Gross Income Pt. 1 Flashcards
How much of group term life insurance is a nontaxable fringe benefit?
$50,000
What is a nonaccountable plan?
Employees don’t report expenses to their employer, so any money received by the employee from the employer for expenses must be included as income
When is a state tax refund not taxable?
When the taxpayer claims the standard deduction. This means there was no benefit received in the prior year (tax benefit rule)
What is the maximum deductible amount for a capital loss on an investment stock sale?
$3,000
Under the tax benefit rule, what happens when a taxpayer itemizes their deductions and receives a state tax refund the following year?
An itemized deduction recovered in the following year is included in income up to the amount that it was a benefit (ex. receive refund of $100 but only $80 exceeded the standard deduction, so $80 is included in income)
When does a taxpayer (cash or accrual) recognize the gain/loss on the sale of stocks/securities?
On the trade date
How are withdrawals from a traditional IRA taxed?
As regular income (a 10% penalty tax is added if the withdrawal is done before the taxpayer is 59.5, but some exceptions apply)
Exceptions that apply to early withdrawals from a traditional IRA to prevent the 10% penalty tax
HIM DEAD
Home buyer (first time) $10,000 max
Insurance (medical)
Medical expenses in excess of percentage of AGI floor
Disability
Education
Adoption or birth of child (made within one year from the date of birth or adoption) $5,000 max
Death
