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REG > Individual Taxation - Schedule A > Flashcards

Individual Taxation - Schedule A Flashcards

1
Q

If TP is claimed as a dependent of another, standard deduction is the GREATER of:

A

 $1,000; OR
 $350 + Earned Income
*Never to exceed standard deduction

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2
Q

Standard deduction may increase over the “regular” standard deduction if:

A

(additional $1,550)
o 65 or older AND/OR
o Blind

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3
Q

Highest standard deduction that would be available to a TP

A

o MFJ; AND
o TP and Spouse are 65; AND
o TP and Spouse are Blind

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4
Q

General Characteristics of Itemized deductions:

A

o Subtracted from AGI in computing Taxable income
o Unique to each TP (not based on filing status)
o Reported on Schedule A page 2 of 1040

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5
Q

Itemized deduction is usually chosen if:

A

Itemized deduction > standard deduction

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6
Q

Itemized deductions = the Sum of COMMITT

A 
\+Charitable Contributions
\+Other Misc.
\+Misc. Expense (2%)
\+Medical Expenses
\+Interest (certain types)
\+Taxes
\+Theft or Casualty

= Itemized deduction

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7
Q

Threshold defined

A

o “FLOOR”
o Expenses are deductible to extent they GO OVER
 A stated % of AGI
 A stated amount

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8
Q

Ceiling defined

A

o Expenses are deductible UP TO
 A state % of AGI
 A stated amount

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9
Q

Charitable contribution requirements

A

Qualified organization

Cash or Property donated exceeds
value received from the charity

Donations > $250 = written substantiation from Charity

Deductible in the year charity receives Cash or Property (in the year paid)

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10
Q

Not considered a Charitable contribution

not deductible

A

Ordinary payments to Qualified organizations for services rendered (tuition to a parochial school)

Voluntary services
(Except for “out of pocket” costs incurred in the performance of the volunteer work)
(e.g. transportation expenses between home and the site of the work – mileage and parking)

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11
Q

Qualified Charitable Organizations

A 
Public (defined in Code section 501(c)(3)
•	Educational Institution
•	Religious Organizations
•	Hospitals
•	Government

Private
• Veteran Organization
• Fraternal Order

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12
Q

Non-Qualified Organizations

A
  • Foreign charities
  • Political Party Contributions
  • Needy Individuals
  • Civic Leagues
  • Clubs
  • Unions
  • Chambers of Commerce
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13
Q

Deductible in the year charity receives property (in the year paid)
 Deemed Paid when:

 Not Deemed Paid when:

A

Deemed Paid:
Charged to CC (because Charity received the money; not when you pay CC)
Check is in the mail

Not Deemed Paid:
Pledge is made (must be payment in some form)

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14
Q

Allowable deduction (AGI ceiling) for a charitable contribution depends on:

A

Type of donation
• Cash
• Ordinary income (STCG) Property
• LTCG Property

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15
Q

AGI Ceilings for:

Cash
STCG
LTCG

A

Prop. Contr. Amount Pub. Priv.

Cash FMV 50% 30%
STCG Lower of AB or FMV 50% 30%
LTCG FMV *30% 20%

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16
Q

Other Misc. Expenses

A

Not subject to 2% floor

 - Gambling Losses
 - Estate taxes on income "IRD"

*Only two items not subject to 2% floor - virtually all others are.

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17
Q

Gambling Losses

A

Deductible to the extent of winnings (no carryover)
Can’t offset Winnings with Losses
Must report full amount of Winnings as Taxable Income
Losses are Not subject to the 2% limit of AGI
Gambling Winnings – on face of 1040

Professional Gamblers can now deduct non-wagering business expenses on Schedule C

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18
Q

Misc. Expenses

A

Subject to 2% floor “BIT”

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19
Q

The following expenses are deductible as miscellaneous itemized deductions if and to the extent they all together exceed 2% of your adjusted gross income (AGI) (threshold) BIT

A

Business expense of an employee

Investment Costs

Tax Prep./Legal Advice relating to taxable income

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20
Q

Business Expense of Employee

A

Business mileage
Job Travel
AICPA and Union Dues
Uniforms (Pizza Boy) – Not a tux for waiter
Laptop
CPE/Job education (keep or maintain profession; not entering new profession)
Business Use of Home (Sch. C if SE; if home is more convenient)
Appraisal Fees for Charitable contribution
Unreimbursed employee business expense (if entitled to reimbursement, must not deduct)

21
Q

Investment Costs

A

Safety Deposit Box

Advisory Fees (investment counsel) and Newsletters (investment Publications)

IRA custodial fees (Doesn’t include fees to buy stock)

22
Q

Tax Preparation/Legal Advice relating to Taxable Income

Tax preparation advice and costs incurred to collect $ owed by others

A
  • Hiring lawyer to collect alimony or
  • Hiring appraiser to collect insurance claim
  • NOT fees for Wills and Testaments, etc..
23
Q

Subject to 2% threshold meaning:

A

o First 2%  Not Deductible

o Anything Above 2%  Deductible

24
Q

Medical Expenses

A

Deductible once 10% AGI threshold is reached
(Example: If AGI is $100,000, your first $10,000 of medical expenses are not deductible)

o 65 and older 7.5% (soon to be 10% for everyone, however)
o Under 65, 10%
o AMT Medical Expenses are 10% for everyone
o Accident/Disability insurance is not deductible

25
Q

Qualified Medical Expenses

A

o Insurance Premiums for Medical or dental care
o In-patient care (in hospital or nursing home)
o Prescription drugs and insulin (minus insurance reimbursement)
o Medical aids (glasses and hearing aids)
o Travel costs and lodging (costs of going to clinic)
o Modification to accommodate handicap
 Capital costs deductible to extent of excess of increase in value of home
o Automobile adaptive devices

26
Q

Non-Qualified Medical Expenses

A

o Premiums on Life Insurance Policies to cover loss of earnings from injuries and illnesses
o Items for general nutrition and health (vitamins, health club, etc..)
o Nonprescription drugs
o Most cosmetic surgery (except illness, injury, birth defect surgery)
o Medicare portion of SS and SE taxes

27
Q

Medical Expenses paid on behalf of another:

A

Dependent Rules + QR Rules JGRorRS

28
Q

Medical Expense deduction must be taken when:

A

In year paid, regardless of when medical services are rendered

*Exception- CC expenses are deducted in year charged to the card (not in year TP pays CC balance)

29
Q

Insurance Reimbursement for Medical Expenses

A

reduce the deductible amount

30
Q

Medical Expenses Paid for deceased spouse or dependent are deductible when:

A

Are deductible in year paid, regardless if they were paid before or after death. (CC exception)

(Must be for Qualified expenses for a spouse or qualified dependent at time of expenses was incurred or payment was made)

31
Q

Two Types of Deductible Interest on Schedule A:

A

Mortgage Loan Interest

 - Acquisition Debt
 - Home Equity Debt
 - Mortgage Points

Investment Interest

32
Q

Interest that is deductible, but NOT on Sch. A

A 
Business Activity interest  (Sch. C)
Rental Activity Interest (Sch. E)
Educational Interest (page 1 of 1040 - I EMBRACED HEF
33
Q

Mortgage Loan Interest

“Acquisition Debt”

A

Acquisition Debt –
o Periodic interest payments for acquisition debt
o Up to $1,000,000
o Secured by Primary or Secondary Residence
o Used to Buy, Build, or Remodel/Improve a home

Must use proceeds to:
Buy, Build, or Remodel/Improve
(not to pay consumer debt; e.g. pay of CC)

34
Q

Mortgage Loan Interest

“Home Equity Debt”

A

o Periodic interest payments on Home Equity Loans
o Up to $100k
o Secured by Primary or Secondary Residence
o Not necessarily used to Buy or Remodel a home

Can use proceeds for ANY PURPOSE:
 Personal use
 Business use (must deduct on Schedule C, NOT Schedule A
o Only up to 100% of Net Equity (FMV less acquisition debt)

35
Q

Mortgage Loan Interest

“Points”

A

Prepaid Interest on Buying new home = Deductible

Prepaid Interest on Improving home = Deductible

Refinancing Points are amortized over the life of the mortgage

“Interest paid in Advance  Not Deductible in the period paid… Even by cash basis TP (allocation over tax year is required)”

36
Q

Investment Interest

A

Refers to borrowings for personal investments
• Marketable Securities; Margin loans purchasing stock; paying taxable income

Deductible to the extent of reported “Net Investment Income” on tax return

37
Q

Investment Interest Expense Formula

A

Gross Investment Income
(-) Investment Expense in excess of 2% of AGI

= Net Investment Income

38
Q

If Investment Produces Non-taxable income (e.g., state and local bonds), Interest is

A

Not Deductible

interest must be related to taxable investment income

39
Q

Interest on Consumer related debt

A

Not Deductible
o Interest on personal property for personal use
o Interest on tax deficiencies

40
Q

Taxes that can be deducted

A

Personal Property
RE tax
State and Local Income or Sales tax (choose one)
Certain Foreign taxes paid

41
Q

Foreign Taxes Paid

A

Foreign Taxes Paid

 - Foreign Income Tax – Deductible
 - Foreign Real Estate Tax – Deductible
 - Foreign Personal Property Taxes – Not Deductible
 - Foreign Tax Assessments – Not Deductible
      - Add to Basis

“Foreign taxes may be claimed as credit instead (can’t have both)”

42
Q

Taxes that can’t be deducted

A

Fees, Fines, Federal, FICA, FORGET IT!!!!

Taxes paid to Federal Government

Taxes for Gas or Excise

Fees charged by State or Local Governments Generally Not deducted UNLESS:
• Taxes are based on Income; OR
• Taxes are based on Property Values

43
Q

Casualty Loss defined

A

Casualty Loss defined –
o Sudden unexpected unusual in nature event
o Causing TP to lose an Asset; OR
o Causing TP’s Asset value to decline over a time period (not exceeding 30 days)

(Expense incurred for repairs are not deductible. Must be permanent.)

44
Q

What is not a Casualty event:

A

Accidental breakage of items in the home by family

Progressive deterioration (termite, moth, drought)

45
Q

Deductible amount for Casualty Loss formula:

A

Lower of Decrease in FMV of Prop. “OR” Tax Basis
(-)Insurance proceeds
(-)$100 *note this was $500 in 2009 tax year…
(10% of AGI)

=Deductible amount

46
Q

Theft is not “mere misplacement”

A

(it is a criminal act)

47
Q

Deduction timing
o Casualty
o Theft

A

o Casualty  1 year casualty occurred

o Theft  1 year theft is discovered

48
Q

Deductions not Subject to AGI Phase-out COMMITT

A

o Medical
o Casualty
o Gambling
o Investment Interest Expense

Story line You get sick (medical); you die (casualty); children get inheritance. One gambles, the other invests.

REG (11 decks)

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