35 - Individual Taxation 4 Flashcards
When are life insurance premiums of an employee includable in income?
Premiums paid by an employer for coverage in excess of $50,000 per employee are includable in income.
When are scholarships not taxable?
When they are not in return for services rendered,
AND
The money is used only for tuition and books
Note: Scholarships for room and board are includable in income.
What interest income is tax free?
State & municipal bond interest
US EE Savings Bond interest (note: HH bond interest is taxable)
Which dividend income is tax free?
S-corporation (actually distributions)
Life insurance
How much social security income can be taxed for individuals in higher income brackets?
Up to 85%
Is unemployment compensation taxable?
Yes.
Which damages awarded in lawsuits are taxable? Which are not?
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.
Are workman’s compensation insurance benefits taxable?
No - similar to an award for damage to make a person whole.
Which of the following are taxable: Child Support, Divorce Property Settlements, Alimony
Alimony IS taxable.
Child support and divorce property settlements are NOT taxable.
Adoption expenses - Are they deductible?
NO, they are not deductible. However tax benefits are available through the adoption CREDIT.
Describe alimony recapture.
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 Recapture
Total Recapture = 1st Year Recapture + 2nd Year
Recapture
How are Net Operating Losses (NOLs) utilized?
Can be carried back 2 years
If any left, can be carried forward 20 years.
Which IRA contributions are deductible?
Traditional IRA = deductible
Roth IRA = not deductible
When can a couple file married filing jointly?
They must be married at the end of the year.
If one spouse dies, they must be married at the end of the year.
What are the requirements for filing as Head of Household?
Must have a dependent child
Must provide more than 50% of the child’s support
Must live with them more than 50% of the year
