Individual Tax (Roger 1 / Gleim 3-4-5) Flashcards
List seven 50% limit charitable organizations (note: 50% limit organizations, which encompass the majority of qualified charitable organizations, are generally public organizations.)
1) Churches
2) Educational organizations
3) Hospitals and certain medical research organizations
4) Organizations that are operated only to receive, hold, invest, and administer property and to make expenditures to or fore the benefit of state and municipal colleges and universities
5) The United States or any state, the District of Columbia, a US possession (including Puerto Rico), a political subdivision of a state or US possession, or an Indian tribal government
6) Private operating foundations
7) Private non-operating foundations that make qualifying distributions of 100% of contributions within 2-1/2 months following the year they receive the contribution.
What is a public charity?
One that derives more than 1/3 of its support from its members and the general public.
What is the carry forward / carry back rule for a charitable contribution?
Individuals may carry forward excess contributions for 5 years.
What donation amount requires written substantiation from the donee organization?
Donations of $250 or more require substantiation by a written receipt from the organization (the bank record alone is insufficient).
What is the overall limitation on charitable deductions?
The overall limitation on charitable deductions is 50% of AGI (applicable to the total of all charitable contributions during the year), but certain contributions may be individually limited to 30% such as capital gain property.
Is the value of services provided to a charitable organization deductible?
No - the value of services provided to a charitable organization is not deductible. However, out-of-pocket, unreimbursed expenses incurred in rendering the serves are deductible.
What are the 2 rules that a charitable contribution of property are normally subject to?
1) ordinary income rule and
2) long-term capital gain rule
What is taxable income?
Taxable income is AGI minus either the itemized deductions or the standard deduction, and the deduction for personal exemptions.
List the taxpayers who are NOT allowed the standard deduction
1) Persons who itemize deductions
2) Nonresident alien individuals
3) Individuals who file a “short period” return
4) A married individual who files a separate return and whose spouse itemizes
5) Partnerships, estates, and trusts
What is the standard deduction?
The standard deduction is the sum of the basic standard deduction and the additional standard deductions.
Who is entitled to take an additional standard deduction?
1) an individual who has attained the age of 65 or is blind
2) an individual who both has reached age 65 and is blind may take twice the amount
3) the individual is entitled to the amount if he/she attains age 65 before the end of the tax year a) even is he/she dies before the end of the year, but b) not if she/he dies before attaining the age of 65 even if he/she would have otherwise reached age 65 before year’s end
4) a person who becomes blind on or before the last day of the taxable year is entitled to the amount
5) Once qualified, the deduction is allowed in full - it is not prorated if a person dies during a tax year.
List the 7 itemized deductions that go on Schedule A
COMMITT
1) Charitable contributions
2) Other Miscellaneous deductions
3) Miscellaneous deductions (BIT)
4) Medical and dental expenses
5) Interest paid
6) Taxes paid
7) Theft and casualty losses
What are some examples of non-deductible medical expenses?
1) Non-prescription drugs and medicines
2) Costs for general health improvement that are not treatments for specific medical conditions
3) Premiums on life insurance and policies to cover loss of earnings from injuries and illnesses
4) Plastic surgery, except to cure disfiguring illnesses, injuries, or birth defects
5) Medicare portion of social security and self-employment taxes
List 8 non-refundable tax credits
1) Foreign tax credit
2) Child and dependent care credit
3) Lifetime learning credit
4) Retirement savings contribution credit
5) Child tax credit
6) Credit for the elderly or the disabled
7) General business credit
8) The adoption credit
What is a refundable credit vs a non-refundable credit?
A refundable credit is payable as a refund to the extent the credit amount exceeds tax otherwise due. Refundable credits allow for the creation of a refund. A non-refundable credit reduces tax liability until tax liability equals a zero balance and does not general a refund. Non-refundable credit means that once tax liability reaches zero, no more credits can be taken to produce refunds.
