Question

Which of the following is more valuable for the tax payer? Kiddie tax credit. $1,000 tax...

Which of the following is more valuable for the tax payer?

Kiddie tax credit.

$1,000 tax deduction.

A tax credit and a tax deduction are the same values.

$1,000 tax credit.

What is the difference between realized and recognized income?

Realized income is taxable in a future tax period, and recognized income is taxable in the current tax period.

Realized and recognized income are the same thing; one is just an accounting term and the other is a tax term.

Realized income is when it is reported on the tax return, and recognized income is when an asset is converted into another asset for a gain.

Realized income occurs when money is earned, and recognized income is when realized income is taxed.

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Homework Answers

Answer #1

1. (a) Kiddie Tax Credit

Explanation:

Kiddie Tax credit will reduce the tax bills by $2,000. A tax deduction does not reduce the tax bills straight away but reduce the taxable income whereas tax credit reduce the tax bills on dollar to dollar basis. Therefore, tax credit of $1,000 is more beneficial rather that tax deduction of $1,000.

2. (d) Realized income occurs when money is earned, and recognized income is when realized income is taxed.

Explanation:

Realized Income refers to the income which has been received whereas recognized income is defined as taxable income recevied. In cash methd, only realized income forms a part of the recongnised income and taxed accordingly.

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