Federal Individual Taxation Flashcards
individual’s suspended passive activity losses
Passive activity losses not deductible nor carried back in the current year can only be carried forward, until utilized
Beginning in 2005, the term “dependent” means:
a qualifying child or a qualifying relative
Losses from gambling may be deducted as itemized deductions to the extent of
gambling winnings
Gambling winnings must be shown at the
gross amount
Doyle won $3,000 from gambling, how much of his grambling losses can be deducted:
3,000
Interest income from municipal bonds is
excluded from gross income
Wages paid for domestic services are subject to Social Security and Medicare taxes if
they exceed $1,800 in a calendar year to one employee
If the second residence had been rented part of the year, the utilities and insurance may have been deductible, subject to the
vacation home rules.
retirement plan rollovers is taxable when
Rollover of a traditional IRA into a Roth IRA
the contribution to a traditional IRA is
deductible
withdrawals from a Roth IRA are
tax-free,
Commercial buildings placed in service after May 12, 1993, are depreciated over 39 years using
straight-line depreciation and mid-month convention
is an allocation process to orderly reduce bond premium, bond discount, and bond issue costs by allocating the cost of an intangible asset to expense over time.
Amortization
Smith is a member of the U.S. Armed Forces (an enlisted person) and is assigned to service in Iraq (a designated combat zone) for a period that begins on January 20 of the current year and ends on May 5 of the current year. How many months of military pay may Smith exclude from gross income for the current year?
5 months
How is the depreciation deduction of nonresidential real property, placed in service in this year, determined for regular tax purposes using MACRS?
Straight-line method over 39 years
What is the tax treatment of net losses in excess of the at-risk amount for an activity?
Any losses in excess of the at-risk amount are suspended and carried forward without expiration and are deductible against income in future years from that activity.
An individual starts paying student loan interest in the current year. How many years may the individual deduct a portion of the student loan interest?
Duration of time that interest is paid
A taxpayer reports a deduction for a long-term capital loss on his tax return for the current tax year. Match the phrase that best describes the status for alternative minimum tax (AMT) computations of this tax item.
Not a preference or an adjustment for the AMT
Tax-exempt interest paid on private activity bonds issued after August 7, 1986, generally is a
tax preference which is an exclusion item.
When a corporation has a group term life insurance plan available for employees, the following is considered to be discriminatory:
the plan will offer $50,000 of group term life insurance to officers and $10,000 of group-term life insurance to all nonofficers.
Credit card interest is considered personal interest and is NOT
deductible on an individual’s tax return.
Mike and Jane Lewis, a married couple filing a joint return, paid funeral expenses of $10,000 for their dependent child in 2013. Select the appropriate tax treatment of the funeral expenses.
Not deductible on Form 1040
Funeral expenses are not deductible on
an individual’s income tax return.
Which phrase best describes the status for alternative minimum tax (AMT) computations if a difference between profits on construction contracts computed under the percentage-of-completion method and completed-contract method for a contractor who uses the completed-contract method for regular tax exists?
An AMT preference or adjustment which is a deferral item for the AMT
Alimony received should be included when determining
adjusted gross income
compensation for injuries or sickness, rental value of parsonages, and tuition scholarship are excluded from
AGI
A taxpayer reports a deduction for depreciation of business assets under the MACRS depreciation system on his tax return for the current tax year. Match the phrase that best describes the status for alternative minimum tax (AMT) computations of this tax item.
An AMT preference or adjustment which is a deferral item for the AMT
Donations must be made to a qualifying organization to be
deductible for income taxes.
Donation to an individual is NOT
Deductible
a church or conventions or associations of churches charitable deduction is limited to
limited to 50% of an individual’s adjusted gross income.
Security deposits by a lessee for performance of the terms of a lease are not income to the lessor if
the deposits are returnable to the lessee
A taxpayer’s spouse dies in August of the current year. Which of the following is the taxpayer’s filing status for the current year?
Married filing jointly
John Larken is a single taxpayer. He sells the home he has owned and lived in for the past 31 years for a gain of $200,000 on October 5, 2013. How much of this gain may he exclude?
$200,000
