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70 Cards in this Set
- Front
- Back
medical expense deduction allowed for cosmetic surgery or similar procedures?
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NONE. unless the surgery or procedure is necessary to ameliorate a deformity related to a congenital abnormality or personal injury resulting from an accident, trauma, or disfiguring disease.
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self employment tax - where is it deducted and how much (what %) is deductible
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deducted as an above the line deduction in calculating AGI. only 50% is deductible.
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2 types of qualified residence interest
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acquisition endebtedness, home equity indebtedness
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$ limit of interest deductions related to acquisition indebtedness
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$1,000,000 (half this amount is married filing separately)
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$ limit of interest deductions related to home equity indebtedness
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$100,000 (half this amount is married filing separately)
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home equity indebtedness cannot exceed...
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FMV of the home as reduced by any acquisition indebtedness
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the deduction for investment interest expense for noncorporate taxpayers is limited to....
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the amount of net investment income
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TRUE or FALSE
no deduction is allowed for charitable contributions to non qualified organizations |
TRUE
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TRUE or FALSE
contributions in excess of the 50%, 30%, 20% limitation can be carried foward for 5 years and remain subject to the 50%, 30%, 20% limitation in the carryforward years |
TRUE
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explain charitable contribution limitation levels
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overall limitation is 50% of AGI. a 2nd limitation: long term cap gain prop. - ltd to 30% of AGI. a 3rd limitation: certain charities ltd to 20%
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rental income includes...
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>advance rent
>leasehold improvements in lieu of rental payments |
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are stock dividends included in gross income? why/why not?
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>no
>unless.... >is on preferred stock >is payable at the election of any shareholder - in stock/property |
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in order to be treated as alimony, payment must be...
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>made in cash
>received by or on behalf of the payee spouse >required to terminate upon spouse death |
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above the line deductions...
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>1/2 self employment tax
>moving expenses >self employed health ins ded. >IRA deduction >pmts to keogh retirement plan >penalty on early w/d savings >student loan interest ded. >alimony paid >tuition & fees ded >health savings acct ded |
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passive losses and credit > if cannot be used in current year > can be carried...
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forward indefinitely or until the property is disposed of in a taxable transaction
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REGULATION section content
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>ethics and professional & legal responsibility
>business law >federal tax procedures & acctg. issues >federal taxation of property transactions >federal taxation - individual >federal taxation - entities |
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6 articles: code of conduct
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1. responsibilities
2. the public interest 3. integrity 4. objectivity 5. due care 6. scope & nature of services |
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prepaid interest can/cannot be deducted?
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cannot
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calculation of excluded portion of annuities & pensions
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net cost of annuity
------------------- expected total annuity pmts times payment received |
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below the line deductions
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>standard ded
>medical & dental expenses >taxes >interest expense >contributions >casualty & theft losses >miscellaneous >exemptions |
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additional taxes
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>alternative minimum tax
>parents election to report childs interest & dividends >lump sum distribution from qualified retirement plans |
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1040 items included in income
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1. wages, salaries, tips, etc.
2. interest (sch b) 3. dividend income (sch b) 4. state & local income tax refunds 5. alimony rec'd 6. business income/loss (sch c) 7. capital gain/loss (sch d) 8. other gains/losses 9.taxable IRA dist. pensions, annuities 10. rents, royalties, partnerships, s corp, estates trusts (sch e) 11. unemployment compensation, social security 12 other |
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what to be cautious of when presented with a question on tax basis?
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if cash basis - watch out for receivables (not included in income)
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dollar amount of deductibility of business gift
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$25 per recipient
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discuss the various exclusions from gross income...
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1. receipt of child support
2. property settlement rec'd in divorce 3. annuities & pensions are exluded - to extent they rep a return of capital 4. life insurance proceeds 5. certain employee benefits 6. accident & health insurance benefits (policy purchased by taxpayer) 7. damages for physical injury & physical sickness 8. gifts, bequests, devises or inheritances 9. receipt of stock dividends 10. certain interest income 11. savings bond for higher ed 12. scholarships & fellowships 13. political contributions 14. rental value of parsonage 15. discharge of indebtedness (maybe) 16. lease improvements 17. foreign earned income exclusion |
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the charitable contribution of a capital gain property is limited to what % of AGI? give an example
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limited to 30%. land, artifacts, etc. held for more than 12 months. this qualified contribution takes 2nd priority to cash contributions subject to 50% of AGI.
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key points - personal casualty & theft gains and losses
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>$100 floor
>10% AGI floor >lower of adjusted basis or FMV >accidental damage not included >expenses related to repair or valuation of loss are not included in casualty deduction |
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how do you differientiate itemized ded subject to 2% floor vs NOT subject to 2% floor
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expenditure incurred in the production of income is subject to 2% floor
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gambling winnings subject to 2% itemized ded floor?
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not subject to 2% itemized ded floor. income included in other income on pg 1 of 1040.
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examples of nondeductible expenses
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-fees & licenses (auto, marriage, etc.)
-home repairs, insurance, rent -personal legal exp -life insurance -burial exp -capital expenditures -illegal bribes & kickbacks -fines & tax penalties -collateral |
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dependency exemption is available for a qualifying relative if
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1. taxpayer furnishes more than 50% of the dependent's sppt
2. the dependent's gross income is less than $3200 3. the dependent is of a specified relationship to the taxpayer or lives in the taxpayer's household for the entire year 4. dependent is a US citizen or resident of US, Canada or Mexico 5. the dependent does not file a joint return |
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qualifying widow filing status is available for the 2 yrs following the year of a spouse's death if:
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1. the surviving spouse was eligible to file a joint return in the year of the spouse's death
2. does not remarry before the end of the current year 3. the surviving spouse pays over 50% of the cost of maintaining a household that is the principal home for the entire year of the surviving spouse's dependent child |
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for purposes of computing an individuals AMT, no deduction is allowed for
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>personal, state & local income taxes and misc itemized deductions subject to the 2% of AGI threshold
>home mortgage interest if the loan proceeds were not used to buy, build, or substantially improve the home |
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the AMT for noncorporate taxpayers is computed by applying a _________ rate schedule to a taxpayer's AMT base
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two-tiered
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how do you get to AMTI from taxable income?
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1. add/subtract AMT adjustments
2. add AMT preferences |
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examples of adjustments when calculating AMTI
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-medical exp ded 10% vs 7.5%
-no ded allowed for home mortgage interest if the loan proceeds were not used to buy, build, or improve the home -no ded for pers, state, property, local taxes and for misc itemized ded subject to 2% floor -no ded for pers. exemptions and the standard ded -real property in svc 87-98 diff between reg. tax depr & SL depr over 40 yrs |
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examples of preferences when calculating AMTI
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-tax exempt interest on certain private activity bonds
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TRUE or FALSE
The amount of alternative minimum tax paid by an individual that is attributable to timing preferences and adjustments is allowed as a tax credit that can be applied against regular tax liability in future years. |
TRUE
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self employed taxpayer is allowed a deemed deduction equal to ________% of self employment earnings in computing the amt of net earnings upon which the tax is based.
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7.65%
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TRUE/FALSE
self employment income includes gains and lossses from the disposition of property used in a trade or business, as well as a shareholder's share of ordinary income from an S corp |
FALSE. self employment income excludes gains and losses from the disposition of property used in a trade or business, as well as a shareholder's share of ordinary income from an S corp
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self employment income represents the net earnings of...
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an individual from a trade or business carried on as a proprietor or partner, or from rendering services as an independent contractor
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a general business credit in excess of the limitation amount is carried back _____ year and forward ______ years to offset tax liability in those years
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carried back 1 year; carried forward 20 years
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general business credit is composed of the:
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investment credit, work opportunity credit, welfare-to-work credit, alcohol fuels credit, research credit, low-income houseing credit, enhanced oil recovery credit, disabled access credit, renewaable electricity production credit, empowerment zone employment credit, Indian employment credit, employer social security credit, orphan drug credit, the new markets credit, the small employer pension plan start-up costs credit and the employer provided child care facilities credit
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CHILD AND DEPENDENT CARE CREDIT:
-the credit is what percentage of qualified expenses, but is reduced by _____% for each $_____ of AGI over $_______ down to a minimum of _____% |
-35%
-the credit is reduced by one % point for each $2000 of AGI over $15000 down to a minimum of 20% |
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CHILD AND DEPENDENT CARE CREDIT:
-the credit is limited to the lesser of $______ for one qualifying individual & $_____ for 2 of more |
-the credit is limited to the lesser of $3000 for one qualifying individual & $6000 for 2 of more
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CHILD AND DEPENDENT CARE CREDIT:
-the credit is what percentage of qualified expenses, but is reduced by _____% for each $_____ of AGI over $_______ down to a minimum of _____% |
the credit is reduced by one % point for each $2000 of AGI over $15000 down to a minimum of 20%
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CHILD AND DEPENDENT CARE CREDIT:
-the credit is limited to the lesser of $______ for one qualifying individual & $_____ for 2 of more |
-the credit is limited to the lesser of $3000 for one qualifying individual & $6000 for 2 of more
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which credit can result in a refund even if an individual had no income tax liability
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earned income credit
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CHILD TAX CREDIT:
individual taxpayers are permitted to take a tax credit based solely on the number of their dependent children under age ______. the amt of the credit is $_____ per _________ child, but is subject to reduction if _____________ income exceeds certain income levels. |
-seventeen
-$1000 -qualifying -adjusted gross |
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HOPE SCHOLARSHIP CREDIT:
-the Hope scholarship credit provides for a max credit of __________ of postsecondary ed. the credit is available on a per student basis and covers tuition paid for the ________________. to be eligible, the student must be enrolled on at least a _________ basis for one academic period during the year. if a parent claims a child as a dependent, only the parent can claim the credit and any qualified expenses paid by the child are ______________. |
-$1500 for 1st 2 yrs (100% first year, 50% second year)
-tuition paid for the taxpayer, spouse and dependents -part-time -deemed paid by the parent |
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can an taxpayer claim both a hope scholarship credit and a lifetime learning credit
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no
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LIFETIME LEARNING CREDIT:
what is the $ limit of qualified tuition and related expenses per year for a grad or undergrad courses? -how long is the credit available? |
-20% of the first $10,000
-unlimited no. of years |
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ESTIMATED TAX PAYMENTS:
-there will be no penalty if the total tax shown on the return less the amount paid through withholding (including excees social sec. tax withholding) is less than... |
$1000
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form 1040 must be filed if gross income is at least _____
for: 1. single 2. married filing separately 3. self employed 4. single over 65 & blind |
1. 8200
2. 3200 3. 400 4. 9450 |
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fees rec'd for jury duty rep compensation for services and must be included where?
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gross income. 1040 pg1 - taxable income
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an interest forfeiture penalty for making an early w/d from a certificate of deposit is/is not deductible?
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is deductible on pg 1 of 1040
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can a cash-basis taxpayer deduct write offs of uncollectible accounts receivable
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no. a/r resulting from services rendered by a cash basis tax payer have a zero basis
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is an educational expense that is part of a program of study that can qualify an individual for a new trade or business deductible? (eg. cpa review study materials)
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not deductible personal expense
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losses sustained from a nonbusiness (personal) bad debt is classified as....
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a short-term capital loss - deductible on sch d - capital gains & losses
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which schedule is used for rental income & expenses
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schedule e - supplemental income and loss
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which schedule is used for income or loss from royalties, partnerships, S corp's, estates and trusts
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schedule e - supplemental income and loss
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where is personal casualty loss deductible?
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schedule a - itemized deductions subject to a threshold of $100 and an additional threshold of 10% of AGI
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list which taxes are not deductible in computing an individuals federal income tax....
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state inheritance taxes paid, federal estate and gift taxes, federal income taxes, social security and other employment taxes paid by an employee
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is the self employment tax subject to gross self employment income or net earnings from self employment?
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net earnings from self employment
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is personal insurance (life, nonbusiness personal property) deductible?
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no
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what is the title of each of the following schedules:
-schedule a -schedule b -schedule c -schedule d -schedule e |
a: itemized ded
b: interest & dividend income c: business income and loss d: capital gains and loss e: supplemental income |
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investment interest expense is deductible where?
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schedule e - supplemental income and loss
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charitable contributions in excess of applicable percentage limitations can be carried...
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forward for up to 5 tax years
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REGARDING THE SALE OF HOME:
up to $_______ of gain can be excluded from gross income if an individual owned and occupied a residence as a __________ residence for an aggregate of at least ____ of ____ years preceding sale. The excludable gain is increased to $________ for married individuals filing jointly if either spouse meets the ___________ requirement, and both spouses meet the ____ requirement. |
1. 250,000
2. principal 3. 2 of 5 4. 500,000 5. ownership 6. use |
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Uniform Capitalization rules generally require that all costs incurred in manufacturing or constructing real or pers prop, or in purchasing or holding prop for sale, must be capitalized as part of the cost of the prop. These rules to not apply to _________ who acquires pers prop. for resale if avg gross receipts for 3 preceding tax years do not exceed ______.
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-small retailer/wholesaler
-$10 million |