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Steps that can reduce the impact of the tax on a child's unearned income

Article Abstract:

The Tax Reform Act of 1986 requires that the unearned income of children must be taxed at the parent's rates. This tax limits but does not eliminate the tax savings of shifting assets to children. Two calculations are used to compute the child's liability. The 'kiddie tax' applies to children who have not reached 14 before the end of the taxable year. The methods for calculating a child's net income, and examples of calculations are provided.

Children, United States. Internal Revenue Service

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Seller financing made easier as a result of the new rules simplifying imputed interest

Article Abstract:

New tax regulations should help increase the sales of property which are financed by sellers. The new rules replace the 120 percent imputing and the 110 percent testing AFR with one 100 percent AFR and provide the nine percent safe harbor interest rate for those sales which do not exceed $2.8 million. Also, the new rules entail a special election for the use of the cash method of accounting.

Analysis, Property taxes, Discount (Finance), Property tax, Interest, Interest (Finance)

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Immediate action needed to protect taxpayers' interests under economic performance rules

Article Abstract:

The Temporary Regulations for Section 461 affect each and every accrual taxpayer. Close examination of each tax payer's recordkeeping capabilities and tax status is required to ensure agreement to the regulation and to improve the effect of the elections. Two different types of election are described by the Temporary Regulations: recurring item exception and effective data election.

United States. Department of the Treasury

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