Cpa Reg

Front 1

Generally, a taxpayer must file a return if his or her income is equal to or greater than:

Back 1

the personal exemption + the regular standard deduction + additional standard deduction (for taxpayers age 65+ or blind) [except for married persons filling separately]

Front 2

which individuals must file income tax returns even if their income is lower than the "general rule" requirement?

Back 2

1. net earnings from self-employment are $400 or more
2. can be claimed as dependents on another taxpayer's return, have unearned income, and gross income of $950 (2010) or more
3. receive advanced payments of earned income credit

Front 3

How can an individual receive an automatic six month extension to file?

Back 3

File Form 4868

Front 4

When do taxpayers who are out of the country file?

Back 4

Automatic two-month extension just by including documentation, and can request the other extensions under the same rules as for other taxpayers.

Front 5

in a _____ state, a husband and wife who elect to file using the married filing separately status must report their own income, exemptions, credits and deductions on their own individual income tax returns.

Back 5

separate property state

Front 6

in a ____ state, most of the income, deductions, credits, etc., are split 50/50.

Back 6

community property state

Front 7

what are the two requirements to have "qualifying widower (surviving spouse)" status?

Back 7

1. two years after spouse's death
2. principal residence for dependent child

Front 8

what are the requirements for the "principal residence for dependent child" requirement for surviving spouse status

Back 8

the surviving spouse must maintain a household that, for the whole taxable year, was the principal place of abode of a son, stepson, daughter, or stepdaughter (whether by blood or adoption). The surviving spouse must also be entitled to a dependency exemption for such individual.

Front 9

what are the four conditions that must be met to be considered head of household?

Back 9

1. is not married, is legally separated, or is married and has lived apart from spouse for last six months of the year
2. not a "qualifying widower"
3. not a nonresident alien
4. maintains a household that, for more than half the taxable year, is the principal residence of dependent son/father or mother/dependent relatives

Front 10

what are conditions to be considered a dependent son or daughter under the head of household requirement?

Back 10

1. legally adopted children, step children, and descendents qualify
2. working families act: the child must either be a qualifying child or qualify as the taxpayer's qualifying relative
3. divorced: noncustodial parent is head of househld if the custodial parent has waived the right to the dependency exemption by completing a Form 8332

Front 11

what are conditions to be considered a "father or mother" under the head of household requirement?

Back 11

not required to live with the taxpayer, provided the taxpayer maintains a home that was the principal residence of the parent for the entire year. maintaining a home means contributing over half the cost of upkeep. This means rent, mortgage interest, property taxes, insurance, utility charges, repairs, and food consumed in the home.

Front 12

what are conditions to be considered a "dependent relative" under the head of household requirement?

Back 12

parents, grandparents, brothers, sisters, aunts, uncles, nephews, and nieces (step and inlaws included) qualify as relatives. must live with taxpayer. cousins, foster parents, and unrelated dependents do not qualify.

Front 13

how can a married taxpayer filing separately claim his spouse's personal exemption?

Back 13

if the spouse has no gross income, and was not claimed as a dependent of another taxpayer

Front 14

what is the acronym for the qualifying child dependency exemption?

Back 14

Close Relative
Age Limit
Residency and Filing Reqs
Eliminate Gross Income Test
Support Test Changes

Front 15

what is the acronym for the qualifying relative exemption?

Back 15

Support (over 50%) test
Under a specific amount of (taxable) gross income test
Precludes dependent filling a joint tax return test
Only citizens (us canada or mex) test
relative test OR
taxpayer lives with individual for whole year test

Front 16

if the parents of a child are able to claim the child but do not no one else may claim the child unless __________________

Back 16

that taxpayer's AGI is higher than the AGI of the highest parent

Front 17

what type of relationships qualify under "close relative" requirement of qualifying child status for dependency exemptions?

Back 17

taxpayer's son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, or a descendent. adopted children and foster children too.

Front 18

what is the age limit to be considered a qualifying child for dependency exemptions?

Back 18

younger than the taxpayer, under age 19 (or 24 in college), no limit to permanently disabled (school attendance at night does not qualify)

Front 19

what are the residency and filing requirements to be considered a qualifying child for dependency exemptions?

Back 19

child must have the same principal place of abode as the taxpayer for more than one half of the tax year. cannot file joint tax return for the year (unless filed only for a refund claim)

Front 20

How much money can a child earn to be considered a qualifying child for dependency exemptions?

Back 20

any amount

Front 21

what is the support test to be considered a qualifying child for dependency exemptions?

Back 21

child must not contribute more than one-half of his support (doesn't need to be by parents though)

Front 22

what is the support test to be considered a qualifying relative for dependency exemptions?

Back 22

the taxpayer must have supplied more than one half of the support. scholarships are not included. social security and state welfare payments are included to the extent that such amounts are actually expended for support purposes

Front 23

how do multiple support agreements work for dependency exemptions?

Back 23

when two or more taxpayers contribute more than half support, the contributing taxpayers (who must be qualifying relatives or lived the entire year with), one gets it. contributor must have given more than 10% of support and meet other dependency tests.

Front 24

what is the multiple support declaration that joint contributors are required to file?

Back 24

form 2120

Front 25

a person may not be claimed as a dependent unless the dependent's gross income is _______

Back 25

less than the exemption amount ($3,650 in 2010/ $3750 in 2011)

Front 26

a taxpayer will lose the exemption for a married dependent who files a joint return unless __________

Back 26

the joint return is filed solely for a refund of all taxes paid or withheld for the taxable year

Front 27

what are the citizen/residency requirements of qualifying relatives for dependency exemptions?

Back 27

only citizens of the u.s. or residents of the u.s., mexico, or canada.

Front 28

how can kissing cousins or foster beer be counted as an exemption?

Back 28

if they live with the taxpayer the entire year.

Front 29

how are children of divorced parents treated for exemption purposes?

Back 29

whoever has custody of the child for a greater period of time (financial support irrelevant). if same, parent with higher AGI.

Front 30

what is form 8322

Back 30

written declaration that waives the right of a custodial parent to take the exemption for a child. must be attached to noncustodial parents return. custodial can revoke by giving one years notice and copy form 8322 claiming the revocation on their return.

Front 31

what can you get for being 65+ or blind?

Back 31

additional standard deduction (not an additional exemption)

Front 32

if an event is taxable, what is the income and basis?

Back 32

fair market value

Front 33

_____ requires the accrual or receipt of cash, property, or services, or change in the form or the nature of the investment (a sale or exchange)

Back 33

realization

Front 34

_____ means that the realized gain must be included on the tax return

Back 34

recognition

Front 35

what are the four characterizations of income

Back 35

ordinary, portfolio, passive, capital

Front 36

what falls under ordinary income?

Back 36

salaries and wages, state and local tax refunds, alimony, IRA and pension income, self employment (schedule C) income, unemployment compensation, social security, prizes, the taxable portion of scholarships and fellowships, gambling income, and anything else.

Front 37

what falls under portfolio income?

Back 37

income a taxpayer would earn on his portfolio of assets, such as interest and dividends.

Front 38

what is passive income?

Back 38

activity in which taxpayer did not actively participate.

Front 39

only ______ may offset passive income.

Back 39

passive losses

Front 40

how are net passive losses treated?

Back 40

not deductible on tax return--suspended and carried forward until passive income exists to offset it, unless an exception exists.

Front 41

what can you get for being 65+ or blind?

Back 41

additional standard deduction (not an additional exemption)

Front 42

if an event is taxable, what is the income and basis?

Back 42

fair market value

Front 43

_____ requires the accrual or receipt of cash, property, or services, or change in the form or the nature of the investment (a sale or exchange)

Back 43

realization

Front 44

_____ means that the realized gain must be included on the tax return

Back 44

recognition

Front 45

what are the four characterizations of income

Back 45

ordinary, portfolio, passive, capital

Front 46

what falls under ordinary income?

Back 46

salaries and wages, state and local tax refunds, alimony, IRA and pension income, self employment (schedule C) income, unemployment compensation, social security, prizes, the taxable portion of scholarships and fellowships, gambling income, and anything else.

Front 47

what falls under portfolio income?

Back 47

income a taxpayer would earn on his portfolio of assets, such as interest and dividends.

Front 48

what is passive income?

Back 48

activity in which taxpayer did not actively participate.

Front 49

only ______ may offset passive income.

Back 49

passive losses

Front 50

how are net passive losses treated?

Back 50

not deductible on tax return--suspended and carried forward until passive income exists to offset it, unless an exception exists.

Front 51

what are two types of passive income?

Back 51

rental income and royalties/ beneficiaries of trusts and investments in Partnerships, LLCs, and S Corporations

Front 52

life insurance premiums: under ____ plans only, premiums above the first $______ of coverage are taxable income to the recipient and normally included in W-2 wages.

Back 52

non-discriminatory plans only; $50,000

Front 53

the proceeds of a life insurance policy paid because of the death of the insured re general excluded from the gross income of the beneficiary....except:

Back 53

the interest income element on deferred payout arrangements if fully taxable.

Front 54

For policies issued after 8/17/06, if a life insurance policy is company-owned (COLI), the beneficiary may exclude from gross income benefits received only up to _____

Back 54

the total amount of premiums and other amounts paid by the policy holder--any excess would be taxable. [many exceptions apply -- family]

Front 55

accident, medical and health insurance -- premium payments are ______ the employee's income when the employer paid the insurance premiums

Back 55

excludable from

Front 56

accident, medical, and health insurance -- amounts paid to the employee under the policy are includable in income unless such amounts are:

Back 56

1. reimbursement for medical expenses actually incurred by the employee
2. compensation for the permanent loss or loss of use of a member or function of the body

Front 57

what are de minimis fringe benefits?

Back 57

benefits that are so minimal that they are impractical to account for and may be excluded from income

Front 58

what are examples of non-taxable fringe benefits?

Back 58

life insurance proceeds; accident, medical, and health insurance; de minimis fringe benefits; meals and lodging; employer payment of employee's educational expenses; qualified tuition reductions; qualified employee discounts; qualified pension, profit-sharing and stock bonus plans; flexible spending arrangements stems; economic recovery payments

Front 59

up to _____ may be excluded from gross income of payments made by employer on behalf of an employee's educational expenses. the exclusion applies to ____ level education.

Back 59

$5,250; both undergrad and grad level education

Front 60

grad students may exclude tuition reduction only if___

Back 60

they are engaged in teaching or research activities and only if the tuition reduction is in addition to the pay for the teaching or research.

Front 61

to be excludable, tuition reductions must be offered on a ____ basis.

Back 61

nondiscriminatory

Front 62

to what extent are merchandise discounts excludable?

Back 62

limited to the employer's gross profit percentage. any excess must be reported as income.

Front 63

to what extent are service discounts excludable?

Back 63

limited to 20% of the FMV of the services. any excess discount must be reported as income.

Front 64

the value of employer-provided parking up to ___ (in 2010) per month may be excluded

Back 64

$230. available even if the parking benefit is taken by the employee in place of taxable cash compensation.

Front 65

the value of employer-provided transit passes up to ___ (for 2010) per month may be excluded

Back 65

$230

Front 66

generally, payments made by an employer to a qualified pension, profit sharing, or stock bonus plan are ____ to the employee at the time of contribution

Back 66

not income

Front 67

benefits received -- the amount that is exempt from tax (plus any income earned on such amount) is taxable to the employee when?

Back 67

in the year in which the amount is distributed or made available to the employee

Front 68

what is a flexible spending arrangement stem (FSAS)

Back 68

plan that allows employees to receive a pre-tax reimbursement of certain (specified) incurred expenses

Front 69

employees have the ability to elect to have part of their salary (generally up to $____ per year) deposited pre-tax into a flexible spending account. the employee has the option to use the deposited funds to pay for _____ and/or ____ costs and submits claims to the plan admin for reimbursement

Back 69

$5,000; qualified healthcare and/or qualified dependent care costs

Front 70

flex spending arrangement -- funds not used within ____ after the year-end or not claimed within a period of time (usually ____ months) are forfeited.

Back 70

2.5 months; 6 months

Front 71

are economic recovery payments ($250/ person) taxable?

Back 71

not taxable.

Front 72

what is the general rule for interest?

Back 72

all interest is taxable, unless specifically excluded

Front 73

is interest income from federal bonds taxable?

Back 73

yes

Front 74

is interest income from industrial development bonds taxable?

Back 74

yes

Front 75

are premiums received for opening a savings account (prizes and awards) taxable? at what value?

Back 75

yes, at FMV

Front 76

is interest income from part of the proceeds from an installment sale taxable?

Back 76

yes

Front 77

is interest on state and local bonds/obligations taxable?

Back 77

no

Front 78

are mutual fund dividends for funds invested in tax-free bonds taxable?

Back 78

no

Front 79

is interest on the obligation of a possession of the US taxable?

Back 79

no

Front 80

when is interest of series EE bonds tax exempt?

Back 80

1. used to pay for higher education (reduced by tax-free scholarships, of the taxpayer, spouse or dependents)
2. there is taxpayer or joint ownership (spouse)
3. the taxpayer is over age 24 when issued; and
4. the bonds are acquired after 1989

Front 81

is there a phase-our for allowable tax exempt interest income from series EE

Back 81

yes

Front 82

is interest on veterans administration insurance taxable?

Back 82

no

Front 83

what are the four examples of tax exempt interest income

Back 83

state and local gov bonds/obligations; bonds of a u.s. possession; serious EE; veterans Administration insurance

Front 84

what is the purpose of kiddie tax?

Back 84

prevent people from putting their unearned income to their kids to have a lower tax liability

Front 85

how is the kiddie tax calculated?

Back 85

child's total unearned income (from dividends, interest, rents, royalties, etc.( and subtracting $1,900 (the childs allowable 2010 standard deduction of $950 (or investment expense, if greater) + $950 (which is taxed at the child's rate))

Front 86

when can parents elect to include on their own return the unearned income of the applicable child?

Back 86

provided the income is between $950 and $9,500 and consists only of interest and dividends.

Front 87

what happens with forfeited interest? (early withdrawal of savings)

Back 87

the bank credits the interest to the taxpayer's account and then, in a separate transaction, removes certain interest as a penalty. the interest received is taxable, but the amount forfeited is also deductible as an adjustment in the year the penalty is incurred. (theoretically netted, but not technically)

Front 88

what are the four sources of dividend income?

Back 88

1. e&p/current = distribute by CYE
2. E&P/accumulated = distribution date
3. return of capital = no e&p
4. capital gain distributions = no e&p/no basis

Front 89

what are the three categories of dividends?

Back 89

1. taxable dividends
2. tax-free distributions
3. capital gain distributions

Front 90

what is the special (lower) tax rate for those dividends that qualify? (2010 only)

Back 90

15% most taxpayers, 0% low income taxpayers

Front 91

what are the four examples of distributions that are exempt from gross income?

Back 91

1. return of capital
2. stock split
3. stock dividend (unless cash or other property option/taxable FMV)
4. life insurance dividend

Front 92

how to account for a stock dividend of the same stock.

Back 92

original basis is divided by total shares

Front 93

how to account for a stock dividend of a different stock?

Back 93

original basis is allocated based on the relative FMV of the different stock.

Front 94

how are capital gain distributions treated?

Back 94

distributions by a corp that has no e&p, and for which the shareholder has recovered his entire basis, are treated as taxable gross income

Front 95

the receipt of a state or local income tax refund in a subsequent year is not taxable if _______.

Back 95

the taxes paid did not result in a tax benefit in the prior year (itemize or standard deduction)

Front 96

payments for the support of a spouse are ____ to the spouse receiving the payments are are ______________ by the contributing spouse

Back 96

income; deductible to arrive at agi

Front 97

what are the requirements to be deemed alimony?

Back 97

1. payments st be legally required pursuant to a written divorce (or separation) agreement
2. payments must be in cash (or its equivalent....paying credit cards or college)
3. payments cannot extend beyond the death of the payee-spouse
4. payments cannot be made to members of the same household
5. payments must not be designated as anything other than alimony
6. spouses may not file a joint tax return

Front 98

is child support taxable?

Back 98

no

Front 99

if the divorce settlement provides for a lump-sum payment or property settlement by a spouse, that spouses gets ____ for payments made, and the payments are _____ of the spouse receiving the payment

Back 99

no deduction; not includible in the gross income

Front 100

for business income, must use ____ method for inventory

Back 100

accrual

Front 101

types of business expenses

Back 101

1. COGS
2. salaries and commissions (paid to others)
3. state and local bus tax paid
4. office expenses
5. actual auto expenses, or standard mileage rate
6. business meal & entertainment at 50%
7. depreciation of business assets
8. interest expense on business loans (when incurred and paid)
9. employee benefits
10. legal and professional services
11. bad debts (accrual tax payer only)

Front 102

which salaries and commissions are considered business expenses?

Back 102

ones paid to others, not to yourself

Front 103

when can business meal and entertainment expenses be 100% deductible?

Back 103

when all proceeds go to benefit a charity

Front 104

interest expense paid in advance by a cash basis taxpayer cannot be deducted until ________

Back 104

the tax year/period to which the interest relates

Front 105

what bad debt write off method is used for tax purposes?

Back 105

direct write off method, rather than allowance method

Front 106

what are nondeductible expenses for schedule c?

Back 106

1. salaries paid to the sole proprietor
2. federal income tax
3. personal portions of stuff
4. bad debt expense of a cash basis taxpayer (who never reported the income)
5. charitable contributions

Front 107

where are charitable contributions reported?

Back 107

itemized deduction on schedule A

Front 108

what are the two taxes on net business income?

Back 108

income tax and fed self-empoyment (S/E) ax

Front 109

an adjustment to income is allowed for _______ of S/E tax (medicare plus social security) paid

Back 109

one-half (which is 7.65% of up to 106,800 of self-eplyment income in 2010 plus 1.45% of self employment income thereafter)

Front 110

all self employment is subject to the ______ tax, but only up to $106,800 in 2010 is subject to the ______ tax

Back 110

2.9% medicare tax, 12.4% social security tax

Front 111

how is a net taxable business loss treated?

Back 111

a business with a loss may deduct the loss against other sources of income. when the loss exceeds these amounts, the excess net operation loss is permitted as a carryover

2 year carryback, 20 year carryforward

Front 112

uniform capitalization rules apply to the following:

Back 112

1. real or tangible personal property produced by the taxpayer for use in his trade of business (machine tools for use in the production line of a machine tool manufacturer)
2. real or tangible personal property produced by the taxpayer for sale t his or her customers (manufacturer's inventory)
3. real or tangible personal property acquired by the taxpayer for resale (retailer's inventory)

Front 113

the uniform capitalization rules do not apply to (inventory) property acquired for resale if _____________________

Back 113

the taxpayer's average gross receipts for the preceding three tax years do not exceed $10,000,000 annually.

Front 114

costs required to be capitalized include:

Back 114

direct materials, direct labor, and applicable indirect costs

Front 115

costs not required to be capitalized include:

Back 115

selling, advertisin, and marketing expenses, certain general and administrative expenses, research, and officer compensation not attributed to production services.

Front 116

unless an exemption exists for a taxpayer or a contract, long-term contracts must be accounted for using the ____ method to determine taxable income for a particular contract

Back 116

percentage-of-completion

Front 117

which contracts are exempt from the long-term requirement that they use percentage-of-completion?

Back 117

1. small contractors (no more than 2 yrs)
2. home construction contractors
3. contract that includes land and where less than 10% of the total contract costs relates to the actual construction of property on the land
4. services performed by architects, engineers, etc (contracted to perform services but are not generally responsible for the final product under contract)
5. services performed under warranty and maintenance agreements related to the long-term contract

Front 118

unless an exemption exists for a taxpayer or a contract, those involved in long-term contracts must use _______ to account for their long-term projects in construction.

Back 118

cost allocation rules (essentially the Uniform Capitalization Rules)

Front 119

which contracts are exempt from the cost allocation rules required for tax for long-term construction contracts?

Back 119

small contractor and home construction.

Front 120

Small contractor and home construction contractors are required to allocate _______ related to the contract to the costs of the project

Back 120

production period interest

Front 121

home construction projects that are not also small constructions projects must use ______

Back 121

uniform capitalization rules

Front 122

in cost allocation rules for long-term construction contracts, interest for the production period need not be capitalized if_______________

Back 122

the total cost of the project is $1 mil or less and the project is estimated to take less than 12 months to complete

Front 123

for cash basis taxpayers, the starting date of production is generally the date on which the contractor ____

Back 123

incurs costs (other than the start-up engineering, design, etc. costs that are excluded from cost allocation) under the contract.

Front 124

for accrual basis taxpayers the starting date is _________

Back 124

the later of the date for cash basis taxpayers or the date the taxpayer has incurred at least 5% of the total costs initially estimated under the contract

Front 125

the end date of the production period is generally the date on which _____

Back 125

the work under the contract is complete (per contract provisions) or on the date the taxpayer has incurred at least 95% of the total costs expected under the contract

Front 126

what is the cost-to-cost method of calculating the percentage-of-completion?

Back 126

ratio of the total cumulative costs incurred to date at the end of the tax year divided by the total expected costs to be incurred under the contract.

Front 127

the ______ method is required to be used for Alternative Minimum Taxation, regardless of the method used for regular tax (except for home construction contracts)

Back 127

percentage-of-completion

Front 128

even if the percentage-of-completion method is used for regular tax purposes, there are still likely to be differences in the calculation of taxable income because ___________

Back 128

the calculation of alternative minimum taxable income must take into account not only the method of income recognition, but also other alternative minimum tax rules (e.g. depreciation methods)

Front 129

_________ must be calculated using the percentage of completion method, even if the corporation uses the completed-contract method for regular tax purposes.

Back 129

corporate earnings and profits.

Front 130

in order for the manufacture of personal property to qualify as long-term contract, not only must the contract not be completed within the year it was started, but it also must be ____________

Back 130

for the manufacture of a "unique" item (i.e., an item that is made specifically for a customer and could not be sold to others, is not generally part of a taxpayer's normal inventory, and requires significant pre-production costs)

Front 131

if a taxpayer performs services for a contractor that is required to account for a long-term contract entered into with a related party using the percentage-of-completion method, the taxpayer (even those providing engineering or design services) must also use the percentage of completion method because of _____, unless the exception exists where ______

Back 131

because of the related party impact. the exception is where over 50% of the 3-year average annual gross receipts of the same items stem from unrelated parties.

Front 132

most farmers use the ___ basis of accounting.

Back 132

cash

Front 133

how does the cash basis work for calculating farming income?

Back 133

inventories of produce, livestock, etc., are not considered. gross income includes the cash and the value of all other items received from the sale of produce, livestock that has been raised by the farmer, and for livestock or other items a farmer may have bought, profit is computed by subtracting the purchase price from the sales price.

Front 134

which farmers are required to use the accrual method?

Back 134

certain corporate and partnership farmers as well as all farming tax shelters.

Front 135

how does the accrual basis work for calculating farming income?

Back 135

gross profit = value of inventories at year end + proceeds received from sales - value of inventories at the beginning of the year - cost of inventory purchased during the year

Front 136

whether on a cash or accrual method of accounting, taxpayers who sell stock or sell securities on an established securities market must recognized gains and losses as of the ___ date, not the ____ date.

Back 136

as of the trade date, not the settlement date.

Front 137

generally, retirement money cannot be withdrawn until the individual reaches the age of ____ or the individual elects _______________

Back 137

59.5; elects to receive equal periodic distributions over his life expectancy.

Front 138

what is RMD?

Back 138

required minimum distribution (for IRAs) by age 70.5

Front 139

when a person retires the funds will be taxed as ______ when received

Back 139

ordinary income (regardless of what type of income, such as capital gain, was earned while the funds were invested)

Front 140

are qualified benefits received from a roth IRA taxable?

Back 140

no

Front 141

what is taxable in a traditional non-deductible IRA?

Back 141

principal - not taxable. accumulated earnings - taxable when withdrawn

Front 142

what is the penalty for withdrawing on an IRA early?

Back 142

10% penalty tax (on top of any increase in regular income tax) if the individual has not met an exception

Front 143

there is no penalty if the premature distribution on an IRA was used to pay for:

Back 143

H - home buyer (1st time) $10,000 max exclusion (w/in 120 days)
I - insurance (medical) if you're unemployed longer than 12 weeks / self employed
M - medical expenses in excess of 7.5% of AGI
D - disability (permanent/indefinite)
E - Education
D - Death

Front 144

excess contribution to an IRA plan are subject to ______________ until the excess is corrected

Back 144

cumulative 6% excise tax each year

Front 145

if an annuitant lives longer than expected, then further payments are _____.

Back 145

fully taxable

Front 146

if an annuitant dies before all the payments are collected, the unrecovered portion is a _______ on the annuitant's final income tax return

Back 146

miscellaneous itemized deduction not subject to the 2% AGI floor.

Front 147

Schedule _ is used to compute supplemental income and/or loss from rental real estate, royalties, partnerships and lLLCs, S corps, estates, trusts

Back 147

Schedule E

Front 148

what is the basic formula for the determination of net rental income or loss?

Back 148

gross rental income + prepaid rental income + rental cancellation payment + improvement in-lieu-of-rent --- rental expenses

Front 149

rental of vacation home - rented less than 15 days - what are the tax implications?

Back 149

rental income excluded from income. treated as personal residence. mortgage interest and real estate taxes are allowed as itemized deductions. depreciation, utilities, and repairs are not deductible.

Front 150

rental of vacation home - rented 15 or more days - what are the tax implications?

Back 150

treated as personal/rental residences. expenses are pro-rated between personal and rental use. (taxes prorated by annual period, utilities and depreciation by annual usage). rental use expenses are deductible only to the extent of rental income.

Front 151

how are nondeductible PALs treated?

Back 151

passive activity losses can only be offset by passive income! carryforward forever--if still unused, suspended losses become fully tax deductible in the year the property is disposed of (sold)

Front 152

if the taxpayer becomes a material participant in the passive activity, how are unused passive losses treated?

Back 152

the can be used to offset the taxpayer's active income in the same activity.

Front 153

who are the taxpayers subject to passive activity loss rules?

Back 153

individuals, estates, trusts, personal service corps, and closely held C corps

Front 154

an individual may deduct rental activity losses if:

Back 154

mom and pop exception, real estate professional

Front 155

what is the mom and pop exception of the passive activity loss disallowed net loss exception?

Back 155

taxpayers ay deduct up to $25,000 per year of net passive losses attributable to rental real estate annually if the individuals are actively participating/managing

Front 156

for the carryforward after the mom and pop exception, an estate can qualify for the ___ years following the decedent's death if the decedent actively participated in the operation

Back 156

two years

Front 157

what is the phaseout for the mom and pop exception?

Back 157

reduced by 50% of the excess of the taxpayer's agi (without consideration of this loss deduction) over 100,000. (so up to $150,000)

Front 158

what are the conditions to be considered a real estate professional (so that the rental activities are not considered passive and the taxpayer can fully deduct losses from the rental activities against other income)?

Back 158

1. more than 50% of the taxpayer's personal services during the year are performed in real property businesses
2. the taxpayer performs more than 750 hours of services in real property businesses during the year

Front 159

the taxpayer must include in gross income the ___ amount received for unemployment compensation

Back 159

full amount

Front 160

are social security benefits included in income?

Back 160

mayyyybe, depends on how much you make! (5 levels of provisional income)

Front 161

what is provisional income?

Back 161

AGI + tax-exept interest + 50% of social security benefits (MODIFIED ADJUSTED GROSS INCOME)

Front 162

if you are low income, how much of your social security benefits are taxable?

Back 162

zero. provisional income: less than $25,000 single, $32,000 married

Front 163

if you are upper income, how much of your social security benefits are taxable?

Back 163

85%. provisional income: more than $34,000 single, $44,000 married

Front 164

what do you need to add to your AGI to end up at MAGI?

Back 164

1. income excluded for foreign earned income exclusion
2. exclusion or deduction claimed for foreign housing
3. interest income from series EE bonds that you were able to exclude bc you paid qualified higher education expenses
4. deduction claimed for student loan interest or qualified tuition and related expenses
5. any employer-paid adoption expense you excluded
6. any deduction you claimed for an annual (non-rollover) contribution to a regular IRA

Front 165

an exclusion from income for certain prizes and awards applies where the winner is _________

Back 165

where the winner is selected for the award without entering into a contest and assigns the award directly to a gov'tal unit or charity

Front 166

when can gambling losses be deducted?

Back 166

only to the extent of gambling winnings. allowable amount is deductible on schedule A as an itemized deduction, but the amount is not subject to the 2% floor.

Front 167

to decide whether a business recovery is excludible, one must determine _______

Back 167

what the damages were paid in lieu of. (if for lost profit, then it's income)

Front 168

when are punitive damages taxable?

Back 168

fully taxable as ordinary income if received in a business context or for loss of personal reputation. also if personal injury case, except in wrongful death cases

Front 169

scholarships and fellowship grants are excludable only up to amounts actually spent on tuition, fees, books and supplies (not room and board) provided:

Back 169

1. the grant is made to a degree-seeking student
2. no services are performed as a condition to receiving the grant
3. the grant is not made in consideration for past, present, or future services of the grantee

Front 170

how are graduate teaching assistants and research assistants who receive tuition reductions taxed?

Back 170

they are taxed on the reduction if it is their only compensation, but not if the reduction is in addition to other taxable compensation.

Front 171

does gross income include property received from a gift or inheritance?

Back 171

no

Front 172

what is the taxable portion of a gift?

Back 172

any income received from such property (interest income, rental income, etc)

Front 173

are medicare benefits included in gross income?

Back 173

no

Front 174

when can you exclude from gross income payments received (even with multiple recoveries) from accident insurance?

Back 174

if the individual paid all premiums for the insurance

Front 175

taxpayers working abroad may exclude from gross income up to $____ of their foreign-earned income. in order to qualify for the exclusion, the taxpayer must satisfy one of the two tests:

Back 175

$91,500. bona-fide residence test (for an entire taxable year), physical presence test (present for 330 full days our of any 12-consecutive -month period.

Front 176

is treasury stock a capital asset?

Back 176

no

Front 177

are copyrights, literary music or artistic compositions that have been purchased capital assets?

Back 177

yes

Front 178

is section 1231 assets capital?

Back 178

no

Front 179

how is the gain/loss calculated when you sell property that was gifted to you?

Back 179

if the fmv is higher, then selling price - basis. if fmv value is lower, then gain = selling price - basis and loss = fmv - selling price. anything inbetween is no gain or loss.

Front 180

how do you calculate gifted property depreciation?

Back 180

lesser of the donor's adjusted basis at the date of the gift or the FMV at the date of gift.

Front 181

what is the holding period when you receive property as a gift?

Back 181

normally assume the donor's holding period. unless the FMV is used (as a loss basis) as the basis of the fit, the holding period starts as of the date of the gift.

Front 182

what is the alternative valuation date for inherited property?

Back 182

the earlier of 6 months after death or the date of distribution/sale

Front 183

what is the general rule for inherited property basis?

Back 183

for years after 2010, property acquired by the bequest or inheritance generally takes as its basis the step-up (or down) to FMV at the date of the decedent's death

Front 184

how is the holding period determined for property acquired from a decedent?

Back 184

automatically considered to be long-term property regardless of how long it has actually been held.

Front 185

a gain is not taxed for the following:

Back 185

H - Homeowner's exclusion
I - Involuntary Conversions
D - Divorced Property Settlement
E - exchange of Like-Kind Business/Investment assets
I - Installment Sale
T - Treasury and capital Stock Transactions

Front 186

What is the dollar amount of the homeowner's exclusion from gross income for gain?

Back 186

$500,000 for married couples filing a joint return and certain surviving spouses; $250,000 for single, married filling separately, and head of household

Front 187

who qualifies for the homeowner's exclusion from gross income for gain?

Back 187

taxpayer owns and used the property as a principal residence for two years or more during the 5 year ending period ending on the date of the sale or exchange. either spouse for a joint return must meet the ownership requirement, but both spouses must meet the use requirement with respect for the property. may not use exclusion more than once every 2 yrs (could get partial if other reasons though)

Front 188

how are involuntary conversions treated for gains?

Back 188

nonrecognition treatment is given because the reinvestment of proceeds restores him to the position he held prior to the conversion. if the taxpayer does not reinvest all the proceeds, his gain on the transaction will be recognized to the extent of the unreinvested amount.

Front 189

in an involuntary conversion, when must property be reinvested by?

Back 189

personal property = 2 years from year end, business property = 3 years

Front 190

in an involuntary conversion, when the gain exceeds $100,000, __________

Back 190

property acquired from related parties and certain close relatives don't qualify as replacement property

Front 191

how are losses dealt with in an involuntary conversion?

Back 191

losses are recognized!

Front 192

nonrecognition treatment is accorded to "like kind" exchange of property used in the trade or business or held for investment, EXCEPT:

Back 192

inventory, stock, securities, partnership interests, and real property in different countries

Front 193

how do you determine the amount of income to report in an installment sale for the year?

Back 193

earned revenue = cash collections x gross profit percentage

Front 194

how are treasury and capital stock transactions by a corporation treated for tax purposes?

Back 194

sales of stock by corporation, repurchase of stock by corp, and reissue of stock are exempt from gain and losses are disallowed. essentially corporations are precluded from tax benefits or income taxes resulting from dealing in their own stock.

Front 195

which losses on sales of property are nondeductible?

Back 195

W - wash sale loss
R - related party transactions
P - Personal loss

Front 196

what is a wash sale?

Back 196

when a security is sold for a loss and is repurchased within 30 days before or after the sale date

Front 197

who falls under a related party?

Back 197

brothers and sisters, husband and wife, lineal descendants, entities that are more than 50% owned by individuals, corps, trusts, and/or partnerships

Front 198

capital gains taxes are imposed on all sales of nondepreciable property between all related parties except:

Back 198

1. husband and wife (basis is merely transferred)
2. individual and a 50% controlled corp or partnership (where the gain is taxed as ordinary income

Front 199

what are the basis rules for selling property under related party transactions?

Back 199

same as gift-basis rules

Front 200

no deduction is allowed for the loss on a non-business disposal or loss. an itemized deduction may be available in the category of ______

Back 200

casualty and theft

Front 201

what is the holding period and tax rate for long term capital gains?

Back 201

more than one year, 15% max, 0% if in the 10% or 15% income tax bracket (increase by 5% in 2013)

Front 202

what is the holding period and tax rate for short term capital gains?

Back 202

one year or less, tax rate is treated as ordinary income.

Front 203

any unrecaptured section 1250 gain from depreciation that is not treated as ordinary income is taxed at ___% for taxpayers not in the 10 or 15% income tax bracket

Back 203

25%

Front 204

long term gains on ________ are taxed at 28% (for taxpayers not in the 10%, 15% or 25% tax brackets)

Back 204

collectibles, antiques, and small company (section 1202) stock

Front 205

individual taxpayers realizing a net long- or short-term capital loss may only recognize (deduct) a max of ___ of the amount realized from other types of gross income (ordinary income, passive income, or portfolio income)

Back 205

$3,000

Front 206

for individuals, what is the carryback of a net capital loss?

Back 206

no carryback. but you can carry forward an unlimited time until exhausted.

Front 207

how is a personal (non-business) bad debt treated?

Back 207

a short-term capital loss in the year debt becomes totally worthless

Front 208

how are worthless stock and securities treated under net capital losses?

Back 208

the cost (or other basis) of worthless stock or securities is treated as a capital loss, as if they were sold on the last day of the taxable year in which they became totally worthless

Front 209

what are the netting procedures for capital gains and losses for individuals?

Back 209

gains and losses are netted within each tax rate group, creating net short-term and long-term gains or losses by rate group. resulting short-term and long-term loses are then offset against short term and long-term gains (respectively) beginning with the highest tax rate group and continuing to the lower rates

Front 210

how are net capital gains for c corps treated?

Back 210

added to ordinary income and taxed at the regular rate (do not get the benefit of lower capital gains rates). section 1231 gains are entitled to capital gain treatment

Front 211

how are net capital losses for c corps treated?

Back 211

corporations may not deduct any capital loss from ordinary income. only use capital losses against capital gains. net capital losses are carried back 3 years and forward 5 years as a short term capital loss.

Front 212

how are section 1231 assets treated in a business in terms of gains and losses?

Back 212

gains treated as "capital" assets used in the business while losses are treated as ordinary losses.