Individual taxation 2.0 Flashcards
Is child support or alimony deductible?
Alimony,
only deductible if met the certain requirement
1) payment made in cash
2) payment must be terminated after death
3) payment cannot be made to someone who lives in the same household
4) made after divorce
When does alimony recapture rule apply?
if alimony payments decrease more than 15k from the previous year
What is the alimony recapture formula?
R2: (P3+15k)
R1: P1- [(p2-r2+p3)/2 + 15k]
r3: r1+r2
The payee recognizes income, the receiver will have the deduction of that amount
Are transfers between divorcing spouses taxable?
Nope, they are nontaxable
Are Annuities taxable?
no, they are excludable to help taxpayer recover previously tax investment
What is the annuities exclusion formula?
[Taxpayer investment in contract / total expected return on contract] X amount received
I/R * Recieved
What is the annuities retirement formula?
Investment in contract/ number of anticipated monthly payments
How is cancelled debt treated
1) Individual taxpayer -> taxable
2) When seller cancels debt -> buyer can reduce property basis to avoid income recognition
3) Shareholder cancellation of corp debt is treated as a contribution of capital
Are compensatory damages or punitive damages excluded from income?
compensatory damages excluded
How are dividends taxed?
- 0% for taxpayer 15%
15% in 10% bracelt
20% for 39.6%
If property or stock is transferred, what is the basis of the new stock?
FMV
What about dividends received as a partial/complete liquidation?
treated as ROC, then cap gain
Will employee death benefits be taxed?
No
Are gifts taxable?
No, unless its income generated by a property
When is group insurance by employer taxable?
Any amount over 50k