Lesson 5 (Ch. 8 & 9) Flashcards

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1
Q

Excessive Executive Compensation

A

For the CEO, CFO and three highest compensated executive salaries, compensation up to $1M is deductible each year, anything above that is not.

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2
Q

Hobby Activities

A

For years 2018-2025 (TCJA) expenses for hobby related activities are not deductible; however, income must be reported.

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3
Q

Rental Use Classification

A
  1. Non-taxable rental use - rented less than 15 days
  2. Primarily rental use - rented more than 14 days and personal use is less than the greater of 14 days or 10% of rental days.
  3. Mixed use - rented more than 14 days and personal use is greater than the greater of 14 days or 10% of rental days.
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4
Q

Tax consequences for primarily rental use classification

A

Income is recognized

All allocable expenses are deductible, even if it results in a loss

Ability to claim loss may be limited by passive activity rules

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5
Q

Tax consequences for mixed use rental classification

A

Income is recognized

Allocable expenses are deductible to extent of income

Tier rules from hobby loss expenses apply

2% AGI floor does not apply (as is the case with hobby losses) – the expenses are deducted “above the line”

Unused expenses can be carried forward

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6
Q

Penalty for excess retirement contributions

A

6%

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7
Q

Penalty for early retirement distributions

A

10%

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8
Q

Penalty for “Too little/Too late” distributions (RMD’s)

A

50%

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9
Q

What is considered the sale date for worthless securities

A

Last day of the calendar year in which the security became worthless

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10
Q

The amount of costs that qualify for the child and dependant care credit is the least of the following…

A

Earned income
Actual costs
$3,000 for one qualified individual and $6,000 for two or more qualified individuals

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11
Q

What the requirements to be a qualifying individual for the child and dependant care credit

A

Qualifying child under age 13 or a physically or mentally disabled dependent or spouse.

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12
Q

What are the phaseout limits for the child and dependant care credit?

A

There isn’t one. Ranges from 20-35% based on AGI

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13
Q

American Opportunity Tax Credit

A

The maximum credit available per eligible student is $2,500 per year for first 4 years of postsecondary education.

100% of first $2,000 of qualifying expenses, plus
25% of next $2,000 of qualifying expenses

Student must be pursuing an undergraduate degree or recognized credential, and be taking at least 1/2 of a full time course load.

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14
Q

Lifetime Learning Credit

A

The maximum credit available per house household is $2,000 and is calculated by multiplying 20% by the amount of qualifying expenses (up to $10,000 per year)

Cannot be claimed in same year as AOTC for same student.

Must be taking at least one course to be eligible.

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15
Q

Child Tax Credit phaseouts

A

The credit is phased out by $50 for each $1,000 of AGI above specified thresholds*

$400,000 for married filing jointly (MFJ) taxpayers

$200,000 for married filing separately (MFS) taxpayers

$200,000 for single taxpayers

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16
Q

What is the maximum retirement savings credit?

A

$1,000 per person per year, or

$2,000 on a joint return