Income Tax

Question 1

Are Entertainment Expenses Deductible?

Answer 1

Entertainment Expenses are no longer deductible

Question 2

If a business has losses which entities should be Considered?

Answer 2

Risk-Free
- Sole Proprietorship
- Partnership
Risky
- S corp
-LLCs

Question 3

Public Charities Deduction Percentage

Answer 3

50% of AGI for Public Organizations
- Cash is limited to 60% of AGI
- LTCG property is limited to 30% of AGI

These are Limited to 50% of AGI but use the basis:
- Inventory/works of Art
STCG property
Unrelated use property

Question 4

Max Deductible allowed for Charitable Contributions

Answer 4

60% of AGI

Question 5

Private Charities Deduction Percentage

Answer 5

30% of AGI for Private Charities
30% of AGI for cash donations

Question 6

Risk-Free Entities

Answer 6

Risk-Free
- Sole Proprietorship
- Partnership

There is little to no liability either by nature of the business or due to adequate insurance

Question 7

Risky Entities

Answer 7

Risky
- S corp
-LLCs

Question 8

If a business is Profitable, which entities should they consider?

Answer 8

Profitable
- C Corps
- Personal Service Corporations

Question 9

Itemized Deductions

Answer 9

• Medical, Dental & Qualified LTC Expenses (7 1/2 of AGI)
• SALT and Sales tax (Limited )
• Personal Property Tax (Limited)
• Real Estate Taxes (Limited)
• Mortgage Insurance Qualified Resident (< $100k AGI
• Home Mortgage Interest
• Charitable Gifts
• Investment Interest
• Casualty Loss (Remember Equation and must be federally declared disaster area

Note: SALT sales, Real estate, and personal property taxes limited to $10k

Question 10

Tax Credits

Answer 10

Credit for Child and Dependent Care Expenses (Until age 13)
-$3k for one dependent, $6k for 2+ dependents

Child Tax Credit
- Phaseout at $200k for single, $400k for MFJ

Foreign Tax Credit

Retirement Savings Contributions Credit
- only for low-income households
- phased-out at $73k (MFJ)

Adoption Credit

Credit for the Elderly/Disabled

Earned Income Credit

Question 11

Adjustments For vs.- From AGI

Answer 11

Adjustments for AGI are above-the-line deductions, which are allowed no matter what

Adjustments from AGI are below-the-line adjustments which are only allowed if you itemize

Question 12

Tax Calculation for taxable income

Answer 12

Gross Income - Less Adjustments (above-the-line) for AGI = AGI

AGI - Less Deductions (below-the-line) from AGI= Taxable Income

Taxable income x Tax Rate= Taxable Calculation

Tax Calculation - credits plus other taxes = Tax Liability

Tax Liability - quarterly payments/withholdings = Net Tax Due or Refund

Question 13

What is Included in Gross Income?

Answer 13

• Ordinary dividends
• Taxable Interest
• Business Income & Losses
• Capital Gains & losses
• Real Estate
• Punitive Damages
• Wages, Salaries, Tips
• IRA Distributions
• Pension and Annuities
• Alimony Received if divorced before 2019
• Unemployment Income
• Taxable Social Security

Question 14

What is Excluded in Gross Income?

Answer 14

• Gifts
• Inheritance
• Child Support
• Municipal Bond Interest
• Workers Comp
• Compensatory Damages

Question 15

How to Qualify for Like-Kind Exchange

Answer 15

The exchange in properties must be lime kind (rental property for rental property) and the taxpayer must use the acquired property in a trade or business

Question 16

Like-Kind Exchange Calculation

Answer 16

Realized Gain= (FMV of property acquired + Boot) - Adjusted basis of Property already owned

Recognized Gain= the lesser of Realized Gain or Boot Received

Substitute Basis= FMV of property acquired - (Realized Gain- Recognized Gain)