Individual Taxation

Front 1

Under what accounting basis are individual tax returns prepared?

Back 1

Cash Basis. Note: This basis is NOT allowed for Corporations, Partnerships with a C-Corp partner, or for inventories.

Hint 1

Individual Taxation

Front 2

What are the deductions to arrive at Adjusted Gross Income (AGI) for individuals?

Back 2

*MSA/HSA contributions*Investment penalties for early withdrawal*Self-employed medical insurance premiums*Self-Employment Tax (approx. 50%)*IRA Contributions*Student loan interest (can't be another taxpayer's dependent)*Moving expenses*Alimony*Attorney fees in discrimination lawsuit

Hint 2

Individual Taxation

Front 3

Which items can be carried over to future years on an individual tax return?

Back 3

Investment interest expense in excess of investment incomeCharitable contributionsExcess Section 179Capital lossesAMT PaidPassive Activity Losses

Hint 3

Individual Taxation

Front 4

Characterize the following carryover: Passive Activity Loss

Back 4

No carrybackCan carry forward indefinitely

Hint 4

Individual Taxation

Front 5

How is excess 179 expense carried forward?

Back 5

Carry forward to next year.Use in any year is limited to taxable income.

Hint 5

Individual Taxation

Front 6

How long can investment interest expense in excess of investment income be carried forward?

Back 6

Indefinitely.

Hint 6

Individual Taxation

Front 7

How long is the carry forward for charitable contributions?

Back 7

Can be carried forward 5 years.

Hint 7

Individual Taxation

Front 8

How long is AMT paid carried forward, and how is it applied?

Back 8

It can be carried forward indefinitely.It may be applied against future *regular* income tax, but not against future AMT tax liability.

Hint 8

Individual Taxation

Front 9

How are capital losses applied in individual taxes?

Back 9

$3,000 net capital loss can be taken in each year, the rest is carried forward indefinitely.The loss retains its character (STCL or LTCL).

Hint 9

Individual Taxation

Front 10

How does an individual capital loss carryover differ from a corporate capital loss carryover?

Back 10

Corporate capital loss carryovers may be carried back 3 years and forward 5 years. Individual capital losses are carried forward indefinitely.Individual capital loss carryovers retain their character (STCL or LTCL). Corporate loss carryovers are carried forward as STCL only.

Hint 10

Individual Taxation

Front 11

What ratio is applied to principle payments in an installment sale to determine the gain in a given year?

Back 11

Gross Profit / Contract Price

Hint 11

Individual Taxation

Front 12

What is the contract price in an installment sale for income tax purposes?

Back 12

Contract Price = Sales Price - Liability assumed by buyer

Hint 12

Individual Taxation

Front 13

On an individual return, regular mortgage interest on what loan amount is deductible?

Back 13

$1,000,000

Hint 13

Individual Taxation

Front 14

Interest on home equity loans up to what amount are deductible on an individual tax return?

Back 14

$100,000

Hint 14

Individual Taxation

Front 15

What business gift amounts are deductible on Schedule C of form 1040? What amount for service awards?

Back 15

$25 per person for giftsService awards up to $400

Hint 15

Individual Taxation

Front 16

What income can business losses offset on a 1040?

Back 16

They may only offset active business income.Note: W2 wages are considered active business income.

Hint 16

Individual Taxation

Front 17

What income can passive losses offset on a 1040?

Back 17

Only passive income such as rental income or limited partnership income.Note: Wages are ACTIVE (cannot be offset by passive) and Interest/Dividends are PORTFOLIO (cannot be offset by passive)

Hint 17

Individual Taxation

Front 18

Are interest and dividends active or passive income?

Back 18

Neither. They are portfolio income.

Hint 18

Individual Taxation

Front 19

What is (are) the depreciation convention(s) for personal property?

Back 19

Mid-year/Mid-quarter

Hint 19

Individual Taxation

Front 20

When is the mid-quarter convention used?

Back 20

For depreciation when 40% or more of all purchases occur in 4th quarter.

Hint 20

Individual Taxation

Front 21

What depreciation convention is used for real property?

Back 21

Mid-month

Hint 21

Individual Taxation

Front 22

What depreciation life and convention are used for leasehold improvements?

Back 22

15 year straight line (S/L)

Hint 22

Individual Taxation

Front 23

What amount of business start-up costs can be deducted? How is it expensed?

Back 23

Up to $5,000Amortized over 180 monthsReduced dollar-for-dollar by amount over $50,000

Hint 23

Individual Taxation

Front 24

How are medical expenses deducted on a 1040?

Back 24

On Schedule A: Amounts in excess of 10% of AGI may be deducted

Hint 24

Individual Taxation

Front 25

Which personal insurance premiums are not deductible as medical expenses on Schedule A?

Back 25

Accident or disability insurance premiums are not deductible.

Hint 25

Individual Taxation

Front 26

Under what circumstances can medical expenses paid on behalf of another be deducted on someone's Schedule A?

Back 26

Must be a citizen of North AmericaMust live with you, or if they do not, must be mother/father or a relative closer than a cousin.Benefactor must provide more than 50% support to the beneficiary.

Hint 26

Individual Taxation

Front 27

Which foreign taxes are deductible?

Back 27

Foreign INCOME and REAL ESTATE taxes are deductible.Foreign personal property taxes are NOT deductible. Foreign tax assessments are not deductible- they are added to the basis.

Hint 27

Individual Taxation

Front 28

How is net investment income calculated, for the purpose of deducting excess investment interest expense?

Back 28

Gross investment income - investment expense in excess of 2% of AGI = net investment incomeInvestment interest expense in excess of net investment income is deductible.

Hint 28

Individual Taxation

Front 29

What investment interest is never deductible?

Back 29

Investment interest expense on tax-free securities is not deductible.

Hint 29

Individual Taxation

Front 30

When are mortgage points deductible and how are they deducted?

Back 30

They are deductible if they represent prepaid interest on purchase of a new home or improving a home.Refinance points are amortized over the life of the mortgage.

Hint 30

Individual Taxation

Front 31

How are charitable contributions of LTCG property and property related to a charity's function deducted?

Back 31

Deducted at fair market value (FMV), up to 30% of AGI

Hint 31

Individual Taxation

Front 32

How are charitable donations for STCG property and property not related to the charity's function deducted on Schedule A?

Back 32

Deduction is taken for adjusted basis in the property, up to 50% of AGI.

Hint 32

Individual Taxation

Front 33

Does a casualty loss affect the basis of property?

Back 33

No. It decreases the fair market value (FMV) of the property.

Hint 33

Individual Taxation

Front 34

How is the deductible portion of a casualty loss calculated?

Back 34

Take the lower of either A) Decrease in FMV or B) Basis in property (call this number GROSS LOSS)GROSS LOSS - insurance proceeds received - $100 - 10% of AGI = Deductible casualty loss

Hint 34

Individual Taxation

Front 35

What are the miscellaneous deductions on Schedule A, and how are they deducted?

Back 35

Deductible in excess of 2% of AGIContinuing Education - if required to keep your jobBusiness travel50% Meals and entertainmentUnion DuesTax prep feesLegal fees to collect alimony Appraisal fees to value casualty loss of charitable contributions

Hint 35

Individual Taxation

Front 36

Which itemized deductions are not subject to phaseout based on income or other factors?

Back 36

MedicalCasualty GamblingInvestment Interest Expense

Hint 36

Individual Taxation

Front 37

Define qualifying child for most individual tax factors.

Back 37

Must be resident of North AmericaUnder age 19, or under age 24 if a student

Hint 37

Individual Taxation

Front 38

Define qualifying relative for most individual tax factors?

Back 38

Must be citizen of North AmericaMust live with you, unless mother/father or relative closer than a cousinYou must provide more than 50% support to the individual

Hint 38

Individual Taxation

Front 39

How is minor income taxed at a parent's rate calculated (AKA kiddie tax)?

Back 39

Child's unearned income - early withdrawal penalties- $1,000- Greater than $1,000 or child's itemized deduction related to unearned income= Amount taxed at parents' rate

Hint 39

Individual Taxation

Front 40

Can spouses married filing jointly use different accounting methods?

Back 40

Yes, if they each own a small business. All non-business income is cash basis.

Hint 40

Individual Taxation

Front 41

At what rate is self-employment tax assessed?

Back 41

15.3% of net earnings from self-employment(Note: executor of an estate is NOT self-employment income)

Hint 41

Individual Taxation

Front 42

What is a refundable tax credit? Which individual tax credits are most commonly refunded?

Back 42

A tax credit which takes the taxpayer's tax owed on the return below zero, resulting in a refund to the taxpayer.Earned Income Credit (EIC), American Opportunity Credit and the Additional Child Tax credit. Note: the REGULAR child tax credit is NOT refundable.

Hint 42

Individual Taxation

Front 43

How many education credits may be taken on a tax return?

Back 43

American Opportunity Credit - per studentLifetime Learning Credit - per taxpayerNote: The American Opportunity Credit is refundable.

Hint 43

Individual Taxation

Front 44

What estimated tax payments must be paid in by an individual taxpayer either via withholding or by quarterly tax payments?

Back 44

The lesser of:90% of current year's total tax100% of prior year's total tax110% of prior year's total tax (if AGI is $150,000 or more)

Hint 44

Individual Taxation

Front 45

Which farming costs related to land are deductible? Which aren't?

Back 45

Deductible: Costs incurred to PRESERVE soil/waterNon-deductible: Costs incurred to drain wetlands or prep for irrigation (i.e. improve land)

Hint 45

Individual Taxation

Front 46

Which depreciation table is used for personal tangible property related to farming?

Back 46

MACRS 150

Hint 46

Individual Taxation

Front 47

How long does the taxpayer have to petition the court for appeal after an audit?

Back 47

90 days

Hint 47

Individual Taxation

Front 48

If no petition to appeal is filed, how long does a taxpayer have to pay tax due after an audit?

Back 48

10 days

Hint 48

Individual Taxation

Front 49

What is the statute of limitations for a tax audit?

Back 49

3 years, generally6 years if 25% or more of gross income was omitted The clock starts on the LATER of the due date or the filing date of the return.There is NO STATUTE OF LIMITATIONS for either fraud or failure to file a required return.

Hint 49

Individual Taxation

Front 50

How is non-business bad debt deducted on a 1040?

Back 50

It is treated as a STCL

Hint 50

Individual Taxation

Front 51

How long does an individual taxpayer have to file a claim for refund?

Back 51

Refunds must be claimed within 3 years of the return due date or within 2 years of being paid, whichever is later.

Hint 51

Individual Taxation

Front 52

When are life insurance premiums of an employee includable in income?

Back 52

Premiums paid by an employer for coverage in excess of $50,000 per employee are includable in income.

Hint 52

Individual Taxation

Front 53

When are scholarships not taxable?

Back 53

When they are not in return for services rendered, ANDThe money is used *only* for tuition and books Note: Scholarships for room and board are includable in income.

Hint 53

Individual Taxation

Front 54

What interest income is tax free?

Back 54

State & municipal bond interestUS EE Savings Bond interest (note: HH bond interest is taxable)

Hint 54

Individual Taxation

Front 55

Which dividend income is tax free?

Back 55

S-corporation (actually distributions)Life insurance

Hint 55

Individual Taxation

Front 56

How much social security income can be taxed for individuals in higher income brackets?

Back 56

Up to 85%

Hint 56

Individual Taxation

Front 57

Is unemployment compensation taxable?

Back 57

Yes.

Hint 57

Individual Taxation

Front 58

Which damages awarded in lawsuits are taxable? Which are not?

Back 58

Payments made to make you whole are NOT taxable (i.e. to pay for losses of property, body parts or earning ability) Any payments for punitive damages ARE taxable.

Hint 58

Individual Taxation

Front 59

Are workman's compensation insurance benefits taxable?

Back 59

No - similar to an award for damage to make a person whole.

Hint 59

Individual Taxation

Front 60

Which of the following are taxable: Child Support, Divorce Property Settlements, Alimony

Back 60

Alimony IS taxable.Child support and divorce property settlements are NOT taxable.

Hint 60

Individual Taxation

Front 61

Adoption expenses - Are they deductible?

Back 61

NO, they are not deductible. However tax benefits are available through the adoption CREDIT.

Hint 61

Individual Taxation

Front 62

Describe alimony recapture.

Back 62

2nd Year: (3rd year - 2nd year - $15,000)1st Year:1st Year Alimony Paid- Avg alimony paid in 2nd & 3rd years- $15,000- Recapture from 2nd year=1st Year Alimony RecaptureTotal Recapture = 1st Year Recapture + 2nd YearRecapture

Hint 62

Individual Taxation

Front 63

How are Net Operating Losses (NOLs) utilized?

Back 63

Can be carried back 2 yearsIf any left, can be carried forward 20 years.

Hint 63

Individual Taxation

Front 64

Which IRA contributions are deductible?

Back 64

Traditional IRA = deductibleRoth IRA = not deductible

Hint 64

Individual Taxation

Front 65

When can a couple file married filing jointly?

Back 65

They must be married at the end of the year.If one spouse dies, they must be married at the end of the year.

Hint 65

Individual Taxation

Front 66

What are the requirements for filing as Head of Household?

Back 66

Must have a dependent childMust provide more than 50% of the child's supportMust live with them more than 50% of the year

Hint 66

Individual Taxation

Front 67

What are the requirements for filing as qualifying widower?

Back 67

Must have a dependent child.Essentially gets MFJ status for the year of death + 2 tax years

Hint 67

Individual Taxation