Aem 4940.2 Chapter 3 Tax Determination; Personal Dependency Exemptions; An Overview Of Property Transactions Supplementary

Front 1

Deductible for AGI? Y/N

Ordinary and necessary expenses incurred in a trade or business?

Back 1

Yes

Front 2

Deductible for AGI? Y/N

1/2 of Self Employment Tax Paid

Back 2

Yes

Front 3

Deductible for AGI? Y/N

Alimony Paid

Back 3

Yes

Front 4

Deductible for AGI? Y/N

Certain payments to traditional Individual Retirement Accounts and Health Savings Accounts

Back 4

Yes

Front 5

Deductible for AGI? Y/N

Moving Expenses

Back 5

Yes

Front 6

Deductible for AGI? Y/N

Penalty for premature withdrawal from savings account

Back 6

Yes

Front 7

Deductible for AGI? Y/N

Capital Loss Deductions

Back 7

Yes

Front 8

Deductible for AGI? Y/N

Deductions attributable to rents and royalties

Back 8

Yes

Front 9

Deductible for AGI? Y/N

Personal and nonbusiness expenses

Back 9

No

(Itemized, so it's a deduction FROM AGI)

Front 10

Deductible for AGI? Y/N

Medical Expenses

Back 10

No

Front 11

Deductible for AGI? Y/N

Charitable Contributions

Back 11

No

Front 12

Deductible for AGI? Y/N

The production or collections of income

Back 12

No

Front 13

Deductible for AGI? Y/N

The management of property held for the production of income

Back 13

No

Front 14

Deductible for AGI? Y/N

The determination, collection, or refund of any tax

Back 14

No

Front 15

The tax system is adjusted to remove the effects of inflation. What is this process called?

Back 15

Indexing

Front 16

Can the additional standard deduction be claimed by dependents?

Back 16

No

Front 17

What is the additional standard deduction amount for 2008. For being over 65 or Blind?

Remember to segregate the amounts

Back 17

HoH, Single : $1,350
Married (J or S), Surviving Spouse: $1050

Front 18

What's the personal exemption for 2008?

Back 18

$3,500

Front 19

Can dependents use a personal exemption?

Back 19

No

Front 20

The qualifying child definition is also used to determine eligibility for other tax benefits

Name 1 of 2

Back 20

1. Child Tax Credit
2. Head of Household Filing Status

Front 21

Do I pass the Relationship Test for Qualifying Child?

Mother

Back 21

No

Front 22

Do I pass the Relationship Test for Qualifying Child?

Brother

Back 22

Yes

Front 23

Do I pass the Relationship Test for Qualifying Child?

Stepbrother

Back 23

Yes

Front 24

Do I pass the Relationship Test for Qualifying Child?

Half-Brother

Back 24

Yes

Front 25

Do I pass the Relationship Test for Qualifying Child?

Nephew

Back 25

Yes

Front 26

Do I pass the Relationship Test for Qualifying Child?

Cousin

Back 26

No

Front 27

For the qualifying relative test, what is the Gross Income amount that cannot be exceeded.

Back 27

$3,500 also the Personal and Dependency Exemption amount.

Front 28

Exemptions are phased out by
(a)__?___ % for each (b)_$____ {(c) $_____for married} or fraction thereof by which the taxpayer's AGI exceeds the threshold amounts. Finally, this amount is multiplied by (d)__/___ to arrive at the phaseout amount for 2008 and 2009

Back 28

(a) 2%
(b) $2,500
(c) $1,250
(d) 1/3

Front 29

What is the general formula for the phaseout of exemptions?

Hit the HINT on This One

Back 29

AGI - Threshold Amount = Excess Amount
Excess Amount / $2500 = Reduction Factor (Rounded Up Always) x 2%
Phaseout Percentage x Aggregate Exemptions = Amount of Exemption to Phaseout
Amount to Phaseout x 1/3 = Amount to Subtract from Exemptions

Hint 29

This measure is based on the AGI and it is a REDUCTION of the Personal and Dependency Exemption (the Aggregate!)

Just repeat this out loud, it's not complicated but requires full understanding

Front 30

Why aren't individuals who taxable income exceed 100,000 can't use the tax table method?

Back 30

Because it doesn't even go that high, these people make A LOT OF money!

Front 31

What's the alternative to the tax rate tables?

Back 31

The Tax Rate Schedule

Front 32

If a child decides to allow their parents to file because of the kiddie tax, should they still file a tax return? Why or why not?

Back 32

No

Remember that the parents only pay the taxes on the allocable parental tax. Thus, the child will not have gross income.

Front 33

If a married couple files separately, who is responsible for the kiddie tax if they decide to transfer the allocable parental tax?

Back 33

The parent with the greater taxable income.

Front 34

How does one qualify for Head of Household?

Back 34

You must maintain a house for a dependent

Front 35

A married taxpayer can file as Head of Household, if she meets the?

Back 35

Abandoned Spouse Rules

Front 36

What is the subsequent step after you have determined if there was a gain or loss from a property transaction?

Back 36

You must determine if it is a capital or ordinary (gain/loss) for tax purposes

Front 37

Are Ordinary Losses Fully Deductible?

Back 37

Yes

Front 38

Are Ordinary Gains Fully Taxable?

Back 38

Yes

Front 39

What is the tax formula?

LINE BY LINE

Back 39

Front 40

How do you determine the gain or loss from property transactions - IN GENERAL?

Back 40

Front 41

Explain Capital Assets

Back 41

Capital Assets are defined as any property other than a list of exceptions.

The main exceptions are:
1.Anything held for sale (Inventory) and
2. Any real estate
3. Any depreciable property used in business.

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

If something is a capital asset for tax purposes, gains or losses on sale or disposition are capital gains or capital losses. For individuals, however, capital losses on property held for personal use are generally not deductible.

Front 42

A vehicle used for a business is a (ordinary/capital) asset?

Back 42

Ordinary

Front 43

A vehicle used for personal use is a (ordinary/capital) asset?

Back 43

Capital

Front 44

Are collectibles capital assets?

Back 44

Yes

Front 45

Short Term gains are held for?
And are subject to a MAXIMUM tax rate of ON NET CAPITAL GAIN?

HINT CARD

Back 45

(a) Less than 1 year
(b) 35%

Hint 45

Remember this is the tax on the GAIN and not the return of capital.

Front 46

Long Term gains are held for?
And are subject to a MAXIMUM tax rate of ON NET CAPITAL GAIN:

(b)___% for Collectibles
(c)___% for Certain depreciable property used in business.
(d)___% all other long-term gains

Back 46

(a) More than 1 year
(b) 28%
(c) 25%
(d) 15%, 5%, or 0%
HINT CARD

Hint 46

Remember this is the tax on the GAIN and not the return of capital.

Front 47

In no event will the capital gain be taxed at a rate higher than the ____?____ bracket rate for the year

Back 47

Regular

If your tax bracket is 15%, you will not be charged greater than 15% on any capital gain.

Front 48

What are the long term capital rates for each tax bracket?

Back 48

Front 49

Net capital loss can be used to offset ordinary income of up to $______ ($_____ for married person filing separate returns).

Back 49

(a) $3,000
(b) $1,500