Download Complete eBook By email at [email protected] Download Complete eBook By email at [email protected] 2023 Income Tax FUNDAMENTALS G E R A L D E . W H I T T E N B U R G S T E V E N L . G I L L San Diego State University Australia Brazil Canada Mexico Singapore United Kingdom United States 1199552277__ffmm__ppttgg0011..iinndddd 11 2299//1100//2222 33::2299 PPMM Download Complete eBook By email at [email protected] Income Tax Fundamentals, 41st Edition Last three editions, as applicable: © 2022, © 2021, © 2020 Gerald E. Whittenburg and Steven L. Gill Copyright © 2023, 2016 Cengage Learning, Inc. ALL RIGHTS RESERVED. Senior Vice President, Product: Erin Joyner No part of this work covered by the copyright herein may be reproduced or distributed in any form or by any means, except as permitted by U.S. copyright VP, Product: Thais Alencar law, without the prior written permission of the copyright owner. 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Product Marketing Manager: Colin Kramer Library of Congress Control Number: 2022919508 Digital Project Manager: Steven McMillian Student Edition: Production Service: MPS Limited ISBN: 978-0-357-71952-7 Designer: Chris Doughman Loose-leaf Edition: ISBN: 978-0-357-71954-1 Cover Images: donatas1205/Shutterstock.com; Cengage iStock.com/gerenme 200 Pier 4 Boulevard Special page images: Boston, MA 02210 USA Zhukov Oleg/Shutterstock.com; ILYA AKINSHIN/Shutterstock.com Cengage is a leading provider of customized learning solutions. Our employees reside in nearly 40 different countries and serve digital learners in 165 countries Intellectual Property around the world. Find your local representative at: www.cengage.com. Content Acquisition Analyst: Nichole Nalenz Project Manager: Anjali Kambli To learn more about Cengage platforms and services, register or access your online learning solution, or purchase materials for your course, visit www.cengage.com. Printed in the United States of America Print Number: 01 Print Year: 2022 LLLLFF..iinndddd 22 3311//1100//2222 66::2211 PPMM Download Complete eBook By email at [email protected] C , C , & P ! onCise urrent raCtiCal Income Tax Fundamentals’ Winning Forms Approach Is Time-Tested I ncome Tax Fundamentals 2023 Edition is designed as a self-contained book for an intro- ductory course in individual income taxation. We take pride in the concise, current, and practical coverage of the income tax return preparation process. Income Tax Fundamentals continues to be the market-leading textbook with a tax forms-based approach that is a reliable choice, with an experienced author team that offers a commitment to accuracy. The workbook format of the textbook presents materials in practical sections with multiple examples and review problems. The presentation of the material does not assume that the reader has taken a course in accounting, making it appropriate for use as a self- study guide to federal income tax. Income Tax Fundamentals adopters tell us: Great text. I have used it for years mostly because of its simple and straightfor- ward approach to the basic income tax elements. — Jerold K. Braun, Daytona State College This text provides an excellent overview for community tax classes. The software gives these students good hands-on experience with the concepts. — Jay Wright, New River Community College I love this book with all its comprehensive problems that progress from easy to difficult. — LoAnn Nelson, PhD, CPA, Lake Region State College The layout of the chapters is well-thought out. — James Hromadka, San Jacinto College I enjoy using the Whittenburg text...it is the best I have found. — Jana Hosmer, Blue Ridge Community College Whittenburg and Gill’s hallmark “Forms Approach” allows students to practice filling out tax returns right in the book while also having the option to download tax forms online. Income Tax Fundamentals follows the Form 1040 and supporting Schedules 1 through 3 and A through E. Every attempt to align the concepts with the schedules has been made so students can follow from the detailed form or worksheet to the schedule and eventually to Form 1040. Each individual tax form required to complete the problems in the textbook is included within Income Tax Fundamentals and within the complimentary ProConnect Tax software. ProConnect Tax is an industry-leading tax preparation software that is hosted on the cloud and provides robust tax content and easy navigation. The ProConnect Tax website offers community and knowledge-based content, view alerts, and FAQ articles. All of the 2022 individual income tax return problems in the textbook may be solved using the ProConnect Tax software, or students may prepare the tax returns by hand. 1199552277__ffmm__ppttgg0011..iinndddd 33 2299//1100//2222 33::2299 PPMM Download Complete eBook By email at [email protected] Income Tax Fundamentals m mesBot/Shutterstock.co Etov oBlevnees fEita cYho uYear ea n t e ew to his dition Many Changes to Tax Law A number of changes that applied to tax year 2021 expired (child tax credit, child and dependent care credit, economic incentive payments, the recovery rebate credit, and virtually all COVID-related provisions). Most of these provisions returned to the 2017 Tax Cuts and Jobs Act versions that are scheduled to expire after 2025. The Inflation Reduction Act of 2022 impacted energy-related tax credits and brought back a form of the corporate alternative minimum tax to a limited number of very large corporations. All of these changes are included in this edition. Introduction of Additional Real-life Source Documents We continue to include commonly used source documents in the exercises and tax return problems, such as Form W-2, a myriad of forms 1099, Form 1095-A, payroll documents, and additional accounting schedules, such as trial balances and income state- ments, in an effort to replicate the tax return preparation process. Information that is extraneous to the problem is included to encourage students to use analytical and critical-thinking skills to deal with less-structured problems. Additions to Content This edition includes expanded coverage in a significant number of areas in an effort to create awareness of certain tax provisions: ● Head of household filing status requirements ● The electronic filing process ● A significant expansion of content surrounding fixed income investments such as bonds, including an overview of bond discount and premium ● The basis of property acquired by gift or inheritance ● Prepaid rent and deposits on rental properties ● Limitations applied to charitable contributions, including a new worksheet designed to assist students ● O verviews of divorced and separated taxpayers, amended returns, deceased taxpayers, foreign bank account reporting require- ments, and taxpayers involved in farming ● Updates for the latests credits expanded or created by the Inflation Reduction Act of 2022 ● Significant increase in the discussion of the “property regulations” that cover the decisions to capitalize or deduct expenditures ● Expanded content on Forms W-4, W-9, and the computation of estimated tax payments ● Added content related to tax preparer regulations, including substantial authority and Circular 230 ● Tax treatment of virtual currencies such as Bitcoin u C s P Pdated umulative oftware roblem The cumulative software problem included as Group 5 questions at the end of Chapters 1–8 has been updated to include more source documents (Forms W-2, 1099, etc.) and extraneous information to encourage students to think more critically about the relevance of certain items when preparing tax returns. a C l s —Cnow 2 omPlete earning ystem v CNOWv2 for Taxation takes students from motivation to mastery. It elevates thinking by provid- ing superior content designed with the entire student workflow in mind. Students learn more efficiently with a variety of engaging assessments and learning tools. For instructors, CNOWv2 provides ultimate control and customization and a clear view into student performance that allows for the opportunity to tailor the learning experience to improve outcomes. Motivation Many instructors find that students come to class unmotivated and unprepared. To help with engagement and preparedness, CNOWv2 for Whittenburg offers the following feature: Self-Study Questions based on the information presented in the textbook help students prepare for class lectures or review prior to an exam. Self-Study Questions provide ample practice for the students as they read the chapters, while providing them with valuable feed- back and checks along the way, as the solutions are provided conveniently in Appendix E of the textbook. iv 1199552277__ffmm__ppttgg0011..iinndddd 44 2299//1100//2222 33::2299 PPMM Download Complete eBook By email at [email protected] Application Students need to learn problem-solving skills in order to complete taxation problems on their own. However, as students try to work through homework problems, sometimes they become stuck and need guidance. To help reinforce concepts and keep students on the right track, CNOWv2 for Whittenburg offers the following: ● End-of-chapter homework: Group 1 and 2 problems ● Algorithmic versions: End-of-chapter homework is available for at least 10–15 problems per chapter. ● Detailed feedback for each homework question: Homework questions include enhanced, immediate feedback so students can learn as they go. Levels of feedback include an option for “check my work” prior to submission of an assignment. Then, after submitting an assignment, students receive even more extensive feedback explaining why their answers were incorrect. Instructors can decide how much feedback their students receive and when, including providing the full solution, if they wish. ● Built-in Test Bank: Provides online assessment. ● CNOWv2’s Adaptive Study Plan: Complete with quizzes, an eBook, and more, it is designed to provide assistance for students who need additional support and prepare them for the exam. Mastery Finally, students need to make the leap from memorizing concepts to critical thinking. They need to be able to connect multiple topics and master the material. To help students grasp the big picture of taxation, tax return preparation, and achieve the end goal of mastery, CNOWv2 for Whittenburg offers the following: ● Comprehensive Problems: Allow students to complete the tax return problems by entering the relevant information on tax forms and schedules in the ProConnect Tax software or by manually preparing the tax forms and schedules provided in an online appendix. Cengage Learning Testing Powered by Cognero® Cognero® is a flexible, online system that allows instructors to: ● author, edit, and manage test bank content from multiple Cengage Learning solutions ● create multiple test versions in an instant ● deliver tests from your LMS, your classroom or wherever you want Cognero® possesses the features necessary to make assessment fast, efficient, and effective: ● S implicity at every step: A desktop-inspired interface features drop-down menus and familiar, intuitive tools. ● Full-featured test generator: Choose from various question types. Multi-language support, an equation editor, and unlimited metadata help ensure your tests are complete and compliant. ● Cross-compatible capability: Import and export content into other systems. CL Testing Powered by Cognero® is accessible through the instructor companion site, www.cengage.com/login. Key Terms Key Terms with page references are located at the end of all of the chapters and reinforce the important tax terms introduced and discussed in each chapter. Key Points Following the Key Terms is a brief summary of the learning objective highlights for each chapter to allow students to focus quickly on the main points of each chapter. r i r a C eliable nstruCtor esourCes re onvenient Solutions Manual The manual, located on the instructor companion website: www.cengage.com/login, contains detailed solutions to the end-of-chapter prob- lems in the textbook. Comprehensive Instructor Companion Website This password-protected site contains instructor resources: the Solutions Manual, the Test Bank, Cognero® testing tools, Solutions to the Cumulative Tax Return Problems, ProConnect Tax software solutions and instructions, PowerPoints, and more: www.cengage.com/login. a w g P s e o to ress To access tax law information after the publication of this textbook, please visit www.cengage.com. At the home page, input the ISBN of your textbook (from the back cover of your book). This will take you to the product page where free companion resources are located. v 1199552277__ffmm__ppttgg0011..iinndddd 55 2299//1100//2222 33::2299 PPMM Download Complete eBook By email at [email protected] Step-by-Step Format Builds Student Confidence The practical, step-by-step format in Income Tax Fundamentals 2023 Edition builds from simple to complex topics. 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tItrs llcla3o etldrellaoow.ca .Lir er3 ndbyby” iir Le nnrdNTsleseuuuoaBttpT Leeidutsd3kfti oiertdihya oa- nntrasusr3c neReapnoteet dicra h eRAhni exstnttgt wgeiritisTwgngr iouaiexr neirorgr ncaliwnaeegmeOnr i neEnnnqXrms e te reOsrbdo uxaapfengi pjiiob r esolntsee ortjueAc trctemtn tl tcsfahPheia-iet nvptlniisaoveot.K sneenvn s sni i .3-51-313 1199552277__ffmm__ppttgg0011..iinndddd 77 2299//1100//2222 33::2299 PPMM Download Complete eBook By email at [email protected] Income Tax Fundamentals Delivers Proven End-of-Chapter Strengths ● The pages are perforated, allowing students to complete end-of-chapter problems and submit them for homework. Students can also tear out tax forms as needed. ● Several question types ensure a variety of assignment options: ● Multiple-Choice Questions ● Problems ● Writing Assignments ● Comprehensive Problems ● The Cumulative Software Problem provided in Chapters 1–8 gives students the flexibility to use multiple resources, such as the tax forms within the book, ProConnect Tax or alternative tax preparation software. The problem evolves with each succeeding chapter’s content, allowing students to build on their comprehension of various tax topics. ● Additional Comprehensive Tax Return Problems are located in Appendix D. Digital Tools Enhance Student Understanding CNOWv2 is a powerful online homework tool. This online resource includes an interactive eBook, end-of-chapter homework, detailed student feedback and interactive quizzing, that covers the most challenging topics, a lab guide for using the ProConnect Tax software, and much more. The student companion website offers—at no additional costs—study resources for students. Go to www.cengage.com, and input the ISBN number of your textbook (from the back cover of your book). This will take you to the product page where free companion resources are located. ProConnect Tax access is included with each textbook. A detailed reference lab guide will help the student use the tax software for solving end-of-chapter problems. For students who are new to the ProConnect Tax software product, we have placed tips throughout the textbook providing guidance to assist students with the transition from a paper form to using the tax software. viii 1199552277__ffmm__ppttgg0011..iinndddd 88 2299//1100//2222 33::3300 PPMM Download Complete eBook By email at [email protected] mages Getty I Note to Students: mages/ manelli/Tetra i Maximize Your Ro Reading Experience Marc This textbook includes many examples to help illustrate learning objectives. After reading each section, including the examples, answer the corresponding Self-Study Problems. You can find the solutions to the Self-Study Problems at the end of the textbook in Appendix E to check your accuracy. Use your performance to measure your understanding, and re-read the Learning Objectives section if needed. Many key tax terms are defined in each chapter, which will help improve your overall comprehension. USING TAX SOFTWARE Numerous tax return problems in the textbook can be solved using either the online tax preparation software or hand preparation. The popular software, ProConnect Tax, is available with the textbook. Helpful tips for using ProConnect Tax have been placed throughout the book so that students can more easily train on the software and prepare the tax returns included in each of the first eleven chapters. A student guide to ProConnect Tax is provided at the companion website. Your college may offer additional tax preparation software, but remember that you can always prepare the solutions manually on the textbook-provided tax forms, schedules and worksheets located conveniently in one place in Appendix F which can be found online with student and instructor resources. USING THE “WOULD YOU SIGN THIS TAX RETURN?” FEATURE A practitioner who knows when to say “I cannot sign this tax return,” even if it means losing a client, is exercising the most basic ethical wisdom. Most chapters contain a “Would You Sign This Tax Return?” case reflecting a common client issue. Each issue corresponds to an obvious concept illustrated in the previous section. However, the approach to advise the client is not always obvious nor easy. The art of explaining tax rules to a client who does not understand them, or, worse, wants to break them, requires not only a good understanding of the rules, but also good interpersonal skills and sometimes the gift of persuasion. The news in the last several years has shown reports of respected CPA firms with members who failed to say the simple words, “I cannot sign this tax return,” demonstrating that simple ethical practice is not always easy. We hope instructors will use these cases to spark group discussions or contemplation, and, perhaps, add examples from their own experience. USING THE CUMULATIVE SOFTWARE PROBLEM The Cumulative Software Problem can be found at the end of Chapters 1–8. The case information provided in each chapter builds on the information presented in previous chapters, resulting in a lengthy and complex tax return by the conclusion of the problem in Chapter 8. Your instructor may have you work in groups to prepare each of the tax returns. The groups can follow the real-world accounting firm model using a preparer, a reviewer, and a firm owner who takes responsibility for the accuracy of the return and signs it. All of the issues in the problem are commonly seen by tax preparers and are covered in the textbook. The full return is difficult to prepare by hand, so tax software is recommended. If the problem is prepared using tax software, the data should be saved so the additional information in the succeeding chapters can be added without duplicating input from previous chapters. ix 1199552277__ffmm__ppttgg0011..iinndddd 99 2299//1100//2222 33::3300 PPMM