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70 Cards in this Set

  • Front
  • Back
medical expense deduction allowed for cosmetic surgery or similar procedures?
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.
self employment tax - where is it deducted and how much (what %) is deductible
deducted as an above the line deduction in calculating AGI. only 50% is deductible.
2 types of qualified residence interest
acquisition endebtedness, home equity indebtedness
$ limit of interest deductions related to acquisition indebtedness
$1,000,000 (half this amount is married filing separately)
$ limit of interest deductions related to home equity indebtedness
$100,000 (half this amount is married filing separately)
home equity indebtedness cannot exceed...
FMV of the home as reduced by any acquisition indebtedness
the deduction for investment interest expense for noncorporate taxpayers is limited to....
the amount of net investment income
no deduction is allowed for charitable contributions to non qualified organizations
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
explain charitable contribution limitation levels
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%
rental income includes...
>advance rent
>leasehold improvements in lieu of rental payments
are stock dividends included in gross income? why/why not?
>is on preferred stock
>is payable at the election of any shareholder - in stock/property
in order to be treated as alimony, payment must be...
>made in cash
>received by or on behalf of the payee spouse
>required to terminate upon spouse death
above the line deductions...
>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
passive losses and credit > if cannot be used in current year > can be carried...
forward indefinitely or until the property is disposed of in a taxable transaction
REGULATION section content
>ethics and professional & legal responsibility
>business law
>federal tax procedures & acctg. issues
>federal taxation of property transactions
>federal taxation - individual
>federal taxation - entities
6 articles: code of conduct
1. responsibilities
2. the public interest
3. integrity
4. objectivity
5. due care
6. scope & nature of services
prepaid interest can/cannot be deducted?
calculation of excluded portion of annuities & pensions
net cost of annuity
expected total annuity pmts


payment received
below the line deductions
>standard ded
>medical & dental expenses
>interest expense
>casualty & theft losses
additional taxes
>alternative minimum tax
>parents election to report childs interest & dividends
>lump sum distribution from qualified retirement plans
1040 items included in income
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
what to be cautious of when presented with a question on tax basis?
if cash basis - watch out for receivables (not included in income)
dollar amount of deductibility of business gift
$25 per recipient
discuss the various exclusions from gross income...
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
the charitable contribution of a capital gain property is limited to what % of AGI? give an example
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.
key points - personal casualty & theft gains and losses
>$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
how do you differientiate itemized ded subject to 2% floor vs NOT subject to 2% floor
expenditure incurred in the production of income is subject to 2% floor
gambling winnings subject to 2% itemized ded floor?
not subject to 2% itemized ded floor. income included in other income on pg 1 of 1040.
examples of nondeductible expenses
-fees & licenses (auto, marriage, etc.)
-home repairs, insurance, rent
-personal legal exp
-life insurance
-burial exp
-capital expenditures
-illegal bribes & kickbacks
-fines & tax penalties
dependency exemption is available for a qualifying relative if
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
qualifying widow filing status is available for the 2 yrs following the year of a spouse's death if:
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
for purposes of computing an individuals AMT, no deduction is allowed for
>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
the AMT for noncorporate taxpayers is computed by applying a _________ rate schedule to a taxpayer's AMT base
how do you get to AMTI from taxable income?
1. add/subtract AMT adjustments
2. add AMT preferences
examples of adjustments when calculating AMTI
-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
examples of preferences when calculating AMTI
-tax exempt interest on certain private activity bonds

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.
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.
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
self employment income represents the net earnings of...
an individual from a trade or business carried on as a proprietor or partner, or from rendering services as an independent contractor
a general business credit in excess of the limitation amount is carried back _____ year and forward ______ years to offset tax liability in those years
carried back 1 year; carried forward 20 years
general business credit is composed of the:
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
-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%
-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
-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%
-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
which credit can result in a refund even if an individual had no income tax liability
earned income 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.
-adjusted gross
-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
-deemed paid by the parent
can an taxpayer claim both a hope scholarship credit and a 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
-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...
form 1040 must be filed if gross income is at least _____
1. single
2. married filing separately
3. self employed
4. single over 65 & blind
1. 8200
2. 3200
3. 400
4. 9450
fees rec'd for jury duty rep compensation for services and must be included where?
gross income. 1040 pg1 - taxable income
an interest forfeiture penalty for making an early w/d from a certificate of deposit is/is not deductible?
is deductible on pg 1 of 1040
can a cash-basis taxpayer deduct write offs of uncollectible accounts receivable
no. a/r resulting from services rendered by a cash basis tax payer have a zero basis
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)
not deductible personal expense
losses sustained from a nonbusiness (personal) bad debt is classified as....
a short-term capital loss - deductible on sch d - capital gains & losses
which schedule is used for rental income & expenses
schedule e - supplemental income and loss
which schedule is used for income or loss from royalties, partnerships, S corp's, estates and trusts
schedule e - supplemental income and loss
where is personal casualty loss deductible?
schedule a - itemized deductions subject to a threshold of $100 and an additional threshold of 10% of AGI
list which taxes are not deductible in computing an individuals federal income tax....
state inheritance taxes paid, federal estate and gift taxes, federal income taxes, social security and other employment taxes paid by an employee
is the self employment tax subject to gross self employment income or net earnings from self employment?
net earnings from self employment
is personal insurance (life, nonbusiness personal property) deductible?
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
investment interest expense is deductible where?
schedule e - supplemental income and loss
charitable contributions in excess of applicable percentage limitations can be carried...
forward for up to 5 tax years
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
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 ______.
-small retailer/wholesaler
-$10 million