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78 Cards in this Set
- Front
- Back
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Test
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Test
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Life Insurance Proceeds
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Non-taxable
Interest earned on life insurance is taxable |
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Accident, Health, and Medical Insurance
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Premium payments by employer are not taxable, but amounts paid out to the employee are unless they are directly to reimburse medical expenses incurred
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Meals and Lodging
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NOT taxable to employee if for business purposes
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Educational expenses
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NOT taxable up to $5,250 for undergrad and grad education
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Tuition reduction
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May be excluded from taxable income and for grad students may be excluded if they also made money being a TA
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Employee Discounts
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Merchandise - exclude up to GPP
Service - exclude up to 20% FMV Parking - up to $230 per month Transit - up to $230 per month |
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Employer Contribution to Retirement Account
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Not taxable at the time of contribution
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Benefits Received from a retirement account
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Taxed + interest is taxed
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FSAS
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Employees can elct to have part of salary up to $5,000 deposited into a pretax account to use for healthcare or dependent care costs. Forfeit funds not used by March 15 of the next year
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Taxable Interest Income
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Federal bonds
Industrial bonds Corporate bonds Interest from late PMT of tax refund |
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Tax Exempt Interest Income
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State and local bonds
Series EE bond Veterans administration insurance |
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Series EE US Savings Bond
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Tax exempt when it is used to pay for higher education of the taxpayer, spouse, or dependents
PHASE OUT 71,100 |
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Unearned Income of a Child
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To prevent parents from hiding money in their kids' accounts:
0-950: 0% 951-1900: child's rate 1901 and over: parent's rate |
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Taxable Dividends
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A special lower rate IF stock was held more than 60 days etc. Have to hold them for a whole. Rate: 15%
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Tax Free Dividends
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-return of capital (reduce basis instead)
-stock split (allocate over new shares) -stock div same: allocate over new -stock div new: original basis based on relative FMV of new stock -life ins div |
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Capital Gain Div Dist
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When company has no E&P, and you have recovered your entire basis, then this distr is taxable gross income
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State and Local Refunds
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Itemized last year and got a refund: it will now be taxed
Stded last year: nonn-taxable but interest earned on it IS taxable |
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Alimony
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Income to receiver, will be taxed
-must be in cash/CC bills/college fees -cannot extend beyond death of spouse -must be legally required to pay |
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Child Support
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Non-taxable
Apply lump sum payment by deadbeat dad as child support first |
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Property Settlements from a Divorce
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not includable/taxable and not deductible on the one paying either
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Sch C: gross income
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cash
property @fmv cancellation of debt |
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Sch C: deductible expenses
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COGS (when inv is sold)
Salaries paid to others State/Local business taxes paid Office expenses Automobile Exp 50% business meal/ent Depreciation of bus assets Int exp on BUS loans incurred/paid Emp benefits Legal/prof services Direct write off bad debts |
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Sch C: nondeductible expenses
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-salary to owner
-federal inc tax -personal portion of anything (these all usually go on Sch A or as an adj to arrive at AGI) |
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Sch C: Net Business Income
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-Net bus income is taxable: income tax AND federal SE tax
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Sch C: Net Business Loss
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May deduct the loss against other sources of income.
2 back 20 fwd |
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Husband and wife JV election
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Instead of treating it like a Pship, report on joint return. Each one's respective portion of business activity goes on either a Sch C or F.
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Uniform Capitalization Rules
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CAP as inventory:
-DM, DL, FOH Period expense: -SGA, research and development |
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Long-term Contracts
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Percentage of completion method required, unless exempt:
-small contractors (under $10m) -home contractors (80% home) -services of architects/engineers -services under warranty/maint |
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LT Contract Production Period
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Start date
-cash basis: date when incur costs -accrual: later of cash or 5% costs End date -work complete/95% costs |
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LT Misc Rules
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-IRS must give consent to change method of contract accounting
-Unique rules for custom products -Corporate E&P calc through % of completion |
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Sch F: Farming Income
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Cash basis (used by most)
-inventories of produce/livestock are NOT considered -Gross income: everything RAISED Accrual: required for some corporate farmers and inventories must also be maintained |
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IRA Income general rules
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Cannot be withdrawn until age 59.5 and must start by 70.5
Premature distributions penalty 10% tax ON TOP of regular inc tax on it |
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Traditional Deductible IRA Distributions
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Taxed as ordinary income when received
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Roth IRA
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Non taxable
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Traditional non-deductible IRA distributions
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Partially taxable:
Principal - non taxable Earnings - taxable when withdrawn |
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Exceptions to Penalty Tax on Early IRA Withdrawals
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HIMDEAD
Home buyer 10,000 max exclusion Insurance for medical (unemployed) Medical expenses excess 7.5%AGI Disability Education tuition books fees Death |
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Annuities
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Like depreciation. Take full amount of the investment and divide over factor and that amount is excludable from taxation. If live longer, fully taxable. If die early, unrecovered will be misc deduction not subject to 2% AGI floor.
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Sch E: Rental Income
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Gross Rental Income
Prepaid Rental Income (nonrefund dep) Rent Cancellation PMT Improvement in-lieu of rent @FMV (Rental Expenses) =Net Rental Income/Loss |
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Rental of Vacation Income: Rented LESS than 15 Days
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Treated as a personal residence. Rental income excluded from income and mortgage interest and real estate taxes are allowed as itemized ded.
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Rental of Vacation Income: Rented 15 Days or MORE
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15 or more days + personal purposes for the greater of
1. more than 14 days 2. more than 10% of rental days It is a rental/personal residence. Prorate expenses between personal and rental. RENTAL expenses only ded to EXTENT of rental income |
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Passive Activity Losses
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Rental, interests in limited partnerships, S corps, and tax shelters
Deduct against passive income only -infinite fwd -can also fully deduct in year -property is actually sold if become active participant in future |
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Taxpayers subject to PAL rules
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Individuals, estates, trusts, personal service corps, and closely held C corps
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PAL Exceptions
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1. Mom and Pop Exception
-25,000 if actively managing -own more than 10% of activity -phase out $100k 2. Real estate professional -fully deduct losses -NOT a passive activity -more than 50% services in RE -750 hrs in RE per year |
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Unemployment Compensation
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All is taxable
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Social Security Income
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MAY be included in income.
1. Low Income - not taxable 2. Lower middle-less than 50% tax etc etc up to possibly 85% of SS being taxable |
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Prizes and Awards
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FMV of prizes and awards is taxable unless won without any action by the winner and then assigned the award directly to a govt/charity
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Gambling
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Winnings taxable
Losses only deducted to extent of winnings (NOT subject to 2% floor, but it is on Sch A) |
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Business Recoveries
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If a damage award if compensation for lost profit, the award is income
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Punitive Damages
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Fully taxable as ordinary income: business context, loss of personal reputation, individual personal injury
Not taxable: wrongful death awards where state law limits it |
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Scholarships and fellowships
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1. Degree-seeking student: excludible only up to amounts actually spent on tuition, fees, books (NOT room)
2. Non-degree seeking student: fully taxable 3. Tuition reduction: only taxable if it IS their compensation (are not TAs) |
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Life Insurance Proceeds
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Non-taxable
Interest income IS fully taxable If they are going to die in 24 months, all is nontaxable |
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Gifts and Inheritances
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NOT taxable when received, but income earned on it is taxable later
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Medicare Benefits
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Nontaxable
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Workers Compensation
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Nontaxable
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Personal Injury or Illness Award
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Nontaxable
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Accident Insurance
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Exclude from taxable income if the individual paid all premiums for the insurance
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Foreign-earned Income
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Taxpayers working abroad may exclude up to $92,900 IF one of the following:
1.resident test for entire year 2. physical presence: 330 full days out of any 12-month period |
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Real Property
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Land and all items permanently fixed to the land (buildings, paving, etc)
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Personal Property
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Whatever is not classified as real property, like machinery an equipment
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Capital Assets
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Includes real and personal such as:
-car -furniture -stocks -interest in pship -goodwill of a corp -copyrights purchased |
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Non-capital Assets
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1. Inventory in ordinary business
2. Depreciable personal property and real estate used in business (1231, 1245, 1250) 3. Copyrights by original artist 4. Treasury stock |
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Gains Deferred or Excluded (from property sold)
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HIDE IT
Homeowners exclusion Involuntary conversion Divorce property settlement Exchange of like-kind Installment sales Treasury capital and stock |
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Homeowner's Exclusion
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Sale of primary residence exclusion:
$500,000 MFJ $250,000 single, MFS, HOH To qualify: -must have owned and used as principal residence at least 2/5 yrs -no age req -exclusion renewable, use once every 2 years |
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Involuntary Conversions
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-when no gain: new property takes basis of old property
-personal property: reinvest 2 yr -business property: reinvest 3 yr -loss fully recognized -gain recog when: amt paid-old basis=gain-amt new building |
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Divorced Property Settlement
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Fully exclude
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Like-Kind Business Assets
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Gain recognized is the lesser of gain realized or boot received. Loss is NEVER recognized.
New basis= adj basis old + gain recog +boot paid - boot received |
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Installment Sale
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Revenue is reported over the period in which cash pmts are received. Multiply annual cash collection by GPP
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Treasury and Capital Stock Transactions
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Exempt from gain and losses are disallowed:
-sale of stock by corp -repurchase of stock -resissue of stock |
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Losses Nondeductible
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WRaP
Wash Sale Losses Related Party Losses and Personal Losses |
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Wash Sale Loss
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Happens when stock/bond is sold for a loss and is repurchased within 30 days before or after sale date. The loss is NOT allowed.
Basis of repurch sec= old basis - proceeds from sale + purch price new |
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Related Party Transactions
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Not considered arms-length.
Who: brothers/sisters, husband/wife, lineal descendant, but inlaws are okay Cap gains: ok on all nondepreciable property UNLESS between hus/wife or 50%+ controlled corp Cap losses disallowed even if made at an arms-length price Follow gift tax rules for new basis Include the previous disallowed loss when you finally sell to a third party to reduce gain |
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Personal Loss
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No deduction is allowed for loss on a non-business disposal or loss - itemized ded may be on Sch A for casualty/theft
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Individual Net Cap Gain Rules
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LT: more than 1 year @ 15%
ST: less than one year @ ordinary rate |
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Individual Net Cap Loss Rules
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$3,000 max deduction against other types of income
unlimited CF maintain character ST or LT |
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Netting Rules
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ST loss will offset ST gain first. Then if there is a net ST loss, it will offset LT cap gains from 28% bracket, then 25% bracket, then 15% bracket.
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Corporate Net Capital Gains
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Added to ordinary income and taxed at the regular rate
Section 1231 gains get capital gain lower tax rate treatment |
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Corporate Net Capital Losses
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May not be deducted against ordinary income
3 yr CB 5 yr CF as a short term cap loss |
