35 - Individual Taxation 2 Flashcards
Are interest and dividends active or passive income?
Neither. They are portfolio income.
What is (are) the depreciation convention(s) for personal property?
Mid-year/Mid-quarter
When is the mid-quarter convention used?
For depreciation when 40% or more of all purchases occur in 4th quarter.
What depreciation convention is used for real property?
Mid-month
What depreciation life and convention are used for leasehold improvements?
15 year straight line (S/L)
What amount of business start-up costs can be deducted? How is it expensed?
Up to $5,000
Amortized over 180 months
Reduced dollar-for-dollar by amount over $50,000
How are medical expenses deducted on a 1040?
On Schedule A:
Amounts in excess of 10% of AGI may be deducted
Which personal insurance premiums are not deductible as medical expenses on Schedule A?
Accident or disability insurance premiums are not deductible.
Under what circumstances can medical expenses paid on behalf of another be deducted on someone’s Schedule A?
Must be a citizen of North America
Must 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.
Which foreign taxes are deductible?
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.
How is net investment income calculated, for the purpose of deducting excess investment interest expense?
Gross investment income - investment expense in excess of 2% of AGI = net investment income
Investment interest expense in excess of net investment income is deductible.
What investment interest is never deductible?
Investment interest expense on tax-free securities is not deductible.
When are mortgage points deductible and how are they deducted?
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.
How are charitable contributions of LTCG property and property related to a charity’s function deducted?
Deducted at fair market value (FMV), up to 30% of AGI
How are charitable donations for STCG property and property not related to the charity’s function deducted on Schedule A?
Deduction is taken for adjusted basis in the property, up to 50% of AGI.
