Chapter 3-4 Flashcards
Charitable contributions subject to the 50% limit that are not fully deductible in the year made may be
Carried forward 5 years.
What are the tax preference items?
P - Percentage depletion P - Private activity bonds (except 2009-2010) I - IDC Q - QSBS - except 9/28/10-12/31/13 E - Excess depletion
Name common AMT adjustments
P - PAL
A - Accelerated depreciation post 86
N - NOL
I - Installment method by dealer for property sales
C - Contracts L/T (difference between percentage
completion & completed contract
T - Taxes (reduced by benefited refunds)
I - Interest (mortgage & recalc invest interest)
M - Medical expenses between 7.5% & 10%
M - Misc itemized deductions subject to 2%
E - Exemptions
What is the criteria that two individuals must pass in order to file MFJ?
On the last day of the tax year:
- Legally married and cohabiting as husband and
wife - Legally married and living apart but not separated
pursuant to a valid divorce decree or separation
agreement - Separated under a valid divorce decree that is not
yet final
What is the criteria for Qualifying Widower / Surviving Spouse and how long is it available?
Available two years following year of death.
1. The taxpayer was eligible to file a joint return with
his or her spouse for the year during which the
spouse died, whether or not a joint return was
filed
2. The taxpayer’s spouse died during either of the
two immediately preceding tax years.
3. The taxpayer has not remarried during the tax
year.
4. The taxpayer maintains a home for at least one
dependent who is a son, daughter, stepson or
stepdaughter, whether related by blood or
adoption. This dependent resides with the
taxpayer for the entire tax year except for
temporary absences.
What are the qualifications for Head of Household?
- is not married, is legally separated, or married
and lived apart from spouse for the last six
months. - is not a qualifying widower
- not a non resident alien
- maintains household for more than half the
taxable year for qualifying dependent.
What constitutes dependent for Head Household?
Over half the support for
Dependent son or daughter - Lives with taxpayer
Parents - not required to live with taxpayer
Relative - lives with taxpayer
What are the qualifications for exemptions for married couples?
Each spouse receives an exemption. If married filing separate, may claim spouse as exemption if:
1. spouse has no gross income AND
2 spouse not claimed as a dependent of another
What requirements must be met for exemption for qualifying child?
C - Close relative (child,step,sib,step,or descend)
A - Age limit - 19/24 college
R - Residency - same abode more than half year
E- Elim. GI test - less than $3,800 (not for child)
S - Support test changes - parent provides over half
of child’s support is eliminated.
What requirements must be met for exemption for qualifying relative?
SUPORT
S - Support test -over one-half of support. If multiple
support agreements, but none more than 50%,
qualifying relative who provided at least 10%
may claim
U - Under exemption amount - taxable income must
be under $3,800
P - Precludes dependent filing a joint return - unless
for a refund of all tax paid or withheld (tax = 0)
O - Only citizens of US, or residents of North
America
R - Relative - Any relative. Cousins and foster
parents must live with taxpayer the entire year
OR T - Taxpayer lives with individual the entire year
What is the formula for exemption phase out?
Reduce by 2% for each $2,500 exceeding threshold
What is threshold for phase out of exemptions?
Married Filing Jointly 300,000 Qualifying Widow(er) 300,000 Head of Household 275,000 Single 250,000 MFS 150,000
When does the accrual method report income?
- all events have occurred fixing right to receive
income - amount can be determined with reasonable
accuracy
Explain provisional income, base amount and adjusted base amount for social security?
- Provisional income - AGI + t/e income + 1/2 SS
benefits - Base amount - $25,000 for all except
MFJ - $32,000 - Adjusted base amount - $34,000 for all except
MFJ - $44,000
Explain basic Social Security taxability formula?
+ Provisional income
- Base amount
= excess PI.
If between $25,000 & $34,000 ($32,000 - $44,000 MFJ) smaller of 1/2 excess or 1/2 SS benefit.
What are the two types of reimbursed employee expenses, and state whether included in gross income?
- Nonaccountable - reimbursements/advances are
included in GI, and expenses deducted subject
to 2% - Accountable - only reimbursements in excess
of expenses must be included in GI
When may an award recipient exclude FMV of award?
- amount in recognition of religious, scientific,
charitable, or meritorious achievement - recipient selected without action on her part
- recipient isn’t conditioned on future services
- amount assigned to a t/e organization designated
by recipient
When employee achievement award (item of tangible personal property) is for safety achievement or length of service, What qualifies it for exclusion?
- Awards do not exceed $400 for nonqualified
plan or - Awards do not exceed $1,600 for qualified
plan (provided average award do not exceed
$400)
Cost of award, not FMV
What is difference between net income from self-employment vs. net earnings from self-employment?
Net income - .9235 = Net earnings
What is the increased medicare tax rate (beginning 2013)
An additional Medicare tax (employee increase) of .9%. The additional .9% applies to wages and self employment income that exceeds threshold.
MFJ - $250,000
MFS - $125,000
Others - $200,000
