Tax Accounting - Chapter 2 Test 2023

Tax Accounting - Chapter 2 Test Ability to pay concept - The tax levied on a taxpayer should be based on the amt that the taxpayer can afford to pay. What are the General Accounting Concepts? - Ability to pay, administrative convenience, arm's length transaction, and pay as you go Administrative convenience concept - Items may be omitted from the tax base whenever the cost of implementing a concept exceeds the benefit from using it. Arm's length transaction - A transaction in which all parties have bargained in good faith and for their individual benefits, not for the benefit of the transaction group. Related party relationships relate to what general accounting concept? - Arm's length transaction Related party relationships - Individuals and their families, individuals and a corporation if the individual owns more than 50% of the corp, and a corporation and a partnership if the same person owns more than 50% of both the corp & the partnership. Pay as you go concept - Requires taxpayers to pay tax as they generate income. What type of system is the Federal Income Tax system? - It's a self-reporting/assessment system Entity concept - Each tax unit must keep separate records & report the results of its operations separate and apart from other tax units. Taxable entities - Those that are liable for the payment of tax. Include individuals and C corporations. Conduit entities - Nontaxable reporting entities - S corps. Assignment of Income Doctrine - All income earned from services provided by an entity is to be taxed to that entity, and income from property is to be taxed to the entity that owns the property.