C237 Taxation I| Questions With 100% Correct Answers | Verified

Define each component of the individual income tax formula - income from whatever source derived exclusions=any item of income that the tax laws says is not taxable gross income=all income received in cash, property, and services from whatever source derived and from which the taxpayer derives a direct economic benefit deductions for AGI=expense one would see on an income statement (wages, repairs, depreciation) and some nonbusiness deductions (alimony, moving expenses, IRA contributions) AGI=measure of taxable income that falls between gross income and taxable income deductions from AGI=itemized deductions, standard deductions, personal/dependent exemptions taxable income=for individuals, taxable income is adjusted gross income reduced by deductions from adjusted gross income tax rate (from table)=rate applied to taxable income to determine gross tax gross tax=tax due before tax credits or prepayments tax credits=amounts that can be deducted from the gross tax to arrive at net tax due or refund due prepayments net tax payable or refund due