Deck 5

Question 1

The taxpayer always claims the standard deduction. What does this mean in reference to state taxes?

Answer 1

The state tax was not deducted in the year it was paid. The state tax refund would therefore not be taxable and would not be included in gross income

Question 2

How are suspected losses allocated?

Answer 2

Losses can be carried forward, not back, until utilized. The losses should be allocated to the two activities with passive losses in the ratio of their losses to total losses

Question 3

Solvency is based on what?

Answer 3

FMV of all assets less the value of all liabilities (doesn’t include non dischargeable liabilities)

Question 4

How much is taxable for payments made by an employer on behalf of an employee for an employee’s educational expenses?

Answer 4

Up to $5250 is non taxable and excluded from gross income; any amount above that is taxable

Question 5

What is the tax rule for a traditional non-deductible IRA?

Answer 5

Partially taxable; the principal is non-taxable, the accumulated earnings on the principal are taxable

Question 6

Requirements of an ISO

Answer 6

The option price can not be less than the FMV of the stock on the date of grant, The stock must be held for at least 2 years from the date and at least one year from the exercise date, can not own more than 10%

Question 7

Requirements of an ESPP

Answer 7

Can not own more than 5%, option price can’t be less than the lesser of 85% of the stock price when granted or exercised

Question 8

Form 1040EZ does not allow:

Answer 8

Itemized deductions; only allows standard deduction

Question 9

How much is taxable for meals?

Answer 9

50% of meals

Question 10

Are FICA taxes excluded or included for tax purposes?

Answer 10

Excluded

Question 11

Are life insurance benefits taxable or nontaxable?

Answer 11

Not taxable and excluded from gross income

Question 12

Roth IRA contributions

Answer 12

Post tax, earnings are also tax free, excluded from gross income

Question 13

Employer matching contribution to 401(k) plan (taxable or no)

Answer 13

Not taxable so excluded from gross income, distribution is taxable though

Question 14

Gift to minors act

Answer 14

Income is not included in gross income if it is below $1000 for a minor under 18 years old

Question 15

Rule for nonaccountable plan

Answer 15

any amounts received by an employee from the employer must be reported by the employer as part of wages on the employee’s W-2 for the year

Question 16

What amount is deducted for charitable contributions?

Answer 16

Deduct the FMV if the good has been held for one year

Question 17

Limit for charitable contributions for appreciated property?

Answer 17

30% of AGI

Question 18

How much self employment tax is deductible:

Answer 18

One-half of the self employment tax is deductible to arrive at AGI

Question 19

Which expense, both incurred and paid in the same year, can be claimed as an itemized deduction subject to the two percent-of-adjusted-gross-income floor?

Answer 19

Employee business expenses, including unreimbursed car expense