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REG Tax > Individual Taxation - Deductions > Flashcards

Individual Taxation - Deductions Flashcards

1
Q

T/F

An individual who elects the standard deduction may deduct gambling losses from AGI as a miscellaneous deduction (to the extent of winnings) not subject to the 2% of AGI floor

A

FALSE

The standard deduction means that the individual taxpayer is forgoing using itemized deductions.

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2
Q

T/F

An individual who forgoes the standard deduction and decides to use itemized deductions may deduct gambling losses from AGI as a miscellaneous deduction (to the extent of winnings) not subject to the 2% of AGI floor

A

TRUE

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3
Q

T/F

A corporation’s expenses relating to insurance premiums on a policy insuring the life of the corporation’s president are deductible on the corporation’s income tax return

A

FALSE

Generally, no deduction is allowed for expenditures that produce tax-exempt income. As the Corporation is the beneficiary of the policy, and the proceeds of the policy will be excluded from the corporation’s income when the president dies, the insurance premiums are non deductible

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4
Q

A CPA who reports on the cash basis billed a client for services rendered but the client did not pay and then declared bankruptcy. What loss can the CPA deduct on their tax return for this bad debt?

A

NONE

Because they are on the cash basis they never recognized the income, therefore they can’t subsequently recognize bad debt. The loss is nondeductible.

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5
Q

T/F

A general individual who grants a loan, which is then never paid back, will claim a business bad debt on their income tax return

A

FALSE

General individuals are not in the business of granting loans and therefore this is not a business bad debt.

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6
Q

T/F

Deductions for personal and dependency exemptions are allowed in the computation of an NOL

A

FALSE

Deductions for personal and dependency exemptions are not allowed in the computation of an NOL

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7
Q

T/F

Lodging and travel expenses while moving are deductible if non-reimbursed by employer

A

TRUE

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8
Q

T/F

Meals while moving are deductible if nonreimbursed by employer

A

FALSE

Even if non-reimbursed, these are not deductible

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9
Q

T/F

Costs of insuring household goods and personal effects during a move are deductible if nonreimbursed by employer

A

TRUE

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10
Q

T/F

Costs of shipping household pets to a new home are deductible if nonreimbursed by employer

A

TRUE

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11
Q

T/F

Costs of moving household furnishings and personal effects are deductible if nonreimbursed by employer

A

TRUE

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12
Q

T/F

The costs of a rental truck to move personal belongings when moving are deductible if nonreimbursed by employer

A

TRUE

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13
Q

T/F

The penalty for breaking a lease when moving is deductible if nonreimbursed by employer

A

FALSE

Even if non-reimbursed by employer, this is not deductible

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14
Q

T/F

If an employer reimburses an employee for costs of moving, these costs are not deductible

A

TRUE

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15
Q

T/F

Charitable contributions are an allowable deduction that can be claimed in arriving at an individual’s AGI

A

FALSE

This can only be deducted FROM AGI if an individual itemizes deductions

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16
Q

T/F

Foreign income taxes are an allowable deduction that can be claimed in arriving at an individual’s AGI

A

FALSE

This can only be deducted FROM AGI if an individual itemizes deductions

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17
Q

T/F

Tax return preparation fees are an allowable deduction that can be claimed in arriving at an individual’s AGI

A

FALSE

This can only be deducted FROM AGI if an individual itemizes deductions

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18
Q

T/F

Self-employed health insurance deductions are an allowable deduction that can be claimed in arriving at an individual’s AGI

A

TRUE

100% of a self-employed individual’s health insurance premiums are deductible in arriving at an individuals AGI

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19
Q

T/F

The deduction for interest on qualified education loans is available even if the taxpayer does not itemize deductions

A

TRUE

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20
Q

T/F

The deduction for interest on qualified education loans only applies to the first 60 months of interest payments

A

FALSE

This 60-month limitation was repealed for tax years beginning after 2002

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21
Q

T/F

For a deduction of interest on qualified education loans, qualified education expenses include tuition fees, room, and board

A

TRUE

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22
Q

T/F

The educational expenses for a deduction of interest on qualified education loans must relate to a period when the student was enrolled on at least a half-time basis

A

TRUE

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23
Q

An employee receives compensation for jury duty. The employee is then to remit that entire amount to their employer in exchange for their regular compensation during the period of jury service. How should the employee record the jury duty fee in their income tax return?

A

It should be deducted from gross income in arriving at adjusted gross income

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24
Q

T/F

Medical Insurance premiums are a medical expense that may be deducted as an itemized deduction

A

TRUE

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25
Q

T/F

Prescribed medications are a medical expense that may be deducted as an itemized deduction

A

TRUE

So long as these costs are unreimbursed

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26
Q

T/F

Nonprescription, Over-the-counter medicines are a medical expense that may be deducted as an itemized deduction

A

FALSE

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27
Q

T/F

Unreimbursed Doctor’s Fees are a medical expense that may be deducted as an itemized deduction

A

TRUE

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28
Q

T/F

Transportation to and from doctors are a medical expense that may be deducted as an itemized deduction

A

TRUE

So long as these costs are unreimbursed

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29
Q

T/F

Expenses for individuals who do not qualify as a dependent are a medical expense that may be deducted as an itemized deduction

A

FALSE

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30
Q

T/F

Repair and maintenance costs on a motorized wheelchair are a medical expense that may be deducted as an itemized deduction

A

TRUE

So long as these costs are unreimbursed

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31
Q

T/F

Tuition, meals, and lodging expenses at a special school for a physically handicapped dependent are a medical expense that may be deducted as an itemized deduction

A

TRUE

So long as the main reason for being in the institution is to receive medical care and so long as the expenses were necessary incidents to that care

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32
Q

T/F

Physical Therapy expenses are a medical expense that may be deducted as an itemized deduction

A

TRUE

So long as these costs are unreimbursed

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33
Q

T/F

Premiums on an insurance policy against loss of earnings due to a sickness or accident are expenses are a medical expense that may be deducted as an itemized deduction

A

FALSE

This is not considered medical insurance because the payments are not based on the amount of medical expenses incurred, therefore this is not a deductible personal expense

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34
Q

If an individual charges medical expenses on their credit card in year x1 but does not pay off these charges until year x2, under what year’s income tax return can the individual claim a deduction for those medical expenses?

A

Year x1

It does not matter that payment to the credit card issuer has not been made when the tax return is filed. Expenses are deductible when paid or charged to a credit card

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35
Q

If an individual pays medical expenses for a deceased spouse/dependent in x1, but the deceased died in year x0, under what year’s income tax return can the individual claim a deduction for those medical expenses?

A

Year x1

Expenses are deductible when paid or charged to a credit card, whether the expenses are paid in the year of or the year after a decedent’s death

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36
Q

T/F

Diaper Service is an expenditure that qualifies as a deductible medical expense for tax purposes

A

FALSE

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37
Q

T/F

Funeral Expenses are an expenditure that qualifies as a deductible medical expense for tax purposes

A

FALSE

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38
Q

T/F

Nursing Care for a healthy baby is an expenditure that qualifies as a deductible medical expense for tax purposes

A

FALSE

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39
Q

T/F

Premiums paid for Medicare B Supplemental medical insurance are an expenditure that qualifies as a deductible medical expense for tax purposes

A

TRUE

40
Q

T/F

Eyeglasses are an expenditure that qualifies as a deductible medical expense for tax purposes

A

TRUE

41
Q

T/F

Foreign real estate taxes are deductible as itemized deductions by a self-employed taxpayer

A

TRUE

This is an itemized deduction from AGI

42
Q

T/F

Foreign income taxes are deductible as itemized deductions by a self-employed taxpayer

A

TRUE

This is an itemized deduction from AGI

43
Q

T/F

Personal Property taxes are deductible as itemized deductions by a self-employed taxpayer

A

TRUE

This is an itemized deduction from AGI

44
Q

T/F

One-half of self-employment taxes are deductible as itemized deductions by a self-employed taxpayer

A

FALSE

This is deductible from gross income in arriving at AGI, not an itemized deduction!

45
Q

T/F

An individual’s state and local income taxes are deductible as an itemized deduction from AGI

A

TRUE

46
Q

T/F

An individual’s federal income taxes are deductible as an itemized deduction from AGI

A

FALSE

47
Q

For a cash basis taxpayer, state and local taxes are deductible as an itemized deduction from AGI ______

A

In the year paid/withheld

48
Q

T/F

Real property tax for deduction purposes may or may not be apportioned between a buyer and seller for tax purposes according to the number of days in the real property tax year that each owns the property. Whether or not this will occur is dependent on if they agree to this in their agreement

A

FALSE

Real property tax must be apportioned between buyer and seller for tax purposes according to the number of days in the real property tax year that each owns the property EVEN IF they did not actually make an apportionment agreement

49
Q

Taxes are apportioned to the seller up to _____ (and including/but not including) the date of sale

A

But not including

50
Q

Taxes are apportioned to the buyer beginning with _____

A

The date of sale

51
Q

T/F

Property taxes on a residence are deductible in calculating itemized deductions from AGI

A

TRUE

52
Q

T/F

A special assessment for installation of a sewer system is deductible in calculating itemized deductions from AGI

A

FALSE

This would be added to the basis of the residence

53
Q

T/F

State personal property tax on an automobile is deductible in calculating itemized deductions from AGI

A

TRUE

54
Q

T/F

Property taxes on land held for long-term appreciation are deductible in calculating itemized deductions from AGI

A

TRUE

55
Q

Interest on an auto loan is considered _____ (personal interest/qualified residence interest) and is (deductible/non-deductible)

A

Personal Interest

Non-Deductible

56
Q

Utilities Expense is considered _____ (personal expense/qualified residence interest) and is (deductible/non-deductible)

A

Personal Expense

Non-Deductible

57
Q

Insurance Expense is considered _____ (personal expense/qualified residence interest) and is (deductible/non-deductible)

A

Personal Expense

Non-Deductible

58
Q

Mortgage Interest is considered _____ (personal interest/qualified residence interest) and is (deductible/non-deductible)

A

Qualified Residence Interest

Deductible as in itemized deduction

59
Q

Penalty payment for prepayment of home mortgage is considered is (deductible/non-deductible)

A

Deductible as interest expense in computing itemized deductions

60
Q

Interest on a life insurance policy loan is considered _____ (personal interest/qualified residence interest) and is (deductible/non-deductible)

A

Personal Interest

Non-Deductible

61
Q

T/F

Additional tax relating to a deficiency assessment is deductible as an itemized deduction

A

FALSE

62
Q

T/F

A late filing pentaly relating to a deficiency assessment is deductible as an itemized deduction

A

FALSE

63
Q

T/F

A negligence penalty relating to a deficiency assessment is deductible as an itemized deduction

A

FALSE

64
Q

T/F

Interest relating to a deficiency assessment is deductible as an itemized deduction

A

FALSE

This is considered personal interest

65
Q

To be deductible a contribution must be made to ______

A

A qualifying organization

66
Q

T/F

A contribution to a needy family may be deductible as a charitable contribution

A

FALSE

To be deductible a contribution must be made to a qualifying organization

67
Q

When appreciated property is contributed, the amount of contribution is generally the property’s ______ (FMV/Cost Basis) if a sale of the property would result in a LTCG (holding period exceeds 12 months)

A

FMV - this is the amount used for the charitable deduction

68
Q

When appreciated property is contributed, the amount of contribution is generally the property’s ______ (FMV/Cost Basis) if a sale of the property would result in a STCG (held for less than 12 months)

A

Cost Basis - this is the amount used for the charitable deduction

69
Q

When an individual makes a charitable contribution on their credit card in year x1, but does not pay that credit card until year x2, when is the charitable deduction available to the individual?

A

Year x1

Charitable contributions are generally deductible in the year actually paid. The credit card charge is considered payment

70
Q

When an individual delivers a promissory note to a charitable contribution in year x1, but does not pay the promissory note until year x2, when is the charitable deduction available to the individual?

A

Year x2

Charitable contributions are generally deductible in the year actually paid. The delivery of a promissory note is not considered payment

71
Q

T/F

When an individual makes a donation that is not completed until after their death (for example, they agree to donate but will retain possession until their death) they are eligible for a charitable deduction in the year the donation is made

A

FALSE

By reserving the right to use/possess the items until their death, they have not made a completed gift therefore no deduction is available.

72
Q

T/F

Earthquakes, tornadoes, floods, fires, vandalism, and auto accidents are all examples of a deductible casualty loss

A

TRUE

73
Q

T/F

A loss due to the accidental breakage of household articles, under normal conditions, such as glassware or china is an example of a deductible casualty loss

A

FALSE

74
Q

T/F

A loss due to damage caused by a family pet is an example of a deductible casualty loss

A

FALSE

75
Q

T/F

Casualty insurance premium is allowed as an itemized deduction subject to the $100 floor and the 10% of adjusted gross income floor

A

FALSE

Casualty insurance premiums on an individual’s personal residence are considered nondeductible personal expenses. Even if a casualty actually incurred, no deduction is available

76
Q

T/F

Casualty insurance premium is allowed as an itemized deduction subject to the 2% of adjusted gross income floor

A

FALSE

Casualty insurance premiums on an individual’s personal residence are considered nondeductible personal expenses. Even if a casualty actually incurred, no deduction is available

77
Q

T/F

Casualty insurance premium is deductible in arriving at AGI

A

FALSE

Casualty insurance premiums on an individual’s personal residence are considered nondeductible personal expenses. Even if a casualty actually incurred, no deduction is available

78
Q

T/F

Casualty insurance premium is not deductible in 2014

A

TRUE

Casualty insurance premiums on an individual’s personal residence are considered nondeductible personal expenses. Even if a casualty actually incurred, no deduction is available

79
Q

T/F

Repairs in connection with a loss are included in the computation of the loss for deduction purposes

A

FALSE

Repairs are not included in this computation

80
Q

T/F

Appraisal fees to determine the amount of loss are deductible from gross income in arriving at AGI

A

FALSE

81
Q

T/F

Appraisal fees to determine the amount of loss are subject to the 2% of AGI floor for Misc. Itemized Deductions

A

TRUE

82
Q

T/F

Appraisal fees to determine the amount of loss are deductible after reducing the amount by the $100 floor

A

FALSE

83
Q

T/F

Appraisal fees to determine the amount of loss are not deductible

A

FALSE

Appraisal fees to determine the amount of loss are subject to the 2% of AGI floor for Misc. Itemized Deductions

84
Q

T/F

Legal fees for tax advice related to a divorce are miscellaneous itemized deductions, subject to the 2% of AGI floor

A

TRUE

85
Q

T/F

IRA trustee’s fees that are separately billed and paid are miscellaneous itemized deductions, subject to the 2% of AGI floor

A

TRUE

86
Q

T/F

Appraisal fees for a charitable contribution are miscellaneous itemized deductions, subject to the 2% of AGI floor

A

TRUE

87
Q

T/F

Check-writing fees for a personal checking accountare miscellaneous itemized deductions, subject to the 2% of AGI floor

A

FALSE

This is a personal expense and is not deductible

88
Q

T/F

Initiation fee for membership in a teachers’ union (for a public school teacher) would be an allowable miscellaneous deduction on Schedule A of Form 1040?

A

TRUE

89
Q

T/F

Dues to a teachers’ union (for a public school teacher) would be an allowable miscellaneous deduction on Schedule A of Form 1040?

A

TRUE

90
Q

T/F

Voluntary unemployment benefit fund contributions to a union-established fund (for a member of the union) would be an allowable miscellaneous deduction on Schedule A of Form 1040?

A

FALSE

91
Q

T/F

Use of a personal auto for company business would be an allowable miscellaneous deduction on Schedule A of Form 1040?

A

TRUE

Only to the extent that it has NOT been reimbursed by the employer

92
Q

T/F

Specialized work clothes would be an allowable miscellaneous deduction on Schedule A of Form 1040?

A

TRUE

93
Q

T/F

Union Dues would be an allowable miscellaneous deduction on Schedule A of Form 1040?

A

TRUE

94
Q

T/F

Cost of income tax preparation would be an allowable miscellaneous deduction on Schedule A of Form 1040?

A

TRUE

95
Q

T/F

Preparation of a will would be an allowable miscellaneous deduction on Schedule A of Form 1040?

A

FALSE

This is personal in nature and is not deductible

96
Q

T/F

Generally there is no deduction for prepaid interest

A

TRUE

REG Tax (21 decks)

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