins to phase out was increased to $400,000 for married taxpayers filing a joint return and $200,000 for other taxpayers. Education provisions The act modifies Sec. 529 plans to allow them to distribute no more than $10,000 in expenses for tuition incurred during the tax year at an elementary or secondary school. This limitation applies on a per-student basis, rather than on a per-account basis. The act modified the exclusion of student loan discharges from gross income by including within exclusion discharges on account of death or disability. Itemized deductions The act repealed the overall limitation on itemized deductions, through Mortgage interest: The home mortgage interest deduction was modified to reduce the limit on acquisition indebtedness to $750,000 (from the prior-law limit of $1 million). A taxpayer who entered into a binding written contract before Dec. 15, 2017, to close on the purchase of a principal residence before Jan. 1, 2018, and who purchases that residence before April 1, 2018, will be considered to have incurred 9

10 acquisition indebtedness prior to Dec. 15, 2017, under this provision, meaning that he or she will be allowed the prior-law $1 million limit. Home-equity loans: The home-equity loan interest deduction was repealed through State and local taxes: Under the act, individuals are allowed to deduct up to $10,000 ($5,000 for married taxpayers filing separately) in state and local income or property taxes. The conference report on the bill specifies that taxpayers cannot take a deduction in 2017 for prepaid 2018 state income taxes. Casualty losses: Under the act, taxpayers can take a deduction for casualty losses only if the loss is attributable to a presidentially declared disaster. Gambling losses: The act clarified that the term losses from wagering transactions in Sec. 165(d) includes any otherwise allowable deduction incurred in carrying on a wagering transaction. This is intended, according to the conference report, to clarify that the limitation of losses from wagering transactions applies not only to the actual costs of wagers, but also to other expenses the taxpayer incurred in connection with his or her gambling activity. Charitable contributions: The act increased the income-based percentage limit for charitable contributions of cash to public charities to 60%. It also denies a charitable deduction for payments made for college athletic event seating rights. Miscellaneous itemized deductions: All miscellaneous itemized deductions subject to the 2% floor under current law are repealed through 2025 by the act. Medical expenses: The act reduced the threshold for deduction of medical expenses to 7.5% of adjusted gross income for 2017 and Other provisions for individuals Alimony: For any divorce or separation agreement executed after Dec. 31, 2018, the act provides that alimony and separate maintenance payments are not deductible by the payer spouse. It repealed the provisions that provided that those payments were includible in income by the payee spouse. Moving expenses: The moving expense deduction is repealed through 2025, except for members of the armed forces on active duty who move pursuant to a military order and incident to a permanent change of station.. Exclusion for bicycle commuting reimbursements: The act repealed through 2025 the exclusion from gross income or wages of qualified bicycle commuting expenses. Moving expense reimbursements: The act repealed through 2025 the exclusion from gross income and wages for qualified moving expense reimbursements, except in the case of a member of the armed forces on active duty who moves pursuant to a military order. 10

11 IRA recharacterizations: The act excludes conversion contributions to Roth IRAs from the rule that allows IRA contributions to one type of IRA to be recharacterized as a contribution to the other type of IRA. This is designed to prevent taxpayers from using recharacterization to unwind a Roth conversion. Estate, gift, and generation-skipping transfer taxes The act doubles the estate and gift tax exemption for estates of decedents dying and gifts made after Dec. 31, 2017, and before Jan. 1, The basic exclusion amount provided in Sec. 2010(c)(3) increased from $5 million to $10 million and will be indexed for inflation occurring after Individual AMT For tax years beginning after Dec. 31, 2017, and beginning before Jan. 1, 2026, the AMT exemption amount increases to $109,400 for married taxpayers filing a joint return (half this amount for married taxpayers filing a separate return) and $70,300 for all other taxpayers (other than estates and trusts). The phaseout thresholds are increased to $1 million for married taxpayers filing a joint return and $500,000 for all other taxpayers (other than estates and trusts). The exemption and threshold amounts will be indexed for inflation. 11