| Dividends Received Deduction |
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| A corporation that receives dividends from a taxable domestic corporation may be entitled to a special deduction from gross income. The recipient corporation may deduct, within certain limits, 70 percent of the dividend received if the corporation receiving the dividend owns less than 20 percent of the corporation distributing the dividend. The amount of the deduction is increased to 80 percent of dividends received if 20 percent of the distributing corporation is owned by the recipient corporation. More... |
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| Business Leagues and Trade Organizations |
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| In order to qualify for tax-exempt status under Internal Revenue Code Section 501(c)(6), an association must show that it is devoted to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. The organization seeking tax-exempt status as a nonprofit business league, chamber of commerce, real estate board, or professional football league must do more than indicate the name of the organization or the object of the local statute under which it is created. More... |
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| Tax Benefit Rule |
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| The purpose of the tax benefit rule is to create a balance between what appeared to be a proper deduction at the time it was taken and the fact that the assumptions on which the deduction was based were erroneous. If a taxpayer deducted an amount from his gross income in one year resulting in a tax benefit to him, and an event occurred in a later year that was fundamentally inconsistent with the premise on which the deduction was based, then the taxpayer must include an amount in gross income of the current year to the extent that the amount was deducted in the prior year. More... |
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| Prepaid Interest Paid By Cash-Basis Taxpayers |
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| In general, if you are a cash-basis taxpayer who prepays interest on a loan, you are not permitted to deduct all the interest in the year of payment. Under the Internal Revenue Code, you are required to capitalize the prepaid interest and deduct it as if you are an accrual-basis taxpayer. In other words, you cannot take a deduction for interest other than in the year in which it is due. The prepaid interest is allocated to the tax year in which the interest actually represents the cost of using the borrowed money. To allow a deduction of prepaid interest in the year of payment rather than in the year it is due would materially distort your income. More... |
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| Traditional Individual Retirement Arrangements |
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| In an attempt to encourage personal savings for retirement, Congress has established a plan that gives you tax advantages for setting aside money for retirement. When you contribute to an individual retirement arrangement (IRA), you may be entitled to deduct some or all of the contribution, and the amounts in the IRA, including earnings, are usually not taxed until they are distributed. The advantage to delaying taxation is that many people are in a lower tax bracket after retirement, thereby reducing the amount of tax paid on the contributions and earnings. More... |
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