Federal Taxation of Individuals - 15-25% Flashcards
A taxpayer provides services to a business, and bills $40,000. In lieu of receiving cash for the entire payment, the business exchanges ownership, and equipment for the services. How do you determine the taxable amount from the transaction?
The income realized by the TP from the services rendered equals the sum of the amount of cash received, and the MV of any property/ ownership received.
What 2 ways can bond premiums be amortized?
- Computed under the constant yield to maturity method.
2. Treated as an offset to the interest income on the bond.
What year did the divorce rules change?
Divorces prior to 2019 are subject to old tax rules.
What is the formula to calculate PI (provisional income fka MAGI)?
PI = AGI + tax exempt interest + PI% (SSB)
What are the base amount thresholds for determining SSB?
BA1 BA2
MFJ $32k $44k
MFS $0 $0
Other $25k $34k
What is the income limitation for the QBI deduction?
MFJ $340,100; $170,050 (MFS/ all others)
How do you determine the QBI deduction?
The QBI deduction cannot exceed the greater of:
- 50% of the TP share of W-2 wages paid by the business, or
- 25% of the TP share of the W-2 wages paid by the business, plus 2.5% of the adjusted basis of qualified property.
If the payment date of a dividend from a listed corporation stock is made on 12-30-01, but the dividend is not received in the mail until 1-2-02; what year is the dividend taxable?
Year 1
How do you calculate the basis for a Common Stock that yields a preferred stock as a dividend?
Determine the ratio of the CS to the total value (Add the FMV of the Common Stock and the Preferred Stock at the date of the dividend, then divide the total FMV by the CS) Multiply this ratio, by the cost basis. The remaining amount is the basis for the PS.
How do you determine the holding period preferred stock dividends?
The holding period of the PS begins when the CS was acquired.
What expenses qualify under a 529 educational savings plan, and what is the annual limit?
Tuition at elementary or secondary public, private, or religious schools.
Exclusions are limited to $10,000/ year.
What is the limit on deductions for the compensation with respect to a covered employee of a publicly traded corp?
$1M per employee.
What amount are you allowed to deduct for business interest expense?
Business interest expense is limited to 30% of the business’s adjusted taxable income.
What items may be deducted in the operation of business for the sale of illegal narcotic substances?
Cost of merchandise. No other business expenses may be deducted.
When are life insurance premiums deductible for a business?
Life insurance premiums are only deductible when the beneficiary is the insured employee, or their own beneficiary.
When are medical expenses paid by credit card deductible?
In the year the charge is made.
How do you calculate the amount of the deduction for charitable donations of property held for less than 1 year?
FMV less STCG
What is the percentage limitation on charitable donations?
Cash contributions up to 60% of AGI.
Non-cash contributions up to 50% of AGI.
Charitable contributions of capital gain property up to 30% of AGI
How do you calculate the casualty loss deduction?
Lower of decline in FMV or Adj Basis of property Less: Insurance proceeds Less: $100 per casualty Less: 10% of AGI thresshold = Deduction amount
What was the rule regarding NOLs?
Cannot be carried back, and can be carried forward indefinitely.
What is the max amount of business losses that a single individual can deduct in 2022?
$270,000
A corporation is required to use what method for deductions relating to bad debts?
A corporation is required to use the direct charge-off method rather than the reserve method.
How do you calculate the taxable amount of income from hobbies?
Sales are reported in gross income, and none of the expenses are allowed as a deduction.
What is the rule regarding rental real estate losses?
For active participation in the rental real estate activity up to $25,000 can be deducted. However, the deduction is reduced once MAGI exceeds $100,000 up to $150,000.
