Reg

Front 1

Qualifying widow/widower: requirements

Back 1

1) Dependent 2) Child (not qualifying child) 3) Lives in taxpayer's home for full year

Front 2

Head of household: how to qualify

Back 2

One of three ways:
1) Unmarried qualifying child lives in taxpayer's household for more than Half a year
2) Dependent Relative lives in taxpayer's household for more than Half a year
3) Dependent parent lives – not required to live with - more than 50% maintained by taxpayer

Front 3

Qualifying child: rules (list) CARES

Back 3

Close Relative
Age
Residency
Eliminate Gross Inc. Test
Support Test change

Front 4

Qualifying child: rules under Close Relative

Back 4

One of the following: 1) Child by blood, marriage, or adoption 2) Foster child 3) Sibling or stepsibling 4) Descendent of one of the above

Front 5

Qualifying child: rules under Age

Back 5

Under 19 Or under 24 if full-time student for 5 months of year

Front 6

Qualifying child: rules under Residency

Back 6

Same as taxpayer for at least half of the year

Front 7

Qualifying child: rules under Support Test change

Back 7

The child did not contribute more than 50% of support

Front 8

Dependent – QUALIFYIG RELATIVE: rules “SUPORT”

Back 8

1) Support TEST: Dependent must not provide over half of support
2) Under taxable Gross Income: dependent's income subject to taxation must not exceed exemption amount $3500 in 2008 (exception: does not apply if dependent is under 19, or 24 if full-time student for 5 months of year)
3) Precludes dependent filing a Joint return: Dependent must not file a joint return
4) Only Citizenship: Dependent must be U.S. citizen (or resident of U.S., Mexico, or Canada)
5) Relative: Dependent must be a relative OR
6) Taxpayer lives with dependent individual for Whole year (foster parent and cousin)

Front 9

Relative: rules

Back 9

1) Linear ancestor (including parents-in-law) 2) Linear descendent (including children-in-law) 3) Siblings (including in-laws) 4) Siblings of a parent 5) Children of a sibling

Front 10

Exemptions are allowed for:

Back 10

1) Taxpayer 2) Spouse, if married filing jointly 3) Spouse, if separate return filed AND spouse has no gross income AND spouse is not dependent of another taxpayer 4) Dependents – See Qualifying child and Qualifying Relative

Front 11

Social Security benefits: how much are taxable?

Back 11

Take half of SS benefits and add to AGI. If result is 1) Less than $32K ==> SS tax-free 2) Between $32K and $44K ==> SS 50% taxable 3) Over $44K ==> SS 85% taxable Note for other than married filing jointly, limits are $25K and $34K

Front 12

Cases where dividend or interest revenue is NOT taxable

Back 12

1) Dividends on life insurance policies 2) Common stock dividends (unless recipient had a choice of receiving cash instead of stock) 3) State and municipal bond interest 4) Some interest on U.S. Series EE bonds

Front 13

EE bond interest not taxable: requirements

Back 13

1) Bonds were bought by taxpayer (not a gift) 2) Taxpayer was 24 or older when bonds were bought 3) Proceeds used to pay college costs for taxpayer, spouse, or dependent

Front 14

Passive activity gains and losses: examples

Back 14

1) Income from partnership or sole propietorship where owner was not actively involved 2) Income from rental activities regardless of involvement 3) Income from limited partnerships regardless of involvement

Front 15

Carryback/forward: passive activity losses

Back 15

Passive activity losses are not deductible on an income tax return. They are carried over and used to offset passive income in the future until used up (indefinitely). A passive activity is a business in which the taxpayer serves as an owner but does not MATERIALLY participate in the operation. Rental activities and limited partnerships are also included in this category, regardless of the owner's participation.

Front 16

Scholarships are taxable income if:

Back 16

Any of the following: 1) Amount received in excess of tuition and other educational costs 2) If recipient is not a degree candidate 3) If student must work in order to receive the scholarship

Front 17

Group term life insurance premiums (paid by employer) are taxable income if:

Back 17

If beneficiary is someone other than the employer AND Coverage is in excess of $50K, THEN Premium for coverage in excess of $50K is taxable income

Front 18

Alimony: requirements

Back 18

1) Must be divorced or legally separated 2) Payments must be in cash 3) Payments must be made to or on behalf of spouse 4) Payments must cease at spouse's death

Front 19

Carryback/forward: self-employment losses (in excess of other ordinary income)

Back 19

Carried back 2 years Carried forward 20 years

Front 20

Self-employment costs: What type of deduction? What can be deducted?

Back 20

Deduction for AGI 1) Half of any self-employment tax 2) Health insurance costs for taxpayer and family if business has a net profit

Front 21

Education costs: What type of deduction? What can be deducted?

Back 21

Deduction for AGI 1) Up to $4K per year for taxpayer, spouse, dependent 2) Cannot be taken if education credit is taken for same student

Front 22

Student loan interest: What type of deduction? What can be deducted?

Back 22

Deduction for AGI 1) Up to $2,500 per year 2) Loan must be taken out for education of self, spouse, or dependent

Front 23

Moving expenses: What type of deduction? What can be deducted?

Back 23

Deduction for AGI 1) Move must be employment-related 2) New job must be 50 miles farther from previous residence than previous job 3) Deduction limited to amount spent on moving possessions and people
There are several tests that must be met before moving expenses can be deducted. For example, the taxpayer must normally move within a year of taking the new job unless circumstances arose that prevent the move in that time period. The son finishing high school is one of those circumstances. The taxpayer must also work at least 39 weeks in the general area of the new location. Moving must be a change in the taxpayer’s main home, which can be a house, apartment, condominium, houseboat, or the like. Finally, the new job must be a commute of 50 or more miles farther than the previous commute.
NEW commute - Old commute = or > 50 miles

Front 24

All itemized deductions are subject to phaseout for high income EXCEPT:

Back 24

1) Medical expenses
2) Nonbusiness casualty losses
3) Investment interest expense
4) Gambling losses

Front 25

Medical expenses: What type of deduction? What can be deducted? Who is eligible?

Back 25

Itemized deduction
1) Amount paid in excess of 7.5% of AGI
2) Costs to improve/maintain health; medical insurance; prescription drugs and insulin
Taxpayer, spouse, dependents; also anyone who would have been a dependent except for the income requirement

Front 26

Taxes: What type of deduction? What can be deducted?

Back 26

Itemized deduction 1) State/local/foreign INCOME taxes (if sales taxes not deducted)
2) State/local SALES taxes (if income taxes not deducted)
3) Real estate/personal property taxes if assessed based on value AND taxpayer owns property AND property is not used in business

Front 27

Interest: What type of deduction? What can be deducted (in general)?

Back 27

Itemized deduction 1) Debt in connection with 1st or 2nd home
2) Debt to finance investments

Front 28

Mortgage interest deduction: requirements

Back 28

1) Must be 1st or 2nd home
2) Taxpayer must own home
3) Acquisition debt deductible for principal up to $1 million
4) Home equity debt (if NOT used to improve home) deductible for principal up to $100K
5) Points are deductible over life of the loan (not up front)

Front 29

Charitable contributions: What type of deduction? What can be deducted (general limitations)?

Back 29

Itemized deduction 1) Long-term capital assets: limited to 30% of AGI 2) All gifts including long-term capital assets: limited to 50% of AGI

Front 30

Charitable contributions: amount of deduction 1) Contribution of services 2) Purchase from a charity above fair value 3) Contribution of property

Back 30

1) Not deductible, but out-of-pocket expenses associated with contribution of services are deductible 2) Excess payment is deductible 3) Deductible at lower of cost or market value (exception: long-term capital assets always deductible at FMV)

Front 31

Carryback/forward: charitable contributions deduction

Back 31

Carried forward up to 5 years

Front 32

Casualty and theft losses: What type of deduction? What can be deducted?

Back 32

Itemized deduction 1) Deduct lower of tax basis or drop in value 2) Deduction is decreased by insurance reimbursement AND $100 for each incident AND 10% of AGI

Front 33

Child tax credit: Amount? Who qualifies?

Back 33

$1K per dependent child under 17 that is a U.S. citizen Includes children by blood, marriage, adoption Also includes siblings/nephews/nieces if you care for them as your own child

Front 34

Child/dependent care credit: Requirements? Who qualifies? Amount?

Back 34

Care must be necessary for taxpayer to be able to work For children under 13 or dependents who cannot care for themselves 1) Calculate cost of care up to $3K for one child or $6K for two or more children 2) Percentage of that cost is amount of credit: 35% if AGI is $15K or less, 20% if AGI is over $43K, other range of percentages in between

Front 35

Hope scholarship credit: Requirements? Amount?

Back 35

Student must be half-time AND in first 2 years of post-secondary education AND must not take Lifetime Learning credit Credit is 100% of first $1100 and 50% of next $1100

Front 36

Lifetime learning credit: Requirements? Amount?

Back 36

Student must be half-time OR education must improve job skills; also must NOT take Hope scholarship credit 20% of costs up to maximum credit of $2K

Front 37

Capital assets: definition

Back 37

Personal assets: furniture, house, cars, etc. Investment stocks and bonds

Front 38

Non-like-kind exchange: New tax basis? Calculation of gain/loss?

Back 38

New basis = FMV of new property
Gain/loss = new basis - old basis

Front 39

Like-kind exchange: taxable gain when boot received

Back 39

First, calculate realized gain: (FMV of items received) - (basis of asset surrendered) Second, calculate taxable gain: lesser of realized gain or boot received

Front 40

Tax basis of inherited property

Back 40

FMV on date of decedent's death OR
Alternative valuation: the earlier of 1) six months after death or 2) date property received from estate

Front 41

Gain/loss on involuntary conversion ( Gov takes your house to build the road) : calculate tax

Back 41

Loss: handled as itemized deduction or capital loss
Gain: 1) Calculate gain: amount received - tax basis
2) Calculate leftover settlement: amount received - cost of replacement property
3) Taxable gain is lesser of gain or leftover settlement

Front 42

Tax basis of gift

Back 42

Determined only when gift is sold to another party 1) If property sold for more than previous owner's tax basis, then basis of gift is same as previous owner's basis 2) If gift is sold for less than previous owner's tax basis, basis of gift is the lesser of the previous owner's basis OR FMV at date of gift

Front 43

Capital gains/losses are reported on:

Back 43

Schedule D

Front 44

Reporting of nonbusiness bad debts and losses

Back 44

Short-term capital loss, regardless of time involved

Front 45

Gain on sale of personal residence: requirements for exclusion of gain

Back 45

All three: 1) Gain can be excluded only once every two years 2) Property must be principal residence of taxpayer AND spouse for at least two of previous five years 3) Property must have been owned by taxpayer OR spouse for the previous five years

Front 46

Traditional IRA: contribution limit

Back 46

Up to $4K ($8K for joint return) contribution is deductible Limited to taxpayer's earned income (includes alimony; does not include interest)

Front 47

Traditional IRA: Are distributions taxable? Penalties?

Back 47

Distributions are taxable 10% penalty for withdrawal before age 59-1/2
unless used for: (HIM DEaD)
1)Home buyer (1st time) - $10,000 max
2) Insurance Medical
3) Med Expenses > 7.5% of AGI
4) Disability
5) Education
6) and
7) Death

Front 48

Roth IRA: contribution limit

Back 48

Up to $4K less any contributions to traditional IRA Up to $5K for taxpayers over 50

Front 49

Roth IRA: Are distributions taxable? Conditions?

Back 49

Distributions are not taxable: After 5 years If taxpayer is over age 59-1/2

Front 50

Education IRA: contribution limit

Back 50

Up to $2K per beneficiary

Front 51

Education IRA: condition for beneficiary

Back 51

Must be under 18

Front 52

Education IRA: are distributions taxable?

Back 52

Distributions are not taxable if used for K-12 education of beneficiary

Front 53

Keogh plan: tax status of contributions/distributions?

Back 53

Contributions are deductible and distributions are taxable

Front 54

Itemized deductions: where reported?

Back 54

Schedule A

Front 55

Constructively received income

Back 55

1) Income is made available to taxpayer AND 2) Taxpayer is entitled to receive income

Front 56

Capital gain/loss: date used?

Back 56

Date of trade (not necessarily date of cash transfer)

Front 57

Credit for over-withholding of Social Security taxes is available if:

Back 57

Over-withholding arose from 2+ employers both correctly withholding taxes

Front 58

Rental income is reported on:

Back 58

Schedule E

Front 59

Distributable net income (DNI) is an amount that sets the limit on the deduction of an estate for distributions to beneficiaries. If DNI =$15,000 and $9,000 is distributed to beneficiary, how much is taxable to the beneficiary and how much is Estate is allowed to deduct?

Back 59

$9,000 is taxable to the beneficiary and
is Estate is allowed to deduct $9,000

Front 60

A portion of a SS benefits may be taxable if AGI is above $_________

Back 60

$34,000