Deck 4 Flashcards

1
Q

Incentive stock option

A

No tax on grant date; taxable when exercised

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2
Q

The rule limiting the allowability of passive activity losses and credits applies to:

A

Personal service corporations

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3
Q

When should a cash basis taxpayer report gross income?

A

For the year in which income is either actually or constructively received

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4
Q

Are rental activities considered passive or non passive activities?

A

Passive

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5
Q

Mom and Pop Exception

A

Up to $25,000 of passive losses may be used as an offset against income from nonpassive sources. The $25,000 is reduced by 50% of the amount by which the individual’s modified AGI exceeds $100,000; must actively participate

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6
Q

Phase out rule for mom and pop exception

A

The $25,000 is completely phased out when the amount of AGI exceeds $150,000

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7
Q

A jury duty fee that is required to be remitted to the employer may be:

A

Deducted from Gross income to arrive at AGI

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8
Q

Interest income is fully taxable except for what kind of interest income:

A

Interest from state and local government bonds

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9
Q

In order for alimony income to count as income, the amount received for alimony must be greater than the amount received for:

A

Child support

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10
Q

Maximum deductible for a capital loss:

A

$3000

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11
Q

How is group term life insurance taxed?

A

First $50,000 is a nontaxable fringe benefit; any amount over that is taxable

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12
Q

Self-employment tax and self-employment health insurance expenses are:

A

Adjustments from gross income

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13
Q

What does filing 1040EZ mean?

A

Person did not itemize in the prior year and did not deduct any state income taxes last year

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14
Q

Tax benefit rule for refunds

A

Refund is not taxable if it was not deducted in the last tax year

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15
Q

Conditions that must be met for tax exemption of accumulated interest on EE bonds bought after 1989:

A

Purchaser of the bonds must be the sole owner of the bonds, must be over 24, must be used for higher education

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16
Q

Head of household

A

Not required to live with the person; must pay for more than half of the relatives support for the entire taxable year

17
Q

What is the maximum deductible for capital loss on investment stock sale?

A

$3,000

18
Q

“Kiddie tax”

A

amount of income for a child under 18 that is taxable at the parents’ maximum tax rate

19
Q

Calculation for kiddie tax

A

Child’s interest income - standard deduction (950) - standard deduction again = amount taxed to parents