Individual Taxation - Deductions Flashcards by Grace-Allison Patchett

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

FALSE

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

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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

TRUE

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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

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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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?

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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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

FALSE

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

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T/F

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

FALSE

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

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T/F

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

TRUE

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T/F

Meals while moving are deductible if nonreimbursed by employer

FALSE

Even if non-reimbursed, these are not deductible

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T/F

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

TRUE

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T/F

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

TRUE

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T/F

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

TRUE

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T/F

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

TRUE

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T/F

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

FALSE

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

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T/F

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

TRUE

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T/F

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

FALSE

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

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T/F

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

FALSE

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

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T/F

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

FALSE

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

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T/F

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

TRUE

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

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T/F

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

TRUE

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T/F

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

FALSE

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

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T/F

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

TRUE

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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

TRUE

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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?

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

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T/F

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

TRUE

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

TRUE So long as these costs are unreimbursed

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

FALSE

T/F Unreimbursed Doctor's Fees are a medical expense that may be deducted as an itemized deduction

TRUE

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

TRUE So long as these costs are unreimbursed

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

FALSE

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

TRUE So long as these costs are unreimbursed

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

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

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

TRUE So long as these costs are unreimbursed

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

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

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?

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

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?

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

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

FALSE

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

FALSE

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

FALSE

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

TRUE

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

TRUE

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

TRUE This is an itemized deduction from AGI

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

TRUE This is an itemized deduction from AGI

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

TRUE This is an itemized deduction from AGI

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

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

T/F An individual's state and local income taxes are deductible as an itemized deduction from AGI

TRUE

T/F An individual's federal income taxes are deductible as an itemized deduction from AGI

FALSE

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

In the year paid/withheld

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

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

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

But not including

Taxes are apportioned to the buyer beginning with _____

The date of sale

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

TRUE

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

FALSE This would be added to the basis of the residence

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

TRUE

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

TRUE

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

Personal Interest Non-Deductible

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

Personal Expense Non-Deductible

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

Personal Expense Non-Deductible

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

Qualified Residence Interest Deductible as in itemized deduction

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

Deductible as interest expense in computing itemized deductions

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

Personal Interest Non-Deductible

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

FALSE

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

FALSE

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

FALSE

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

FALSE This is considered personal interest

To be deductible a contribution must be made to ______

A qualifying organization

T/F A contribution to a needy family may be deductible as a charitable contribution

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

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)

FMV - this is the amount used for the charitable deduction

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)

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

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?

Year x1 Charitable contributions are generally deductible in the year actually paid. The credit card charge is considered payment

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?

Year x2 Charitable contributions are generally deductible in the year actually paid. The delivery of a promissory note is not considered payment

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

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.

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

TRUE

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

FALSE

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

FALSE

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

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

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

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

T/F Casualty insurance premium is deductible in arriving at AGI

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

T/F Casualty insurance premium is not deductible in 2014

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

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

FALSE Repairs are not included in this computation

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

FALSE

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

TRUE

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

FALSE

T/F Appraisal fees to determine the amount of loss are not deductible

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

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

TRUE

T/F IRA trustee's fees that are separately billed and paid are miscellaneous itemized deductions, subject to the 2% of AGI floor

TRUE

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

TRUE

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

FALSE This is a personal expense and is not deductible

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?

TRUE

T/F Dues to a teachers' union (for a public school teacher) would be an allowable miscellaneous deduction on Schedule A of Form 1040?

TRUE

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?

FALSE

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

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

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

TRUE

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

TRUE

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

TRUE

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

FALSE This is personal in nature and is not deductible

T/F Generally there is no deduction for prepaid interest

TRUE