Individual tax

Question 1

Cash Basis allowed for

Answer 1

Individuals owning business

Not for: Corp, partnership w/ c-corp partner, Inventory

Question 2

Deductions to get to AGI

Answer 2

MSA/HSA cont
Investment pen for early w/drawal
SE med premiums
50% SE tax
SEP, Keogh, Simple IRA cont
Student Loan Int
Tuition
Alimony Pd
atty fee in discrimination lawsuit ONLY
Teacher exp
moving exp

Question 3

Section 179 exp

Answer 3

New & Used equip
500,000 max deduction on 2010,000 of assets
phased out $ for $ anything over the 2.01M
179 limited to NI

Question 4

Installment sales

Answer 4

GP/ contract price

Contract price = Sales Price- Liab assumed by buyer

Question 5

Home mortgage int

Answer 5

Reg Mortgage int deductible on loans up to $1M

Home Equity Loan Int ded up t $100k

Question 6

Business losses - active/passive

Answer 6

Only offset active (W-2 = active)
Only offset passive (Ltd partnership inc = passive )
Int/Div income is not passive - investment inc

Question 7

DEP conventions

Answer 7

MQ - mid qtr, 40% bought in last Qtr (Personal Prop)
MM- mid month ( Real Prop)
Leasehold Imp - S/L 15yrs

Question 8

Business start up costs

Answer 8

deduct up to $5K
reduce $ for $ over $50K
remaining amortized

Question 9

Medical Exp

Answer 9

Deductible once meet 10% floor

Accident/disability ins prems not deductible

Question 10

Med exp paid on behalf of someone

Answer 10

Must be a citizen
if person family closer than cousin do not have to live with
most provide more than 50% support

Question 11

Foreign taxes pd

Answer 11

Foreign income tax and prop tax deductible

personal prop tax are not deductible (car)

Question 12

Investment Int

Answer 12

Deductible only to extent of Investment Inc
Gross Invest Inc- Investment exp in excess 2% AGI
= Net Investment Inc

Question 13

mortgage pts

Answer 13

deductible if represents prepaid int

refinance pts amortized over life of loan

Question 14

Charitable Cont

Answer 14

LTCG Prop - deduction for FMV up to 30% of AGI

STCG Prop- deduction for adj basis up to 50% AGI

Question 15

Casualty Loss

Answer 15

Decrease in FMV of prop vs. Basis
Lower of FMV or Basis - Ins proceeds- $100-10% AGI = deduction
exps for repair not ded

Question 16

Misc Sch A ded

Answer 16

Must exceed 2% of AGI
Education if required to keep job
Business travel exp
50% M&E
Union Dues
Tax prep fee
legal fees to collect alimony
appraisal fees to value casualty or charitable cont

Question 17

Itemized deductions subject to reduction

Answer 17

Medical
Casualty
Gambling
Investment int exp

Question 18

Qualifying Child

Answer 18

Must be US resident

Under 19 or 24 if student

Question 19

Qualifying relative

Answer 19

Must be citizen of North America
Must be relative closer than cousin to not live with
otherwise must live with
provide more than 50%
cant earn more than 3,500 (SS doesn’t count)

Question 20

Refundable tax credits

Answer 20

Earned Income Credit

Additional Child tax credits

Question 21

Education credits

Answer 21

American Opportunity credit - Per student, not refundable

Lifetime learning - Per Taxpayer, not refundable

Question 22

Dividend Income

Answer 22

Treated as Ordinary Income

Question 23

Life insurance

Answer 23

Employer can pay premiums up to 50K without including in income
Premiums on coverage over 50K counts as income to taxpayer

Question 24

scholarships

Answer 24

not taxable as long as no services rendered ( grad assistant) , money used for tuition and books

Question 25

Tax free interest income

Answer 25

State and Muni bonds
US EE savings bonds
US treasuries - TAXABLE
US HH bonds - TAXABLE

Question 26

Unemployment

Answer 26

Taxable as income

Question 27

Workers compensation

Answer 27

NOT taxable

Question 28

Alimony paid

Answer 28

deduction

Question 29

Child support / Alimony received

Answer 29

taxable

Question 30

adoptions

Answer 30

treated as personal exp - not deductible

Question 31

IRA conts

Answer 31

Traditional = deductible

Roth IRA = non deductible