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Laura Tax > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

What taxpayers are not allowed the standard deduction?

A
  1. persons who itemize
  2. nonresident aliens
  3. individuals who file a short year return
  4. MFS whose spouse itemizes
  5. partnerships, estates, trusts
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2
Q

What is 2013 standard deduction?

A

$12,200 MFJ, QW ($1,200 65/blind)
$8,950 HH ($1,500 65/blind)
$6,100 Single, MFS ($1,200 65/blind)

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3
Q

What is the basic standard deduction for child under age 19 or student under 24 who can be claimed on another’s return?

A

Greater of:
$950 ($1,000 for 2013)
or earned income plus $300 up to standard deduftion

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4
Q

What are the basic itemized deductions?

A
  1. medical/dental
  2. taxes paid
  3. interest paid
  4. charitable contributions
  5. casualty / theft losses
  6. Other misc. deductions
  7. job expenses
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5
Q

What is included in deductible medical expenses?

A
  1. diagnosis, cure, mitigation, treatment or
    prevention of disease, purpose of affecting
    any structure or function of body
  2. transportation primarily for and essential
    to medical care
  3. medical insurance
  4. qualified l/t care premiums and services
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6
Q

When are expenses deductible as medical expenses when individual is in institution other than hospital?

A

If principal reason is need for and availability of the medical care furnished by the institution, and full costs of meals, lodging and other services necessary (incl. special schooling) for furnishing medical care are all deductible

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7
Q

What part of the cost of a permanent improvement deductible as a medical expense?

A

The excess of the cost of a permanent improvement over the increase in value of the property is a deductible medical expense

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8
Q

What travel is deductible for medical expense?

A
  1. amounts paid for transportation essential to
    medical care
  2. may choose between actual expenses and
    .23 per mile for 2012 (plus cost of tolls &
    parking
  3. expenses for lodging up to $50 per individual
    per night
  4. medical insurance
  5. self-employed health care above the line
    deduction
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9
Q

When is a state tax refund included in income?

A

the recovered amount is included in income to the extent total allowable itemized deductions exceed the standard deduction (for the same year

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10
Q

When are Ad Valorem taxes deductible?

A

only if the tax is:

  1. substantially in proportion to value of property
  2. imposed on an annual basis
  3. actually imposed
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11
Q

What are the two types of Qualified Residence interest and what are the limits?

A
  1. acquisition indebtedness on no more than $1
    million
  2. home equity indebtedness on less of no more
    than 100k or excess FMV over “first mortgage”
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12
Q

What is carryforward for excess contributions?

A

5 years

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13
Q

What are generally 50% limit organizations?

A
  1. Churches
  2. Educational organizations
  3. Hospitals and certain medical research orgs
  4. orgs for colleges
  5. US etc
  6. private operating foundations
  7. private nonoperating foundations that make
    qualifying distributions
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14
Q

When does a 30% limit apply?

A

gifts to all qualified orgs that are not 50%

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15
Q

When does a special 30% limit for capital gain property apply?

A

gifts of capital gain property to 50% org

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16
Q

When does a 20% limit apply?

A

gifts of capital gain property to non-50% limit

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17
Q

What is formula for non-business casualty and theft losses?

A

Loss $xxxxx
less insurance ($xxxxx)
less $100 deduct ($100)
less 10% AGI ($xxxxx

Total deduction

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18
Q

What are some “other misc deductions” not subject to 2% limit?

A
  1. amortizable premium on taxable bonds
  2. casualty/theft from income producing property
  3. federal estate tax on income for decedent
  4. gambling losses to extent of gambling income
  5. impairment-related work expenses for disabled
  6. repay of more than $3,000 under claim of right
  7. un-recovered investment in pension
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19
Q

How are un-reimbursed employee expenses treated?

A

itemized subject to 2%

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20
Q

What are some employee expenses?

A
  1. employee travel away from home
  2. transportation expenses for business
  3. outside salesperson expenses
  4. employee entertainment (50%)
  5. employee home office expenses
  6. uniforms (for work only)
  7. union dues and initiation fees
  8. prof. dues and memberships
  9. subscription to business journals
  10. job seeking expenses in same business
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21
Q

When is education expense deductible?

A

if incurred to maintain or improve skills that are required for current employment or if incurred to meet legal or employer requirements

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22
Q

What are a summary of itemized 2% deductions?

A

HUTIE

  1. hobby expenses
  2. unreimbursed employee expenses
  3. tax determination expenses
  4. investment expenses
  5. employee expenditures
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23
Q

What are a summary of 2% employee expenditures

A
  1. Home office
  2. union dues
  3. professional dues and membership
  4. uniforms
  5. job seeking expense
  6. entertainment expenses
  7. transportation expenses
  8. subscriptions business journals
  9. travel expenses
  10. outside salesperson expenses
  11. education expenses
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24
Q

How will unused foreign tax credit be used?

A

carryback 1 year, carryforward 10 years

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25
Q

For child and dependent care credit, how may the expenses be incurred?

A

when taxpayer:

  1. is employed
  2. actively seeking employment
26
Q

When is a taxpayer eligible for child dependent care credit?

A
  1. taxpayer is employed or actively seeking
    employment
  2. taxpayer provides more than half the cost of
    home for dependent under 13 or incapacitated
    spouse or dependent
27
Q

What are qualifying child care expenses?

A
  1. babysitting, housekeeping and nursing

2. qualified day care facilities

28
Q

Total child expenses cannot exceed the taxpayer’s earned income. (for married couple, smaller of the two income) What is the income consideration for a spouse who is a full time student or is unable to care for themselves?

A

$250 a month for one qualifying individual and $500 a month for two or more qualifying individuals

29
Q

What are the child and dependent care expense limitations?

A

$3,000 for one qualifying indiv and

$6,000 for two or more

30
Q

What is the credit for child and dependent care equal to?

A

35% of the child expenses. Rate reduced by 1% (not below 20%) for each $2,000 or part thereof by which AGI exceeds $15,000.

31
Q

What is the Lifetime Learning Credit?

A

20% of qualified tuition expenses. Max credit per year is $2,000 and limited to 20% of first $10,000

Both graduate and undergrad level courses

Available in years that American Opp. credit is not claimed.

32
Q

When does the Lifetime Learning Credit phase out?

A

For AGI between $52,000 and $62,000 for singles and between $104,000 and $124,000 on joint

33
Q

What are child tax credit qualifications?

A

qualifying child (child(step), sibling(step) or descendant of these, or eligible foster child who
1. US citizen or resident alien
2. for whom taxpayer may claim dependency
exemption
3. who is less than 17 years at close of year

credit allowed only for tax years consisting of 12 months

34
Q

When does child tax credit begin to phase out?

A

$75,000 single and HH
$110,000 MFJ
$55,000 MFS

Credit reduced by $50 for each $1,000 above MAGI

35
Q

What is eligibility for elderly or disabled credit?

A

Age 65, (or retired due to total and permanent disability) before end of tax year

36
Q

What is base amount of elderly or disabled credit?

A

15% multiplied by initial base

$5,000 single
$7,500 MFJ (both 65 or older)
$3,750 MFS

37
Q

What is the initial base amount of elderly or disabled credit reduce by?

A
  1. tax exempt social security
  2. pension or annuity excluded from GI
  3. disability income if under 65
  4. ONE-HALF excess AGI over:
    $7,500 single
    $10,000 MFJ
    $5,000 MFS
38
Q

What is the Work Opportunity Tax Credit?

A

Employers credit equal to 40% of first $6,000 for targeted groups who work at least 400 hours (reduced to 25% for employ of more than 120 hours but less than 400). $10,000 for LT family assistance recipients and $3,000 for qualified summer youth employees (minimum 120 hours). Second year credit for LT family recipients is 50% of first $10,000

39
Q

What are basic qualifications for Earned Income Credit (not including income thresholds)?

A

Taxpayer (and spouse if married and filing joint)
1. valid social security number
2. have earned income from employment,
self-employment, or another source
3. cannot use MFS filing status
4. must be US citizen, resident alien, etc
5. cannot be QC of another person
6. have AGI and earned income < thresholds
7. have investment income < $3,200

40
Q

If an individual does not have a QC, what are qualifications for Earned income credit (not including income thresholds)?

A
  1. principle residence in US > half year
  2. between 25 and 64
  3. not be a dependent of another
41
Q

What are the qualifications for a qualified child for earned income credit?

A
  1. Relationship - related by birth, adoption, foster or
    step
  2. Residency - taxpayer must provide principal
    place of abode > 1/2 year
  3. Age - under 19 close of year, 24 if student
    or be permanently disabled
42
Q

What are the maximum amounts of earned income credit?

A

QC applicable % min EI Max EIC
0 QC 7.65% $6,210 $475
1 QC 34% $9,320 $3,169
2 QC 40% $13,090 $5,236
3 + 45% $13,090 $5,891

43
Q

What is the EIC phaseout for individual filers?

A

QC applicable % beg phase compl phase
0 QC 7.65% $7,770 $13,980
1 QC 15.98% $17,090 $36,920
2 QC 21.06% $17,090 $41,952
3 + 21.06% $17,090 $45,060

44
Q

What is the EIC phaseout for joint filers?

A

QC applicable % beg phase compl phase
0 QC 7.65% $12,980 $19,190
1 QC 15.98% $22,300 $42,130
2 QC 21.06% $22,300 $47,162
3 + 21.06% $22,300 $50,270

45
Q

What is additional child tax credit?

A

up to less of 15% of earned income in excess of $3,000, or unclaimed portion of the nonrefundable child tax credit.

46
Q

What is American Opportunity Credit?

A

Max credit $2,500 per student per year for first four years of post secondary

  1. 100% of first $2,000
  2. 25% of second $2,000
47
Q

What are qualified expenses for American Opportunity Credit?

A

tuition, fees, course materials only

48
Q

What is the phase out for American Opportunity Credit

A

Single $80,000 - $90,000

MFJ $160,000 - $180,000

49
Q

How is the reduction in credit for American Opportunity Credit calculated

A

Reduction in credit = Amt of credit allowed x (AGI - $80,000 ($160,000 joint) / $10,000 (20,000 joint)

50
Q

What is amount for adoption credit?

A

Max credit $12,650 per QC. Phase out between $189,710 and $229,710. Unused credit carried forward up to 5 years

51
Q

What is MFJ AMT exemption amount for 2012?

A

$78,750 less 25% (AMTI-$150,000)

52
Q

What is MFS AMT exemption amount for 2012?

A

$39,375 less 25% (AMTI-$75,000)

53
Q

What is Single status AMT exemption amount for 2012?

A

$50,600 less 25% (AMTI-$112,500)

54
Q

What are the tax preference items for AMT?

A

add-back PPP
Private Activity Bonds
Percentage depletion
Pre-1987 accelerated depreciation

55
Q

What the adjustments for AMTI?

A 
PANIC TIMME!!!
P - passive activity loss
A - accelerated depreciation post 86
N - NOL
I - installment of dealer
C - contracts  - percentage com vs comp. contract
T - taxes
I - interest on equity loans
M - medical deductions over 10%
M - Misc deductions
E - exemptions and standard deduct
56
Q

For individuals, what is the basic NOL carryback (forward)?

A

First carried back 2 years, then forward up to 20 years. May elect to forgo carry back

57
Q

For individuals, what is the casualty NOL carryback (forward)?

A

May carry back 3 years

58
Q

What is the NOL calculation?

A 
(negative taxable income)
\+ (p/y NOL if applicable)
\+ personal exemptions
\+ excess non business deductions over non
   business income
\+ excess non business CL over CG
59
Q

What constitutes a taxpayer materially participating in an activity for PAL limitation?

A

One of the following:
1. participates more than 500 hours
2. taxpayer’s participation constitutes substantially
all of the participation in the activity.
3. participates more than 100 hours and exceeds
the participation of any other individual
4. materially participated in the activity for any
of the 5 of 10 preceding years before year
in question
5. materially participated in a personal service
activity for any 3 years preceding the year
in question
6. participates in the activity on a regular,
continuous, and substantial basis

60
Q

What is the criteria for a person to deduct up to $25,000 losses from the passive activity from other than passive income?

A
  1. actively participates in activity
  2. owns 10% or more of activity for entire year
  3. has MAGI of less than $150,000 (phaseout
    begins at $100,000. Reduced 50% over $100k
61
Q

When may a person avoid PAL on rental real estate?

A
  1. > 50% of personal services performed during the
    year are performed in real property
  2. performs >750 hours of service in the real
    property trade

Laura Tax (7 decks)

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