Definitions

Question 1

What is the definition of gross income?

Answer 1

All income from whatever sourced derived.

Question 2

3 Requirements that must be met to records Gross Income

RAD

Answer 2

Realization
Accession to wealth
Dominion, Control

Question 3

Accession of wealth defined

Answer 3

Tax payers net worth increased. Asset-liabilities. Loans don’t count.

Question 4

Realization is when

Answer 4

There’s a trigerring effent that requires you to record income.

Question 5

Is a stock increasing in valuation a realization of wealth

Answer 5

No because although it increased, you didn’t collect the money. Only when you sell or exchange the stock.

Question 6

Dominion and Control

Answer 6

Control the income to be received with no strings attached.

Question 7

Is a security deposit gross income?

Answer 7

No, because you don’t have control of the money. Assets and a liability increases and it doesn’t increase your net worth.

Question 8

Common Types of Income is defined in what section

Answer 8

61A

Question 9

Examples of gross income

Answer 9

Compensation for services
Gross income derived from business
gains from property
interest
rent
royalties
dividends
alimony, divorce before 2019
Annuities
Pensions
Income from discharge of debt
Share of partnership income
Income in respect of decedent
Income from interest in estate trust

Question 10

Constructive Receipt - 4 Requirements

Answer 10

credited to his or her account, set apart for him or her, or otherwise made available so that (s)he may draw upon it at any time, or so that (s)he could have drawn upon it during the taxable year if notice of intention to withdraw had been given.

Question 11

When is a check included in income?

Answer 11

When received, whether or not cashed.

Question 12

T/F - Constructive receipt is only use for the cash basis method

Answer 12

True

Question 13

Claim of Right Doctrine Definition

Answer 13

taxpayer receiving payments under a claim of right and without restrictions on its use or disposition includes the payment in income in the year received even though the right to retain the payment is not yet fixed or the taxpayer may later be required to return it.

Question 14

Under the claim of right doctrine, if you get a bonus and you have to pay it back if you leave the company early, do you have to include it in income?

Answer 14

Yes

Question 15

If payment is paid in property, what is included in gross income?

Answer 15

The FMV of the property.

Question 16

What is your basis in the property received to pay for your services?

Answer 16

The basis is the amount included in income.

Question 17

If you agreed on a price for services and afterwards you decide to accept a piece of property for the services, would income be the negotiated service price or the FMV of the property?

Answer 17

The negotiated service price would be considered income.

Question 18

For tipped food service employees, what is the amount of taxable income related to tips?

Answer 18

(Total food / drinks sales * 8%) - tips received = Taxable income tips

Question 19

Who will received a 1099-K?

Answer 19

1) Payment cards - debit, credit, store valued cards

2) Third party networks when total transactions exceed both $20k and 200 transactions.

Question 20

T/F Prepayments are excluded from gross income until servive.

Answer 20

False, they are included with an exception of the purchase is for merchandise. These are included in gross income when the item ships.

Question 21

Bartered Service and Goods are included in gross income at..

Answer 21

The FMV of the goods

Question 22

What is the assignment of income doctrine?

Answer 22

Gross income includes income attributable to a person even though the income is received by other persons. This doctrine imposes the tax on income on those who earn it, produce the right to receive it, enjoy the benefit of it when paid, or control property that is its source.

Question 23

If you direct your commission for a service you perform to be paid to another party, who pays the tax?

Answer 23

The person who performed the service.

Question 24

If you have a bond that earns interest, and you assign the interest to be paid to your daughter, who pays the tax?

Answer 24

The bondholder.

Question 25

How do you assign an asset to another party?

Answer 25

transfer of property be complete and bona fide, with no control retained over either the property or the income it produces, and that the transfer take place before the income is actually earned

Question 26

Are royalties gross income or a return of capital and capital income?

Answer 26

Gross income

Question 27

Cash or the FMV of property received in exchanged for using personal property is gross income on Schedule C, Line 8 of 1040 or Schedule E?

Answer 27

Schedule C. Schedule E is for rental property and real estate.

Its on Line 8 of 1040, if you aren’t in the business of renting property as a business.

Question 28

Where are deductions for the expense of rental property?

Answer 28

Schedule C if for a business or line 22 if you rent it personally.

Question 29

If you rental your property periodically and not-for-profit, , how much can you deduct?

Answer 29

You can deduct up to rental income.

Question 30

How long can you carry losses for a not for profit rental activity?

Answer 30

You can’t.

Question 31

Not for profit rental income is reported on…?

Answer 31

1040 and 1040 NR.

Question 32

If you rent property as a business, it is classified as a not-for-profit rental if you don’t make an income during what period?

Answer 32

3 out of 5 years need to show an income to be a rental business.