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2019 reg SY > Individual taxation > Flashcards

Individual taxation Flashcards

1
Q 
statute of limitation: #1 :General 
#2: 25% understatement 
#3:bad debts,worthless securities
A 
#1: 3 years from later of the date filed or due date of return(4/15)  
#2:6 years
#3: 7 years
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2
Q

cost of life insurance in excess of $50,000 paid by employer is

A

taxable

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3
Q
  1. Life insurance proceeds (upon death)
  2. Accident, medical& health insurance
  3. Death Benefits
A

are Non Taxable

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4
Q

A. Return of Capital - Company distributes funds but has no E&P, reduce basis in common stock held.
B. Stock split - Allocate original basis over total shares now held.
C. Stock Dividend - (Unless Cash Option)
D. Life Insurance Dividend – Premium return

A

are Non Taxable

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5
Q

Alimony is

A

Non taxable!

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6
Q

Personal/dependent exemption is

A

NO MORE

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7
Q

BAD DEBTS & WORTHLESS SECURITIES:
A. Business
B. Nonbusiness

A

A. Business – Deductible against business income

B. Nonbusiness – when completely worthless it is deductible only as a short term capital loss.

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8
Q

Rental income = Passive income

A. Principal Residence Rental Income (14 days or less)
B. Improvements NOT in- lieu-of-rent

A

These are tax free
A. Principal Residence Rental Income (14 days or less)
B. Improvements NOT in- lieu-of-rent

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9
Q

All rental activity treated as “passive“ and net losses =

A

All rental activity treated as “passive“ and net losses = non deductible

Exception: (If AGI is below $100,000) (Phaseout $100,000 to $150,000)
a. Active Participant - $25,000.00 maximum

NONDEDUCTIBLE LOSSES – carry forward forever or used in year asset is sold

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10
Q 
I. UNEMPLOYMENT 
II. COVENANT NOT TO COMPETE 
III. WINNIGS: 
A. Prize 
B. Gambling
IV. JURY DUTY
V. DAMAGES: - For lost profits, punitive damages 
VI. STATE TAX REFUND
A

I. UNEMPLOYMENT – Fully taxable II. COVENANT NOT TO COMPETE – All taxable as ordinary income
III. WINNIGS: A. Prize – All taxable (even Nobel) B. Gambling – All taxable income, may take a miscellaneous itemized deduction for gambling losses up to the amount of winnings.
IV. JURY DUTY: Fees paid are income, however, if these fees are turned over to employer, taxpayer is allowed to directly deduct (adjustment ) the amount on their tax return. V. DAMAGES: - For lost profits, punitive damages
VI. STATE TAX REFUND:

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11
Q

SCHOLARSHIPS

A

SCHOLARSHIPS:
A. Tax Free – Tuition for a candidate going for their degree.
B. Taxable – Tuition for noncandidate.
C. Taxable – Stipend or grant for student work.
D. Taxable – Room and board to all

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12
Q 
I. DAMAGE AWARDS 
A. Workmens Compensation 
B. Accident & Health 
Proceeds 
C. Lawsuit Awards for Damages (Except: Punitive) 
D. Disability Benefits 
II. GIFTS 
III. INHERITANCE & BEQUESTS
IV. DEBTS FORGIVEN
A

I. DAMAGE AWARDS: Tax Free – All are attempts to undo the damage and make you whole again. (Personal injury awards) A. Workmens Compensation
B. Accident & Health Proceeds C. Lawsuit Awards for Damages (Except: Punitive)
D. Disability Benefits
II. GIFTS: Tax Free III. INHERITANCE & BEQUESTS: Tax Free
IV. DEBTS FORGIVEN: Tax Free in Bankruptcy

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13
Q

MACRS
200% DDB
Half Year Convention
Mid Quarter Convention

A

5 years: car, copier, PC

& years: furniture desks

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14
Q

REAL PROPERTY LIFE

Mid month convention

  1. Residential building
  2. Commercial building
A
  1. Residential building – 27.5 year S/L

2. Commercial building – 39 years S/L

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15
Q

INTANGIBLES

Goodwill
Licenses & permits granted by government
Covenants not to compete Trademarks

A

15 years

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16
Q

NOL

A

No carry back any more,

carry forward forever

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17
Q

1/2 self employment tax

self employed health insurance

A

deductible

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18
Q

IRA

A

A.$5,500 per person with salary, compensation, or alimony
B. $5,500 for a non-working spouse

over 50 YO, can deduct +$1,000

NOt allowed if AGI is >$120,000

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19
Q

Jury duty

A

included in income but deductible later

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20
Q

Moving exp

A

NO MORE

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21
Q

EDUCATIONAL LOAN INTEREST

MEDICAL SAVINGS ACCOUNTS

A

deductible against Gross income = arriving at the AGI

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22
Q

STANDARD DEDUCTION

A

Joint : 24,000
Single:12,000
head of household:18,000

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23
Q

Itemized

medical

A
  • insurance reimbursement

- 10% of AGI

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24
Q

REAL ESTATE TAXES
INCOME
PROPERTY

A

itemized deduction

income tax is up to total $10,000

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25
Q

Interest on $750,000 of debt for two houses

A

No MORE home equity indebt

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26
Q

Charity

cash:
Property(FMV):

A

cash:60% of AGI

Property(FMV):30% of AGI

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27
Q

charity carry over

A

5 years

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28
Q

Casualty loss

A

NO MORE for individual

corp is still allowed

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29
Q

social security(nenkin)

A

max.855 of SS to be included in gross income

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30
Q

NOL calculation

A

personal exemption
standard deduction
net capital loss

won’t be included!

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31
Q

interest on Home equity for adding room is

A

Non deductible!

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32
Q

kids income under 18

A

up to $1,050: non taxable
1,051 to 2,100:child tax rate
2,100 to:trust tax rate

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33
Q

profit of selling home

A

non taxable up to $500,00 for couple, 250,000 for single

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34
Q

AMT preference

A

private activity bond

35
Q

child and dependent care credit

勤労収入のある独身ないし共働きの夫婦において、扶養家族である13才未満の子供や障害者(配偶者なども対象)などのためのディケア費の一部が認められます。

A

3,000 for child

6,000 for 2 and more

36
Q

adoption credit

A

legal fee, agent fee is allowed

but not for medical exp

37
Q

accuracy related penalty is for

A

Either

  1. 10% +
  2. 5,000 USD
38
Q

estimated tax for AGI higher than 150,000USD

A
  1. 90% of current year tax basis

2. 110% of prior year tax basis (if AGI is more than 150,000USD)

39
Q

business expense is

A

100% deductible against business income = above the AGI

40
Q

The deduction for investment interest expense is now limited to the

A

individuals amount of net taxable investment income

if investment income is tax free, deduction is not allowed.

Disallowed interest expense has unlimited carry forward.

41
Q

Jury Duty

A

Taxable as other income

not deductible item

42
Q

Schedule

A : itemized
B : interest and dividends
C : Business income and losses

A 
D : Capital gain/losses
E : supplement income 
   - rental activity
   - royalty
   - partnership income
   - S corp
   - trust
43
Q

Deductible for arriving at AGI

A
  • Self employed SEP
  • Forfeit interest
  • Keogh
  • 1/2% self employment tax
  • % self employed health insurance
44
Q

Non-business bad debt (such as loan for friend) is

always treated as

A

short term capital loss

45
Q

Loss from sale of Sec 1244 stock is treated as

A

Ordinary loss

“sale of business property”

46
Q

Non-itemized deductible tax

A

federal tax
inheritance tax
gift tax
social security

47
Q

interest income from tax free bond is

A

tax free!

48
Q

Subscription for investment publication

A

NO deductible in 2019

49
Q

interest expense on a home equity line of credit for personal use is non-deductible

A

but it’s deductible if the loan is for for business use

interest exp on 750,000 USD of debt for 2 houses

50
Q

Estimated income tax paid is

A

itemized deductible

51
Q

Disability income insurance premium

A

Not includable in medical deduction

52
Q

registration fee for car

A

Non deductible

53
Q

A cash basis taxpayer should report gross income

A

for the year in which income is either actually or constructively received whether in cash or in property

54
Q

Prepayment interest

A

deduct the current year’s interest only and amortize the balance over next years

55
Q

Nonpassive activity rule

A

work 500 hours a year

56
Q

1040EZ is for

A

those who only do standard deduction

refund of state tax can be taxable only for those who did itemized deduction in last year. but interest on refund is taxable for both all

57
Q

FICA tax

Federal Insurance Contribution Act

A

owner needs to withheld from employee’s wages. owner is not exempted.

58
Q

No more itemized deduction for Employee business exp

A

home equity loan interest exp is no more deductible

59
Q

Pension benefit exclusively paid by employer is taxable

A

Pension benefit exclusively paid by employee(beneficiary) is non taxable, it’s return of capital.

60
Q

On W-2, state income tax is stated.

A

Don’t forget to put this amount to 1040 sch.A!

and deductible state/property/RE tax is up to 10,000USD.

61
Q

deductible interest exp on Mortgage loan is only for

A

Purchase/improve home. loan for other purpose is non deductible!

62
Q

Foreign charity is not deductible.

political party contribution is

A

not deductible!

63
Q

Charity less than 250USD doesn’t require

A

supporting document (per donee)

64
Q

An individual taxpayer reports the following items for the current year:

Ordinary income from partnership A, operating a movie theater in
which the taxpayer materially participates $70,000
Net loss from partnership B, operating an equipment rental business
In which the taxpayer does not materially participate (9,000)
Rental income from building rented to a third party 7,000
Short-term capital gain from sale of stock 4,000
What is the taxpayer’s adjusted gross income for the year?

A

70,000+4,000=74,000

passive activities inc.Rental activity :(9,000)+7,000=(2,000)
Remember, you cannot deduct passive activity loss!
actively-participated rental activity is the only exception passive loss can be taken(up to 25,000)

65
Q

For taking gambling loss, you must use itemized deduction

A

standard deduction cannot take particular gambling loss.

66
Q

Earned income credit will be granted to those who have AGI with 5,000+

A

but the EIC will be reduced for excess portion of 5,000USD

67
Q

IRA deduction would be limited if you are covered by

A

employer’s retirement plan

If neither spouse was covered by employer-sponsored pension plan, then IRA contribution is deductible

68
Q

FUTA

Federal Unemployment Tax Act

A

corporation will pay, no withhold from employee is needed

69
Q

Child tax credit under 17YO (16YO is OK)

A

2,000USD per child

70
Q

If you are a nonresident alien, you cannot claim the

A

standard deduction

71
Q

Above the line deduction

A
  • IRA
  • Student loan interest
  • Moving expense is no more, except for military person
72
Q

Estimated income tax for those AGI was lower than 150,000USD

A

either lower of

  1. 90% of this year’s TL
  2. 100% of current year’s TL
73
Q

A claim for refund must be filed?

A

3 years from the date of original return or 2 years after paying the tax, which is later

74
Q

Under a divorce settlement, Joan transferred her 50% ownership of their personal residence to Jim. The joint basis of the residence was $200,000. At the time of the transfer, the property’s fair market value was $300,000. What was Joan’s recognized gain and Jim’s basis for the residence?

A

NO gain, Basis is 200,000

no gain recognition in divorce settlement which covers lump-sum payment or property settlement.

Divorce settlement is nontaxable to the recipient and nondeductible to the giver.

75
Q

Casualty loss incurred in a federally declared disaster

A

itemized deduction

subject to the $100-per-casualty and 10%-of-AGI limitations

76
Q

Jury Duty pay > need to include in AGI

A

Jury duty remitted > deductible above the line!!

77
Q

qualified educator can deduct up to

A

250 USD for unreimbursed business expenses, school supplies, course fee etc

78
Q

nonbusiness bad debts

A

deductible if it’s completely worthless

79
Q

AMT adjustment - not so many

A

standard deduction:not allowed
SALT:not allowed
All property taxes
excess depreciation

80
Q

charitable contribution below 250USD

A

no need of substantiate for deduction 証明書が無くてもdeductできる！

81
Q

the Tax Cuts and Jobs Act of 2017 suspends the deduction for interest paid on home equity loans from 2018 through 2025

A

unless they are used to “buy, build, or substantially improve the taxpayer’s home that secures the loan.”

82
Q

Under the new law…interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not..

A

As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.

83
Q

Under the new tax code, nurses can no longer write off their scrubs. Salespeople can’t deduct their travel expenses. Professors can’t subtract research costs.

A

Previously, employees could potentially write off work-related expenses that added up to more than 2 percent of their gross income, and for which an employer didn’t reimburse them.

84
Q

Sec 179 1,000,000 USD spending cap:2,500,000USD

A

For new and used equiopment, off the shelf software

2019 reg SY (8 decks)

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