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20 Cards in this Set
- Front
- Back
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Child support tax treatment |
Not gross income to the payee Not deductible to by the payor |
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If the decree or instruments specifies both alimony and child support, but less is paid than required, how is the payment allocated? |
then amounts are first allocated to child support, with any remainder allocated to alimony |
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If a specified amount of alimony is to be reduced upon some contingency related to a child, |
then an amount equal to the specified reduction will be treated as child support rather than alimony
ex: Payments of $1,000 per month will be reduced by $400 when a child reaches 21. $400 of each $1,000 payment is treated as child support |
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How do you handle attorney fees to collect alimony? |
Put on Schedule A as a 2% misc. itemized deduction |
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How do you handle attorney fees to collect child support? |
Not deductible |
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Tax effects of granting and exercising an incentive stock option |
No taxable income when granted or exercised to the employee |
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What's the basis of the stock for incentive stock options? |
Option (exercise) price |
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What's the tax effects of selling incentive stock options? |
Don't have to recognize gain at the time you exercise the option
The gains are counted as a long term capital gain (which is taxed at a lower rate than short term capital gain) |
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If the following criteria are met: (for qualified or unqualified options)
- Employee holds the stock acquired through the exercise of the option at least two years from the grant date - Holds stock itself at least one year
What are the tax effects? |
Employee's realized gain is a long term capital gain Employer receives no deduction |
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If the following criteria are not met: (for qualified or unqualified options)
- Employee holds the stock acquired through the exercise of the option at least two years from the grant date - Holds stock itself at least one year
What are the tax effects? |
Employee has ordinary income = FMV at exercise date - option price Remainder of the gain is short term or long term capital gain Employer receives a deduction equal to the amount the employee reports as ordinary income |
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Nonqualified stock option tax effects |
Included in income when received if the option has a determinable FMV |
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If a nonqualified stock option does not have a determinable FMV upon receipt, what is the tax effect |
Income arises when the option is exercised Income = FV when exercised - option price |
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What type of income is the income upon receipt or exercising of a nonqualified stock option for the employee and employer? |
Employee - ordinary income
Employer - deduction allowed = amount included in employee income |
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Who are nonqualified stock option plans offered to? |
Some employees (discriminates) |
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Gain from selling nonqualified stock option = |
Selling price - FMV |
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Gain from selling qualified stock option = |
Selling price - option price |
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What's the basis of the stock for unqualified stock options? |
FMV
Note - GO OVER THIS PROBLEM IN THE VIDEO FOR SIMULATION |
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Tax effect of buying a lottery ticket |
Deduct the cost of the ticket against the gross winnings on Schedule A as a misc. itemized deduction that does not have to exceed 2% of AGI |
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What prizes or awards are nontaxable by the recipient? |
If they are received for religious, charitable, scientific, educational, artistic, literary, or civic achievement only if the recipient
1. Was selected without any action on his part 2. Is not required to render substantial future services, and 3. Designates that the prize or award is to be transferred to a governmental unit or tax exempt charitable, educational, or religious organization (but the recipient cannot take a charitable contribution for this!) |
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Tax benefit rule |
A recovery of an item deducted in an earlier year must be included in gross income to the extent that a tax benefit was derived from the prior deduction of the item |
