Federal Income Tax

Question 1

Gross income:

Answer 1

any economic benefit or any clearly realized accession to your wealth.

Question 2

Alimony Rule:

Answer 2

Unless otherwise provided in the written agreement, alimony is taxable to the receiving spouse and deductible to the paying spouse.

Question 3

4 Elements for alimony

Answer 3

1. In writing
2. Cannot be members of same household
3. Will cease at or before death
4. Must be cash.

Question 4

Child support:

Answer 4

Is not taxable to the receiving spouse and not deductible to paying spouse.

Question 5

General rule: Inheritances

Answer 5

Gross income does NOT include amounts received by bequest, devise, or inheritance.

Look for belated compensation of work - that is not really a gift.

Question 6

General rule: Gifts

Answer 6

Gross income does NOT include amounts received by gift.

Question 7

Definition of gifts

Answer 7

A transfer made out of detached and disinterested generosity.

Question 8

Divorce property settlements

Answer 8

A transfer of property between spouses that is INCIDENT to the divorce IS NOT A TAXABLE EVENT TO EITHER PARTY

The spouse receiving the property will have the same basis that the donor spouse had. (Substituted basis.)

Question 9

Basis in gift property - gains

Answer 9

Applies to non spousal gifts: The recepient of the gift takes the donor’s basis.

Question 10

Basis in inherited property

Answer 10

the FMV of the property at the date of the decedent’s death. (or upon executioner’s election, the date 6 months following decedent’s death.

Question 11

Sale of a principal residence

Answer 11

Up to $250k ($500k joint) of gain from the sale of principal residence can be excluded if the property has been used and owned as the taxpayer’s principal residence for periods aggregating two years during the five year period ending on the date of the sale.