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1 Teaching Federal Income Tax with US Presidential Income Tax Returns. John D. Rossi, III Associate Professor of Accounting Moravian College 1200 Main.

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Presentation on theme: "1 Teaching Federal Income Tax with US Presidential Income Tax Returns. John D. Rossi, III Associate Professor of Accounting Moravian College 1200 Main."— Presentation transcript:

1 1 Teaching Federal Income Tax with US Presidential Income Tax Returns. John D. Rossi, III Associate Professor of Accounting Moravian College 1200 Main Street Bethlehem, PA Phone: Fax:

2 2 Teaching Federal Income Tax with US Presidential Income Tax Returns. With presidential elections we are told allot about the candidates without telling us much at all. In the case of the Presidential Election, tax returns are one of the few sources of information that a politician cannot spin. If you understand tax laws and personal finance, a tax return offers interesting insights into a President. They are also helpful and fun tool in teaching taxes and the strategies to avoid paying too much tax.

3 3 Teaching Federal Income Tax with US Presidential Income Tax Returns. You can find copies of presidential and vice presidential (not always complete) tax returns that have been voluntarily released to the public at: tialTaxReturns?OpenDocument

4 4 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: George W. & Laura Bush The president and Mrs. Bush do not sign their own tax returns, in fact, there is no indication that they even look at their tax returns. The Bushes returns have been signed under a power of attorney by Nancy Felton-Elkins, a vice president at Northern Trust Co. Every other recent president has signed his own return, except one: The current presidents father, George H.W. Bush.

5 5 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: George W. & Laura Bush Another interesting point worth noting is the Bush ranch in Crawford, Texas. It seems to me that a real ranch ought to have a profit motive and report its income and expenses to the IRS. Otherwise, what you have is not really a ranch; it is a house with a big front yard and some large pets running around. The Bush returns for 2000 through 2006 do not show any income or expense for the Crawford property. It is possible, though unlikely from a tax planning perspective, that the ranch files a separate tax return as a C corporation. If that is the case, however, the Bush administration has not acknowledged that part of the presidents financial data is being withheld. In a break with past practice going back to President Carter, George W. Bush has not released the supplementary statements that provide details of many entries on his tax returns.

6 6 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: Richard & Lynne Cheney The vice presidents financial advisors seem to have sharper pencils than do the presidents. Like Mr. Bush, Mr. Cheney comes from a non-income-tax state (Wyoming). Unlike the president he is subject to AMT. Unlike the president, Mr. Cheney obtains nearly all of his interest income from tax- exempt sources. One position on the Cheneys 2003 return seem a little aggressive. They reported no tax preparation expenses as itemized deductions. Instead, it appears that all of the Cheneys $4,113 in tax preparation fees and $1,650 in other professional fees were allocated to Lynne Cheneys political consulting business, where the expenses reduced her self-employment taxes. Most taxpayers would allocate tax preparation and, depending upon their nature, other professional fees between itemized deductions and business purposes, rather than 100% to business.

7 7 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: William J. & Hillary Clinton Unfortunately for the Clintons, presidents do not get raises very often. Clintons $200,000 salary was the same compensation Richard Nixon received when he took office in But things could have been worse. The Republics original presidential salary of $25,000 was established for George Washington in 1789 and did not get raised, to $50,000, until The presidential salary doubled as soon as Clinton left office. President George W. Bush receives $400,000. The Clintons made a point of donating income from outside sources to charity. Mrs. Clinton thus directed her after-tax royalties from her book It Takes A Village. Unlike other recent occupants of the White House, Mrs. Clinton treated her book royalties as self-employment income that was subject to Social Security tax.

8 8 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: George H.W. & Barbara Bush George H.W. and Barbara Bush each received literary royalties while Mr. Bush was in office. Neither paid Social Security tax on those royalties. Mrs. Bushs writing was by far the more lucrative. She received nearly $900,000 in 1991 alone for Millies Book, a tale of White House life as seen by the family dog. The 1991 tax return appears to show that $100,000 of the royalties was paid in turn to a co-writer, with the balance used to fund the Barbara Bush Foundation for Family Literacy.

9 9 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: Ronald W. & Nancy Reagan The Reagans 1987 return is the last presidential Form 1040 known to be handwritten. The Reagans did not take aggressive steps to avoid taxes. They paid substantial state income taxes as California residents. They did not report deductible mortgage interest after 1983, even once the 1986 tax reform Mr. Reagan championed began to phase out their modest deductions for personal interest on life insurance loans.

10 10 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: Jimmy & Rosalynn Carter The Carter returns are the last by a U.S. president to use penny amounts not surprisingly, given Mr. Carters famous penchant for detail. Jimmy Carter was the only president to release a detailed personal balance sheet as well as a tax return. His 1979 balance sheet showed a net worth of $893,000 after allowing for future taxes on the sale of investments.

11 11 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: Richard M. & Patricia Nixon President Nixons returns fueled controversy by demonstrating how Nixon claimed a $576,000 deduction in 1969 for donating some of his vice presidential and congressional papers to the Library of Congress, ostensibly just before the law was changed to bar such deductions. In 1970 and 1971, Nixon paid less than $1,000 in income taxes each year, partly the result of carryover benefits from the donation of his papers, and partly of large depreciation deductions he claimed for improvements to his homes in San Clemente, Calif., and Key Biscayne, Fla.

12 12 Teaching Federal Income Tax with US Presidential Income Tax Returns. Just a few Interesting Facts: Individual income tax returns including those of public figures are private information, protected by law from unauthorized disclosure. Indeed, the Internal Revenue Service is barred from releasing any taxpayer information whatsoever, except to authorized agencies and individuals. Like all other citizens, U.S. presidents enjoy this protection of their privacy. Since the early 1970s, however, most presidents have chosen to release their returns publicly. In the hope of making this information more widely available, the Tax History Project at Tax Analysts has compiled an archive of presidential tax returns.


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