Chapter 1 Flashcards
Requirements for qualifying widower
1) Tax payer’s spouse died in one of two previous years and TP hasn’t gotten remarried. 2) TP has dependent child. 3) Paid Half of dependent’s costs for WHOLE year 4) Dependent lived with TP for whole year 5) TP file joint return in year spouse died
Qualifying Widower & Head of Household
W - Widower needs to provide support for WHOLE YEAR
H - Head of House needs to provide for HALF YEAR
Can you claimed as Exemption (“CARES” Test)
C - Close: Relative
A - Age: Child under 19, or under 24 if in college
R - Resident:Child lives with TP for more than 1/2 the Year
E - Eliminate: Gross income test (See U) in “ SUPORT”
S - Suport: As long as child did not provide 1/2 of own support, TP can claim exemption
Can you claim as Exemption (“SUPORT” Test)
S - Did TP provide half of SUPPORT for the year. (Scholarships not included in support calc. SocSec income rec’d and spent are included in support calc). If multiple add up to 50%. Contributor must have paid at least 10%
U - Dependent’s Gross Taxable Income is UNDER Exemption amount ($3,950)
P - PRECLUDES dependent filing joint return
O - Dependent can be ONLY citizens of US, Canada, Mexico
R (or T)- RELATIVE of TP, doesn’t have to live with TP unless adopted
T (or R) - Lives with TP for whole year
What is included in gross income for group term life insurance?
The amount above the first $50,000 is included at the IRS established cost per $1000
What is the mom and pop real estate exception?
If you actively participate in passive activities the you qualify to deduct $25,000 of passive activity losses to your non passive activity income
What is the phase out for the mom and pop exception for real estate?
The $25,000 deductible is phased out when AGI ranges from $100,000 to $150,000. It is phased out completely at $150,000. For every $2000 of AGI, $1000 becomes non-deductible
For Early IRA distributions what is the penalty tax rate?
10%
What is the exception to the early IRA distribution penalty? (HIMDEAD)
H - 1st time home buyers I - insurance M - Medical expenses over 10% of AGI D - Diability E - education A - and D - Death
When is a gain recognized for a Qualified Stock Option?
It is recognized in the year of the sale.
No income or gain is recognized for the grant date
What income is included in year of grant for Non Qualified Stock Options?
The Ordinary Income is the Fair Market Value per share times the shares granted. NOT CAPITAL GAIN
How long must an Incentive Stock Option be held?
ISOs must be held for 2 years after the grant or 1 year after the exercise.
When can an employer recognize a deductible expense for NQSOs?
In the same year the employee recognizes ordinary income.
Does the recipient of an ISO have to recognize an expense?
NO, they do not.
What are the Qualified Stock Plans?
1) Incentive Stock Options (ISOs)
2) Employee Stock Purchase Plans (ESPPs)
