A nonliquidating distribution

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Coverdell Savings Account: ayment for higher education costs (tuition, fees, books, and room and board reduced by tax-free scholarships and similar payments, including elementary and secondary school expenses) for a beneficiary who is under age 18 (unless a special needs student) – Limit: 2000 per beneficiary per year, phased-out proportionately if AGI is over 0,000 for married-joint (a ,000 range) or ,000 for single taxpayers (a ,000 range) – Corporations or tax-exempt entities may make contributions regardless of the income of the entity VIII. “traditional” IRA – If made nondeductible contributions, prorated between the total nondeductible contributions and the remaining balance in the account, nondeductible not taxable – Penalty tax of 10%, exceptions: * Disabled or age 59 ½ * Made in the from of certain periodic payments.

* Used to pay medical expenses in excess of 7.5% of AGI * Used to purchase health insurance of an individual who is unemployed for at least 12 weeks * For first-time home buyer expenses * Distributed for the qualified higher education expenses * Amounts are levied by the IRS – Must withdrawal from 70.5 – In 20, up to 0,000 of distributions is tax-free if contributed to a charitable organization by an individual age 70 1/2 or over B.

B will be taxed on 0 of income (0 is return of capital). No consideration is expected in return: non taxable B.

If TP had not sold the policy, then TP would have received 0 tax free. Income on gift: taxable, to donor if before time of gift, to donee if after C.

Cash Method: Prepaid expenses are prorated for cash basis taxpayers if recognition of the total expense in the current year would distort taxable income. Hybrid Method: required for taxpayers where sales of inventory constitute a substantial source of income taxable bonds: amortize and deduct tax exempt bonds: amortize, but no deduction Interest is accrued on bonds purchased between interest dates, and the portion earned prior to the purchase is treated as a return of capital. Bond Discounts: Cash basis taxpayers can defer the original issue discount on US savings bonds (series EE bonds — not series H) until maturity Individuals can elect to amortize discounts on bonds purchased in the secondary market (straight-line method is allowed). the owner of the bond is at least 24 years old The interest is excluded in proportion to the educational expenses of the taxpayer, spouse, or dependent phased-out for 2008 when modified AGI exceeds ,100 (0,650) for single (filing joint) status VI.

Dividends on Stock distributions of cash or property to shareholders is taxed as dividend income liquidating dividend is treated as a return of capital until the basis of the stock is recovered; amounts in excess of basis are taxed as gains from a sale of the stock cash basis: when the property is made available 5% if the taxpayer is in the 10% or 15% bracket, 0% in 2008. Requirement: from a domestic corporation or a foreign corporation whose stock is tradable on an established U. securities market If the stock was held for 60 days or less during the 121-day period beginning 60 days before the ex-dividend date, does not qualify Note: Example: TP owns 40 shares in XYZ Corporation purchased at a cost of per share (0 total). Otherwise: non-qualified stock option – The gain on the stock sale is ordinary income, employer receives a deduction – Difference in the FMV on the sale date and the FMV on the exercise date is capital gain or loss Example: TP owned a life insurance policy on his spouse, but was short of cash.

Distributions must be used qualified medical expenses (health insurance premiums are not qualified) – must only be covered under a high-deductible health plan and may not be entitled to benefits under Medicare.* Qualifying automobile expenses: 0.19 (2008) per mile plus parking and tolls * Lodging: 50 per night, including person who is required to travel with.No deduction is allowed for meals, unless part of treatment program.Accountable Plans: The employer must require the employee to accept lodging as a condition of employment to be excluded from income G.Working condition: nontaxable Benefit that would be deductible (as an employee business expense) if the employee had instead paid the expense H. No Additional Cost Fringes: be used in other tax calculations, such as in the computation of the alternative minimum tax or the exclusion of social security benefits. Social Security Benefits Generally nontaxable, but if the taxpayer’s provisional income (PI) exceeds a specified amount, up to 85% of the benefits is taxable Traditional IRAs – ,000 ((,000 if married) in 2008, or compensation, an additional

Distributions must be used qualified medical expenses (health insurance premiums are not qualified) – must only be covered under a high-deductible health plan and may not be entitled to benefits under Medicare.

* Qualifying automobile expenses: 0.19 (2008) per mile plus parking and tolls * Lodging: 50 per night, including person who is required to travel with.

No deduction is allowed for meals, unless part of treatment program.

Accountable Plans: The employer must require the employee to accept lodging as a condition of employment to be excluded from income G.

Working condition: nontaxable Benefit that would be deductible (as an employee business expense) if the employee had instead paid the expense H. No Additional Cost Fringes: be used in other tax calculations, such as in the computation of the alternative minimum tax or the exclusion of social security benefits. Social Security Benefits Generally nontaxable, but if the taxpayer’s provisional income (PI) exceeds a specified amount, up to 85% of the benefits is taxable Traditional IRAs – $5,000 (($10,000 if married) in 2008, or compensation, an additional $1,000 catchup contribution is allowed for taxpayers over the age of 50.

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Distributions must be used qualified medical expenses (health insurance premiums are not qualified) – must only be covered under a high-deductible health plan and may not be entitled to benefits under Medicare.* Qualifying automobile expenses: 0.19 (2008) per mile plus parking and tolls * Lodging: 50 per night, including person who is required to travel with.No deduction is allowed for meals, unless part of treatment program.Accountable Plans: The employer must require the employee to accept lodging as a condition of employment to be excluded from income G.Working condition: nontaxable Benefit that would be deductible (as an employee business expense) if the employee had instead paid the expense H. No Additional Cost Fringes: be used in other tax calculations, such as in the computation of the alternative minimum tax or the exclusion of social security benefits. Social Security Benefits Generally nontaxable, but if the taxpayer’s provisional income (PI) exceeds a specified amount, up to 85% of the benefits is taxable Traditional IRAs – $5,000 (($10,000 if married) in 2008, or compensation, an additional $1,000 catchup contribution is allowed for taxpayers over the age of 50.

,000 catchup contribution is allowed for taxpayers over the age of 50.

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