An English Course in Practical Taxation. Учебно-практическое пособие

Block 11. Sources of Federal Income Tax Law

Ex. 5. Translate the following sentences into English.

1.Службы внутренних доходов являются структурным под- разделением Министерства Финансов. Его ответственность распределяется в рамках регулирования налогового зако- нодательства и перераспределения налогов в соответст- вующей бюджет.

2.Федеральный закон о подоходном налоге был введён в

1913 году, но с тех пор в отношение этого налога было предпринято много изменений.

3.В настоящие время правовым регулирование подоходного налога занимается Кодекс внутренних доходов 1986 года.

4.В целях правового регулирования внутренних доходов Федеральное казначейство выпускает множество инструк- ций, разъяснений к кодексу внутренних доходов и правил.

5.Инструкции подвергаются интенсивному обсуждению и процессу общественного комментария, прежде чем они будут выпущены.

6.Одним из источников налогового права является судебный прецедент. Он имеет место в том случае, если налогопла- тельщик и налоговый орган не в состоянии разрешить проблему самостоятельно. В этом случае они обращаются в суд.

7.Если налогоплательщик неудовлетворён решением суда, он вправе обратиться в апелляционный суд, либо в Вер- ховный суд.

8.Налоговая информация налогоплательщикам предостав- ляется также в разнообразных косвенных источниках: спе- циализированные налоговые журналы, учебники.

9.Вторичные источники полезны, так как они помогают по- нять первичные источники.

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Block 12. Income

come is income broadly defined minus income items that are excluded from taxation. Items of gross income are included in the computation of taxable income. Generally, gross income is the starting point for reporting income items on a tax return.

A fundamental rule in regard to income is that an item is included in gross income unless it is specifically excluded by the tax law. Exclusions represent increases in a taxpayer's wealth and recoveries of the taxpayer's capital investment that Congress has decided should not be subject to income tax. Thus, income exclusions are not counted as gross income. Common income exclusions include inheritances, gifts, and interest on certain municipal bonds.

Although not an explicit part of the income tax computation, deferrals of income and deductions are also found in the tax law. A deferral is an item that does not affect the current period's taxable income but will affect taxable income in a future tax year. Thus, a deferral is like an exclusion in that it does not have a current tax effect. However, it differs in that an exclusion is never subject to tax, whereas a deferral will be subject to tax at some point in the future Taxable income is a net number and is the tax base. Taxable income is determined by subtracting deductions and exemptions from gross income. Taxable income is the tax base that is multiplied by the applicable tax rate to compute the federal income tax. Taxable income is usually different from financial accounting income computed by using generally accepted accounting principles.

The differences between financial accounting income and taxable income generally arise because taxable income is computed according to the rules prescribed by the tax law. Tax accounting rules are not based on generally accepted accounting principles (GAAP). GAAP are concerned with determining the "true income" for an annual period. The income tax is geared to producing and collecting tax revenues and providing incentives for particular economic and social transactions. An important difference between the two objectives is that the income tax system attempts to collect the tax on income in the period during which the taxpayer has the resources to pay the tax. Under GAAP, having the re-

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An English Course in Practical Taxation

sources to pay taxes is of no concern. As a result, specific income and deduction items may be accelerated, deferred, or permanently excluded from the current year's taxable income computation, as opposed to the GAAP treatment. For example, prepaid rental income may be amortized over the lease period for financial reporting but must be reported in full in the year it is collected for tax reporting. Another example is the treatment of depreciable property. For tax purposes, assets must be depreciated by using a statutorily determined recovery period, without regard for their actual useful life. For financial reporting, the same asset is depreciated over its useful life. These are but two examples of income and deduction items that are different for financial and taxable income and that will be discussed throughout the text.

Income is also referred to as ordinary income. Ordinary income is the recurring income earned by a taxpayer for a tax year. It is the common type of income that people and businesses expect to earn. Ordinary income typically includes business profits, rent from property, interest on investments, dividend income, and wages. Ordinary income is subject to tax using regular tax rates and computations. That is, ordinary income receives no special treatment under the laws.

Income also results from gains. A gain is the difference between the selling price of an asset and its tax cost and is the result of disposing of the asset. Usually, a gain will be the result of a sale of a single asset. Most gains produce ordinary income. However, gains on the sale of certain types of assets receive special treatment in the determination of taxable income and the tax liability. These gains are called capital gains and result from the sale of capital assets.

Ex. 1. Find the equivalents for the following words and expressions in the text.

Подлежащий и не подлежащий обложению налогом до- ход; предоставление отчета о доходе; капиталовложения; му- ниципальные облигации; общепринятые принципы бухучета; правила предписанные налоговым правом; поощрение опре- деленных экономических и социальных операций; доход от

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Block 12. Income

аренды; срок аренды; предписанный законом период возме- щения; процент с инвестиций; налоговые обязательства; ос- новной капитал

Ex. 2. Complete the sentences using the appropriate words.

a — depreciated b — net

c — gross d — gain

e — deferral

f — exclusions g — taxable

h — tax return i — nontaxable j — ordinary

k — generally accepted accounting principles

1.Income includes both … and … types of income.

2.… income is income broadly defined minus income items that are excluded from taxation.

3.Gross income is the starting point for reporting income items on a …

4.… represent increases in a taxpayer's wealth and recoveries of the taxpayer's capital investment that Congress has decided should not be subject to income tax.

5.A … is an item that does not affect the current period's taxable income but will affect taxable income in a future tax year.

6.Taxable income is a … number and is the tax base.

7.Tax accounting rules are not based on ….

8.For tax purposes, assets must be … by using a statutorily determined recovery period, without regard for their actual useful life.

9.… income is the recurring income earned by a taxpayer for a tax year.

10.A … is the difference between the selling price of an asset and its tax cost and is the result of disposing of the asset.

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Block 12. Income

Ex. 5. Translate the following sentences into English.

1.Доход — это очень широкое понятие, так как означает весь доход, принадлежащий налогоплательщику и включает в себя налогооблагаемые и не облагаемые налогом типы до- ходов.

2.Валовой доход — доход физического лица из всех источ- ников до вычета налогов. Этот тип дохода является от- правной точкой для информации, которую налогопла- тельщик предоставляет налоговому органу, заполняя на- логовую декларацию.

3.Налоговый доход является налоговой основой. Он опреде- ляется путём вычитания из валового дохода льгот по дан- ному налогу и различных вычетов, предоставляемых нало- говым органом.

4.Для того, чтобы вычислить федеральный подоходный на- лог необходимо умножить налоговую основу на соответст- вующую ставку.

5.Необходимо понимать различие между налоговым и фи- нансовым доходом. Налоговый доход вычислен согласно правилам, предписанным согласно налоговому закону. Финансовый доход вычисляется с использованием обще- установленных принципов бухгалтерского учёта.

6.Обычный доход — это возвращающийся доход, зарабо- танный налогоплательщиком в течение налогового года. Обычный доход обычно включает деловую прибыль, арендную плату от собственности, проценты по инвести- циям, доходы от дивидендов, и заработной платы.

7.Доход также следует из прибыли. Прибыль — это разли- чие между продажной ценой актива и его налоговой стои- мостью и — результатом избавления от актива.

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Block 13. Deductions

(investment activity), and certain specifically allowed personal expenses of individuals. Trade or business expenses and in- come-producing expenses must be ordinary, necessary, and reasonable in amount to be deductible. Allowable personal expenses are deductible as itemized deductions and are subject to strict limitations.

The term loss refers to two distinctly different types of events. A loss occurs when an asset is disposed of for a selling price that is less than its tax cost. This type of loss is referred to as a transaction loss and represents a loss of capital invested in the asset. In later chapters, it will be necessary to apply limits to the amount of a loss that can be deducted in a tax year. To apply the limits, losses are characterized as personal, business, or capital. These limits deny deductions for most personal losses, place a cap on the amount of capital losses that may be deducted in the year of the loss, and allow business losses to be fully deducted as incurred.

The second type of loss is an annual loss. An annual loss results from an excess of allowable deductions for a tax year over the reported income for the year. The treatment of the annual loss depends on the activity in which the loss is incurred.

Individuals, trusts, and estates may subtract predetermined amounts called exemptions to determine their taxable incomes. The exemption deduction for individuals is, in effect, Congress's recognition that people need a minimum amount of income to provide for their basic living expenses. Thus, this minimum amount of income is deducted as an exemption and is not subject to tax. The deduction for individual exemptions is reduced for high-income taxpayers. Apparently, the reduction is Congress's way of saying that these taxpayers have enough income to support themselves and that the ability-to-pay concept should prevail. Since the minimum basic costs of living increase each year because of inflation, the exemption amounts are indexed to inflation and increase each year to reflect the increased costs individuals incur.

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An English Course in Practical Taxation

Ex. 1. Find the equivalents for the following words and expressions in the text.

Инвестиционная деятельность; разумный по величине; допустимые личные траты; подлежать строгим ограничениям; установить ограничения; нести потери; обеспечение основных жизненных потребностей; понятие платежеспособности; ин- дексировать в соответствии с инфляцией.

Ex. 2. Complete the sentences using the appropriate words.

a — exemptions b — annual

c— high-income

d— deductions

e— expenses

f— permits

g— less

h— expenditure

i— losses

1.… are amounts that the tax law specifically allows as subtractions from gross income.

2.An item may not be deducted unless the tax law specifically … it.

3.Deductions are characterized as …, …, and ….

4.An expense is a current period … that is incurred to earn income.

5.A loss occurs when an asset is disposed of for a selling price

that is … than its tax cost.

6. . An … loss results from an excess of allowable deductions for a tax year over the reported income for the year.

7.The deduction for individual exemptions is reduced for … taxpayers.

Ex. 3. Are the statements true (+) or false (–)? Correct the false statements.

1.Deductions are amounts that the tax law specifically allows as subtractions from gross income

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