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Regulation > Federal Taxation of Individuals > Flashcards

Federal Taxation of Individuals Flashcards

1
Q

How is the interest on series EE bonds treated when calculating taxable income?

A

Interest is excluded if used for higher education

The owner of the bonds but be at least 24 years old

Interest is excluded in proportion to education expense (expense/total bond * interest)

The exclusion is phased out when modified AGI exceeds $79,700 (single), $119,550 (MFJ). Phaseout is $15,000 ($30,000)

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2
Q

How is municipal interest treated when calculating taxable income?

A

excluded

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3
Q

What items are included in gross income?

A 
Wages
Alimony
Tip Income
Attorney fees and cost covered
Jury duty pay
unemployment compensation
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4
Q

What are the requirements in order for payments to be considered alimony?

A

1) required by decree
2) made in cash
3) paid to or on behalf of former spouse
4) terminate upon death of recipient

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5
Q

What items are excluded from gross income?

A 
Child support
Property transfers in divorce
Personal injuries
Prize and awards
Scholarships
Life Insurance proceeds
Gifts and inheritances
Forgiveness of Debt
Social Security benefits
Foster child payments
Welfare payments
Worker's compensation
Fringe benefits
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6
Q

What are the requirements for prizes and awards to be excluded?

A

1) selected without action
2) not required to perform a service
3) amount is paid directly to a tax exempt or governmental organization

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7
Q

What are the accounting methods used for individuals?

A

1) Taxpayer whose annual gross income < $1,000,000 = cash method
2) Taxpayer whose annual gross income > $1,000,000 can use cash method if primary business is service

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8
Q

What is the limitations on the exclusion of Life Insurance Premiums?

A

Limited to $50,000

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9
Q

How much can be deducted for health insurance premiums?

A

100% for self coverage

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10
Q

When is retirement savings subject to tax?

A

When withdrawn

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11
Q

What are the contributions limit (deductible) for IRA’s?

A

$5,500 ($11,000)

and additional $1,000 catch-up contribution for taxpayers over 50

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12
Q

What are the two types of deductions?

A

Deductions for AGI - subtracting deductions from Gross Income
Deductions from AGI

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13
Q

What items are deducted for AGI?

A

1) Business expense associated with trade
2) Alimony payments
3) 1/2 self employment tax
4) medical insurance premium
5) Moving expenses
6) IRA contributions

7) Interest on student loans
8) Contributions to health and saving account
9) Repayment for jury duty
10) forfeited interest

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14
Q

What are the requirements for moving expense to be deductible?

A

The new job location 50 miles or greater

Taxpayer must work at new job for 39 weeks

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15
Q

How much is deductible for student loan interest?

A

$2,500 per year

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16
Q

What is the limit on contributions for Health and Savings Account?

A

$3,450 ($6,900)

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17
Q

What are the types of personal itemized deductions?

A

1) Medical expense
2) Interest
3) Taxes
4) Charitable contributions
5) Casualty losses
6) Miscellaneous deductions

18
Q

What are the standard deductions that may be claimed?

A

Single & Married Filing Separate - $6,500

Head of Household - $9,550

MFJ - $13,000

19
Q

When can medical expenses be deducted?

A

When expenses exceed 10% of AGI

20
Q

What are the deduction requirements for LTCG property donated?

A

FMV is deductible

Limited to 30% of AGI

21
Q

What is the maximum amount that can be deducted for charitable contributions?

A

50% of AGI

22
Q

Charitable contributions in excess of limit can be carried forward how many years?

A

5 years

23
Q

How to calculate the amount of casualty loss?

A

Lower of decline in FMV or AB of property - insurance reimbursements - $100 per casualty - 10% of AGI

24
Q

What are the types of miscellaneous deductions subject to 2% floor?

A

1) Employee business expenses not reimbursed under an accountable plan
2) Investment expenses
3) Tax return preparation expense
4) Home office expenses
5) Hobby expenses

25
Q

What percentage is itemized deductions reduced by if it exceeds AGI limits?

A

3% of AGI in excess of threshold

26
Q

What are the deductions for employee business expense for meals and entertainment?

A

50%

27
Q

How much can be deducted for Hobby Losses?

A

to extent of revenue

28
Q

How to determine Vacation Home Expenses?

A

a. rented < 15 days = personal residence (excluded)
b. rented >15 days and not used for personal use more than the greater of 1) 14 days or 10% of total days rented = rental property
c. rented > 15 days is used for personal and rental
d. deductions are limited to rental income

29
Q

What amount is personal exemption?

A

$4,050

30
Q

What are the requirements for a qualifying child?

A

1) Relationship test - natural child, step child, foster child, sibling, step sibling
2) Residence test - more than 1/2 year
3) Age test - under 19 at end of tax year, or under 24 if full time student
4) Citizenship test
5) Not self-supporting test - <50%

31
Q

What are the requirements for a qualifying relative?

A

1) Support test - more than 50%
2) Gross income test - < than exemption

3)Citizenship

32
Q

What are the phaseout amount for personal exemptions?

A

2 % of total exemptions for each $2,500 increment over AGI

33
Q

What is the Child Credit Amount?

A

$1,000 per qualifying child under age 17. Credit is phased out for married taxpayers with AGI > $110,000 ($75,000). Reduced by $50 for each $1,000 that exceeds AGI

34
Q

What is the American Opportunity Tax Credit?

A

$2,500 for each eligible student (1 -4 years post secondary education)

35
Q

What is the Lifetime Learning Credit?

A

$2,000. Expenses are limited to $10,000 per year

36
Q

What is the child and dependent care credit?

A

1) (20-30%)
2) 13 years or younger
earned income of lowest paid spouse
3) $3,000 ($6,000 2 or more)
4) 35% if AGI< $15,000
5) Reduced by 1% for each $2,000 in excess of AGI (not less than 20%)

37
Q

How much expenses is allowed for the adoption credit?

A

$13,840

38
Q

What is the annual exclusion for gifts?

A

$15,000 per donee

39
Q

What is the unified credit for transfers of estate and gifts?

A

$5,600,000

40
Q

What is the foreign tax credit limit?

A

Lower of:

1) taxes paid; or
2) tax credit * foreign source/ WW income

41
Q

What is the maximum of Social Security benefits that can be included in gross income?

A

85% of benefits

Regulation (7 decks)

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