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However, taxpayers should note that Code Sec. 1411 is to follow normal income tax rules (i.e. rules that a tax lawyer or accountant might refer to as tax rules under chapter one of the Internal Revenue Code), so for ease of calculation, what is exempted from the regular income tax, such as tax-exempted mutual bonds, are also excluded from the NII sum.
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The Federal income tax and the transfer tax (i.e. estate, gift and GST tax) systems are separate and distinct.
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This Income Tax Vacation aims the tax cut (i.e. stimulus) at the group that actually makes a difference: the innovators, investors, small business owners, entrepreneurs and private sector taxpayers.
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Having said this, the 3.8% Medicare Surtax applies to rental real estate activities in a slightly different manner than the general income tax rules (i.e. those under Code Chapter One) do.
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That means 81% of the expenses listed above can be written off against the rental income on the owner's Schedule E, according to Abe Schneier, a tax specialist at the American Institute of CPAs.
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E. is simply using its products as currency to acquire an (often tax-advantaged) income stream.
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