Gross Income Inclusions Flashcards
Income (broadly conceived)
- exclusions from gross income =
Gross Income
Gross income
less deductions for adjusted gross income =
AGI
AGI
less the greater of: _____________ or ____________
=Taxable Income
total itemized deductions or standard deduction
When a taxable sale or exchange occurs, the seller is permitted to recover _______________ in the property before gain or loss is recognized.
basis (or adjusted basis)
This doctrine stipulates that a transaction will not be effective for income tax purposes unless it is intended to achieve a genuine business purpose other than tax avoidance.
Business purpose doctrine
This doctrine allows the IRS to look through the legal formalities of a transaction to determine its actual economic substance. If the substance differs from the form, the IRS will determine the tax consequences of the transaction on the basis of its reality rather than its illusion.
Substance-over-form
This doctrine is generally well known under the colloquial term the fruit and the tree. According to a famous U.S. Supreme Court case, a taxpayer who earns income and is the source of that income (i.e., the tree) cannot assign that income (i.e., the fruit) to someone else for income tax purposes
Assignment of income doctrine
This rule converts otherwise nontaxable receipts into taxable income. The most common example is when a taxpayer is reimbursed in a subsequent year, for medical expenses paid, and deducted in a previous year
Tax benefit rule/doctrine
If there is no substantial limitation or restriction on a taxpayer’s right to bring the funds under personal control, the income is taxed to a taxpayer as though it had actually been received.
Constructive receipt doctrine
taxable income that has not yet been received in cash
Phantom income
With phantom income, the investor’s _________ is increased each year by the amount of interest income required to be recognized on the taxpayer’s income tax return.
basis
Partnerships and S corporations are ____________ entities
pass-through
Each partner receives a____ indicating his share of the partnership income.
Income from a general partnership on the K-1 is typically ______________ income
Income from a limited partnership is ____________ income for the limited partner
Income from partnerships is taxed ___________ at their own individual rates
- K-1
- self-employment
- passive activity
- to the partners
The ____________, rather than the corporation, pay the tax on an S cor-poration’s income
shareholders
Each shareholder receives a _____ indicating her share of the S corporation’s income and it is considered _________ income, not self-employment income.
- K-1
- passive activity
Income generated by assets of an estate that is distributed from the estate to the beneficiaries is generally taxable
income in respect of a decedent (IRD)
If the interest charged on the loan is less than the federal rate, the ___________ is the difference in interest determined using the federal rate and the interest determined using the actual rate.
imputed interest
No interest is imputed on total outstanding gift loans in the aggregate of _________ or less between individuals, unless the proceeds are used to purchase income-producing property.
$10,000
On loans between individuals greater than $_______and less than or equal to $________, the imputed interest cannot exceed the borrower’s _______________ (from all sources) for the year.
- 10,000
- 100,000
- investment income
if the borrower’s investment income for the year does not exceed $__________, no interest is imputed on loans of $100,000 or less.
1,000
As the value of the annuity increases, the owner or annuitant does not report any income because it has not been______________________
constructively received
annuities: Withdrawals (including loans) on contracts issued after August 13, 1982, are included in gross income up to total earnings (________ basis recovery).
LIFO
Collections before the annuity start date on contracts issued on August 13, 1982, or earlier are subject to_________ tax treatment so that adjusted tax basis is received first and is not taxable.
FIFO
fixed annuity exclusion amount = ________/_________ x _________
investment basis / expected return x annuity payment
variable annuity exclusion amount = ___________ / ____________
investment basis / life expectancy factor
Payments beyond projected life expectancy are _____________.
Fully taxable
If the annuitant dies before life expectancy and has not completely recovered the basis, the unrecovered basis is _________ on the annuitant’s final income tax return as a ____________________________
- deductible
- miscellaneous itemized deduction.
Employees can exclude premiums paid by their employers on the first ___________ of group term life insurance.
Partners, proprietors, and greater than ___% S corporation owners are ineligible for the exclusion.
- $50,000
- 2%
As much as ___% of Social Security benefits may be included in gross income if provisional income exceeds
-44k MFJ
-$0 for married taxpayers who did not live apart the entire year and file separately, or
-34k for all other filing statuses
- 85%
Up to ___% of Social Security benefits are subject to taxation if the taxpayer’s provisional income exceeds
a. $32,000 for MFJ,
b. $0 for married taxpayers who did not live apart the entire year and file separately, or
c. $25,000 for all other filing statuses .
50%
Provisional income is _____ from all sources plus ___% of Social Security benefits received, foreign income previously excluded, and any tax-exempt interest income.
- AGI
- 50%
FICA consists of the _____________ and the ____________.
- social security tax
- medicare tax
For OASDI, a tax rate of _____% is applied to wages for the employer share, and _____% for the employee share, with a base cap of ____________ also called the Social Security taxable wage base (TWB) in 2023 (indexed to changes in average wages).
- 6.2%
- 6.2%
- $160,200
Self-employed individuals pay a total OASDI rate of ____% on net income.
12.4%
The medicare tax has _____________ for earnings.
The HI tax is _____% for both employee and employer.
SE TP’s pay ______% on net income
- no ceiling
- 1.45%
- 2.9%
Total self-employment taxes are _________%.
15.3% (12.4% + 2.9%).
When calculating self-employment tax, the taxpayer reduces net earnings from self-employment by _____
7.65%
(or another method is to multiply the net self-employment earnings by 92.35%).
The Additional Medicare Tax of _____% also applies to self-employed individuals who have a combined income greater than $200,000 if single, and $_________if MFJ
- 0.9%
- 250,000
The 0.9% Additional Medicare Tax is imposed on the earnings __________ of the thresholds.
in excess
A net investment income tax of ____% is imposed on unearned (investment) income of certain higher-income taxpayers
3.8%
