Individual tax Flashcards
Filing as a surviving spouse or qualifying widow(er) requires;
Filing as a surviving spouse or qualifying widow(er) requires the individual’s spouse to have died during one of the previous 2 tax years. In addition, the survivor must maintain a household that is the principal place of residence for a dependent child. “Maintain” means the spouse furnishes over 50% of the costs of the household for the entire year.
What are the rules for a multiple support agreement?
The taxpayer must provide over one-half of the support of a dependent. An exception to the support test permits one of a group of taxpayers, who are otherwise eligible to claim the exemption and who together furnish more than one-half of the support of a dependent, to claim a dependency exemption even when no one person provides more than 50% of the support. Any such individual who contributed more than 10% of the support is entitled to claim the exemption if each of the other persons in the group who contributed more than 10% signs a written consent filed with the return of the claiming taxpayer.
What does the gross income test for a qualifying relative include and not include?
what is the minimum?
If gross income is less than $4,000 for 2015 can take an exemption.
Gross includes income that is taxable.
Does not include non taxable portion of scholarships, non taxable social security benefits, tax exempt interest.
Personal exemptions vs. Standard deduction
Personal exemption is $4,000 for 2015
Standard deduction is: Single $6,300 MFJ $12,600 SS/QW $12,600 HOH $9,250 MFS $6,300
Additional standard deductions: aged 65 or older and/or blind
Single, HOH $1,550
MFJ, MFS, SS $1,250
What is the personal exemption phase out for taxpayers with high incomes?
What are the rules?
If a TP’s AGI exceeded a specific threshold amount (based on filing status), the deduction allowed for personal and dependency exemptions is reduced by 2% for each $2,500, or fraction thereof, by which the adjusted gross income exceeds the threshold amount.
For single TP that phase out amount is $258,250.
So if TP made $260,300-258,250=2050/2500=.82 round up to 1 so reduce the $4,000 exemption for 2%.
What is alimony?
Alimony is any payment in cash if
(1) it is received under a divorce or separation agreement,
(2) the agreement does not designate the payment as not includible in gross income,
(3) the payee and payor are not members of the same household at the time the payment is made, and
(4) there is no liability to make such payment for any period after the death of the payee spouse.
is income recognized on the discharge of indebtedness?
Gross income includes income from the discharge of indebtedness for consideration.
When are security deposits considered income?
Security deposits are income if and when the lessor becomes entitled to the funds by reason of the lessee’s violation of the terms of the lease.
When are advance rent received included in income?
Advance rent received upon execution of a lease is includible in gross income in the year received, whether the taxpayer is on the cash or the accrual basis.
If rental property is rented for less than 15 days, how is income and expenses treated?
The IRC states that income from rental of a personal dwelling is excluded from income if rented for less than 15 days during the year. In addition, no deductions are allowed for rental use if rented for less than 15 days during the year.
If property is 100% rental, how are expense and income treated?
all expenses are deducted and a passive loss may occur.
Advanced payments for next year are included in income in which year?
Both cash- and accrual-basis taxpayers must include amounts in gross income upon actual or constructive receipt if the taxpayer has an unrestricted claim to such amounts.
Are refundable deposits included in income?
NO
are lease improvements made in lieu of rent included in income?
YES
If a lump sum of $60,000 is received as an agreement not to operate a competing enterprise within 10 miles of the store’s location, for a period of 6 years, what is that $60,000 considered?
It’s ordinary income since it replaces what would otherwise be ordinary income and it’s all included in the year received.
How do you calculate the taxable social security portion?
Lesser of:
50% of Social Security Benefits
50% (MAGI+50%(Social Security Benefits)-$32,000MFJ or $25,000 Single)
So basically if income is less than $32,000 for MFJ and $25,000 for Single, no need to tax.
But if SS income is $44,000 for MFJ and $34,000 for single then include 85% of it.
what amount of gambling winnings is included if claiming standard deduction? what about itemized deduction?
Gambling winnings (whether legal or illegal) are included in gross income. Therefore, Emil must include the full $10,000 in gross income. Gambling losses, i.e., amounts spent on nonwinning tickets, may be deductible but only as an itemized deduction to the extent of gambling winnings.
if an employer uses a nonaccountable plan to reimburse their employees for expenses, how much of it would be included in income? let’s say gets $400 for 12 months, but spent less than that amount.
In a nonaccountable plan, the reimbursements are included in the employee’s gross income, and all the expenses are deducted from AGI (below-the-line-deductions). These expenses are a miscellaneous itemized deduction subject to the 2% floor.
Are scholarships included in gross income?
When is any money received from school included in gross income?
Scholarships may be excluded from gross income provided a student is enrolled in a degree-seeking program and that the scholarship is used for qualified expenses such as tuition and fees. However, amounts received for services such as teaching must be included in gross income.
Are any amounts received for worker’s comp included in gross income?
Specifically excluded from gross income are amounts received under workers’ compensation acts as compensation for personal injuries or sickness.
Are inheritances and proceeds of a lawsuit for physical injuries included in Gross income?
Inheritances are excluded from the gross income of the recipient as gifts, and proceeds of a lawsuit for physical injuries, provided they are for actual damages, are specifically excluded from gross income as compensation for injury or sickness.
is interest on tax refunds taxable?
Yes, interest on tax refunds fully taxable.
What kinds of interest is excluded from income?
The exclusion applies only to interest on states and LOCAL government bonds (Federal government obligations and fully taxable)
As a result of a fire, Sam had to vacate his apartment for a month and move to a motel. If his normal living expenses are $800 and incurred expenses of $1500 because of vacating, Insurance money received $1100. What is included in income?
A taxpayer whose residence is damaged or destroyed and who must temporarily occupy another residence can exclude from gross income any insurance payment received as reimbursement for living expenses during such period. This exclusion is limited to the excess of actual living expenses incurred by the taxpayer, $1,500 over the normal living expenses of $800 the taxpayer would have incurred during the period, or $700. So $1100-700=400
Usually dividends on life insurance policies are usually not included in gross income unless?
The dividends on life insurance policies are generally considered a return of premiums or capital and are not included in gross income (provided the cumulative dividends do not exceed the cumulative premiums paid).
for Series EE bonds, what must be met for a tax exemption?
(1) The purchaser of the bonds must be the sole owner (or joint owner with his or her spouse) of the bonds;
(2) the issue date of the bonds must follow the 24th birthday(s) of the owner(s); and
(3) the redemption proceeds must be used to pay tuition and fees of the taxpayer, spouse, or dependent to attend a college, a university, or certain vocational schools.
What is the deduction amounts for Charitable contributions if using FMV or AB of property?
If using FMV of CG property for the contribution amount, the deduction will be 30% of AGI. If using AB of CG property for the contribution amount, the deduction will be 50% of AGI.
If Short Term stock was donated, what is the deduction to the taxpayer?
If the stock has not been held long term, it is ordinary income property, and the deduction is equal to the lesser of FMV or AB.
What is the limit for cash contributions by individuals to qualifies charities?
Properly substantiated cash contributions by individuals to qualified charities are limited to 50% of the taxpayer’s AGI
Charitable contributions can be carried forward how many years?
Carried forward 5 years.
How is the deduction amount calculated in casualty losses for individuals?
The amount of the loss for a personal use property is the lesser of AB or the decline in FMV of the property:
Reduce the smaller amount by insurance proceeds rcvd.
Reduce by a $100 per event floor for personal use property
Further reduce losses from personal use property by 10% of AGI
Charles and Marcia are married cash-basis taxpayers. In 2015, they had interest income as follows:•$500 interest on federal income tax refund
•$600 interest on state income tax refund
•$800 interest on federal government obligations
•$1,000 interest on state government obligations
What amount of interest income is taxable on Charles and Marcia’s 2015 joint income tax return?
A. $1,900
B. $1,100
C. $500
D. $2,900
A. $1,900
Answer (A) is correct.
Unless otherwise excluded in another section, the IRC includes interest in gross income. The IRC excludes from gross income interest on most obligations of states or political subdivisions of a state (e.g., municipal bonds). This exclusion does not apply to the obligations of the United States (with the exception of EE bonds used for qualifying education expenses) or interest on state income tax overpayments. Interest income is taxable unless specifically excluded from gross income.
What is excluded when a physical injury has occurred?
Gross income does not include benefits specified that might be received in the form of disability pay, health or accident insurance proceeds (even if the benefits are a substitute for lost income), workers’ compensation awards, or other damages for personal physical injury or physical sickness. Also excluded are damages received for emotional distress if an injury has its origin in a physical injury or physical sickness (regardless of whether the damages are received by a lawsuit or an agreement). However, punitive damages received are includible in gross income even if in connection with a physical injury or physical sickness.
As a result of a fire, Sam had to vacate his apartment for a month and move to a motel. His rent for the apartment had been $600 per month. No rent was charged for the month the apartment was vacated. His motel rent for this month was $1,000. He normally pays $200 a month for food, but food expenses for the month he lived in the motel were $500. He received $1,100 from his insurance company to cover his living expenses. Based on this information, determine the amount, if any, he must include in income.
A. $0
B. $300
C. $400
D. None of the answers are correct.
C. $400
Answer (C) is correct.
A taxpayer whose residence is damaged or destroyed and who must temporarily occupy another residence can exclude from gross income any insurance payment received as reimbursement for living expenses during such period. This exclusion is limited to the excess of actual living expenses incurred by the taxpayer, $1,500 ($1,000 rent + $500 food) over the normal living expenses of $800 ($600 rent + $200 food) the taxpayer would have incurred during the period, or $700 ($1,500 – $800). The exclusion covers additional costs incurred in renting suitable housing and any extraordinary expenses for transportation, food, and miscellaneous items. The amount of the reimbursement included in income is $400 ($1,100 reimbursement – $700 exclusion).
Exclusion of accumulated interest on U.S. savings bonds issued at a discount is permitted. The bonds must be issued after 1989. Exclusion of interest is conditioned on each of the following:
(1) The purchaser of the bonds must be the sole owner (or joint owner with his or her spouse) of the bonds; (2) the issue date of the bonds must follow the 24th birthday(s) of the owner(s); and (3) the redemption proceeds must be used to pay tuition and fees of the taxpayer, spouse, or dependent to attend a college, a university, or certain vocational schools.
What are the percentages for medical deductions?
exceeds 10% AGI
or exceeds 7.5% AGi if the TP or spouse are age 65 or older.
Expenditures for new building construction or for permanent improvements to existing structures may also be
Expenditures for new building construction or for permanent improvements to existing structures may also be deductible in part. The excess of the cost of a permanent improvement over the increase in value of the property is a deductible medical expense.
How much of the investment interest expense is deductible?
Investment interest expense is deductible only to the extent of net investment income.
Who is ineligible for a standard deduction?
Nonresident aliens are ineligible.
How is appraisal fee to determine amount of fire loss treated?
Expense for appraisal of a casualty loss is not treated as part of the loss. It is treated as a cost to determine tax liability. It is a miscellaneous itemized deduction subject to the 2%-of-AGI floor.
Taxes may be deducted only by who?
Taxes may be deducted only by the person on whom they are legally levied and the person who owns the house.
In order to qualify as a dependent, an individual must be what kind of resident? or what countries?
In order to qualify as a dependent, an individual must be a citizen, national, or resident of the United States or a resident of Canada or Mexico at some time during the calendar year in which the tax year of the taxpayer begins.
What is allowed deduction per month by a taxpayer to maintain an individual other than a dependent as a member of his or her household under a written agreement between the taxpayer and a qualified organization to provide educational opportunity for pupils or students in private homes.
Amounts paid by a taxpayer to maintain an individual other than a dependent as a member of his or her household under a written agreement between the taxpayer and a qualified organization to provide educational opportunity for pupils or students in private homes are deductible up to $50 per month.
