Tax Law

Purchase price 1000
Basis 1000
Sale price 1200
Gain: 200
Include in gross income:
if a capital good, a capital gain; if held for 2 years, long term capital gain – favorable tax rate!

Purchase price 1000
Depreciation 200
Basis now 800
Sale at 1200
400 in gain!

Straight line depreciation:
equal amount of depreciation per year for the life of the asset

example 5 year life=
20% depreciation per year

Basis
Y0   Y1  Y2  Y3  Y4  Y5
1000 800 600 400 200 0

Like Kind Exchanges:
Stock-for-Stock  — like kind = not a realization of income!
Stock-for-Assets — is it the same kind of good? if so, not income!
Basis of the exchanged goods are averaged out.
Depreciated truck for depreciated car.<br />Truck has a basis of 500. Car has a basis of 400. New basis? 450

Like-Kind exchange plus boot
-boot is a realization of income and is taxed.

Double Declining
(1/2 life)
Y0   Y1  Y2  Y3  Y4    Y5
1000 500 250 125 62.50 62.5

For Wednesday please read Commissioner v. Duberstein http://supreme.justia.com/cases/federal/us/363/278/case.html
For tuesday read Old Colony Trust. http://supreme.justia.com/cases/federal/us/279/716/

we just read Commissioner v. Glenshaw Glass http://supreme.justia.com/cases/federal/us/348/426/case.html

Vocabulary for tax:

Tax incidence – Steuerinzidenz
Steuerhinterziehung – Tax Evasion
Steuervermeidung – Tax Avoidance
Treuhandgesellschaft – Trust
Trust res – Das betreute Vermögen
Treuhander – Trustee
Beneficiary = Trust Object – Begunstigte(r); Nutznießer
Grantor – Vergeber (des Vermögens)
Besitz – Posession; Equitable title
Eigentum – Legal title
Mehrwertsteuer – Value added tax
Tax deduction – Steuerabzug
Tax credit – Steuergutschrift
Depreciation – Abschreibung
depreciation on a straight-line basis – lineare Abschreibung
double-declining balance method of depreciation -degressive Doppelratenabschreibung
Bruttoeinkommen – berichtigtes Bruttoeinkommen
Nettoeinkommen – adjusted gross income
Vermögensteuer – Tax on capital;
capital gains tax – die Kapitalgewinnsteuer 
tax rate – steuersatz
estate tax – die Nachlasssteuer
tax rate – die Steuerrate
tax basis – Steuerbasis
tax base – Steueraufkommen, Steuerbemessungsgrundlage
tax yield – Steuerertrag
boot
like-kind exchange
realization of profit – die Gewinnerzielung
source principle
tax-exempt threshold – die Steuerfreigrenze
user fee – Gebühr
Steuerbetrag – Tax paymenet
Parafiscal Charges cotisations sociales Sozialabgaben
double taxation – Doppelbesteuerung
Market distortion – Verzerrung der Wirtschaft
tax transparency; pass-through entity
Ad valorem property taxation – Grundsteuer
Excise tax – Warenumsatzsteuer
Lowest tax bracket – Basissteuersatz
Favorable tax treatment – Steuervergünstigung
Tax exoneration – Steuerbefreiung
Favorable tax treatment – Steuerermäßigung
Double taxation treaty – Doppelbesteuerungsabkommen
Laffer curve
tax deductible – steuerlich absetzbar
tax exempt – steuerfrei
Taxpayer – Steuerzahler
Tariff – Zölle
Magna charta
to raise a tax; to levy a tax – ein Steuer Erheben
to impose a tax – ein Steuer auferlegen
Carry Forward (of loss) – steuerlicher Verlustvortrag
Carry Back (of loss) – steuerlicher Verlustrücktrag
Passive income
Tax on capital
Tax haven – Steuerparadies