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Yaeger REG > Mod 35: Individual Taxation Pt. 4 > Flashcards

Mod 35: Individual Taxation Pt. 4 Flashcards

1
Q

AMT has its own…

A

Foreign tax credit

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2
Q

You owe AMT if it is greater than…

A

Regular tax liability - foreign tax credit

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3
Q

Refundable tax credit

A

Get refund even if you didn’t owe any tax liability

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4
Q

Earned income credit is…

A

A refundable credit

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5
Q

AMT tax credit does not…

A

Does not reduce AMT taxes

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6
Q

If not an adjustment or preference item is…

A

Deductible for AMT

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7
Q

Charitable contributions are…

A

Deducted for both AMT and regular taxes

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8
Q

LT capital gains is…

A

Not a preference or adjustment for AMT

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9
Q

AMT computation 6 steps

A 
1 regular taxable income 
\+/- adjustments + tax preferences 
2 = Alternative minimum taxable income
- exemption amount
3 = alternative minimum tax base
X 26% or 28%
4 = Tentative before foreign tax credit
- AMT foreign tax credit
5 = Tentative minimum tax
- Regular tax liability
6 = AMT if positive
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10
Q

In the calculation of AMT, the alternative minimum tax base is multiplied by 26% or 28% unless…

A

Reduced rates for Qualified dividends and capital gains

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11
Q

In the calculation of AMT, regular tax liability (which is subtracted in 5th step from tentative minimum tax). The regular tax liability is…

A

Reduced by regular foreign tax credit

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12
Q

AMT adjustments:

Real property 2

A

1 Placed in service after 1986 and before 1999

2 difference between regular tax depreciation and straight line depreciation over 40 years

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13
Q

The current MACRS rates on depreciation after 1999

A

27.5 years or 39 years

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14
Q

AMT adjustments:

Personal property placed in service after 1986…2

A

1 Difference between regular tax depreciation = 200% declining
balance method

2 And depreciation using 150% declining balance method

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15
Q

AMT adjustments:

Excess of stock’s FMV over…

A

Amount paid upon exercise of incentive stock options

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16
Q

Excess of stock’s FMV over amount paid upon exercise of incentive stock options, is…

A

Income for AMT, but not for regular taxes

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17
Q

AMT adjustments:

Medical expense deduction

A

1 Computed using 10% floor

2 must recompute adjustment if used 7.5% for regular taxes

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18
Q

AMT adjustments:

Home equity loan

A

add back as adjustment if used for reason other than home improvements

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19
Q

AMT adjustments:

No deduction is allowed for (must add to AMT as an adjustment)…4

A

1 personal
2 state
3 local or
4 property taxes

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20
Q

AMT adjustments:

Miscellaneous deductions…

A

Subject to 2% floor are added back as adjustment

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21
Q

AMT adjustments:

Long term contracts 2

A

1 Must use percentage completion method

2 add back excess income of percentage completion method over
The completed contract method

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22
Q

AMT Preference items:

Tax exempt interest on private activity bonds…2

A

1 Added back as preference

2 unless issued in 2009 or 2010

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23
Q

Under AMT:

Preferences are…

Adjustments are…

A

Preferences always +’s

Adjustments are +’s and -‘s

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24
Q

AMT Preference items:

Accelerated depreciation…

A

On real property and leased property placed into service before
1987

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25
Q

AMT Preference items:

Excess of accelerated depreciation…

A

Over straight line

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26
Q

What was the name for accelerated depreciation of property placed in use prior to 1987?

A

ACRS

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27
Q

AMT:

Tax credits are generally…

A

1 Allowed to reduce regular tax liability

2 only to extent regular tax liability exceeds tentative tax liability

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28
Q

AMT:

All nonrefundable personal credits are…

A

Offset both regular tax liability and alternative minimum tax

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29
Q

AMT:

Minimum tax credit

A

Amount of AMT paid net of exclusion preferences

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30
Q

AMT:

Minimum tax credit is allowed as…

A

Credit against regular tax liability in future years

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31
Q

AMT tax credit 2 requirements

A

1 credit can be carried forward indefinitely, but can’t be carried back

2 can only be used to reduce regular tax liability not AMT liability

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32
Q

With the child tax credit, a portion of it…2

A

1 Is refundable

2 the other portion is nonrefundable

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33
Q

Self employment tax is imposed on individuals who work for themselves. These include individuals that are…3

A

1 sole proprietors

2 independent contractors

3 general partners

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34
Q

Interest income goes on…

A

Schedule B

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35
Q

Charitable contributions go on…

A

Schedule A

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36
Q

Rental income goes on…

A

Schedule E

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37
Q

Self employment tax deductibility

A

Partially deductible from gross income in arriving at AGI

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38
Q

Self employment tax is…

A

Social security for self-employed individuals

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39
Q

There is no tax if self-employment earnings are…

A

Less than $400

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40
Q

Individuals normally deduct what percentage of self employment tax?

A

Deduct 50% total self-employment tax for AGI

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41
Q

Child and Dependent Care Credit:

The credit may vary from…

A

20%-35% of amount paid for qualifying household

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42
Q

Child and Dependent Care Credit eligibility requirement:

applies to dependent care expenses incurred to…

A

Enable taxpayer to be gainfully employed or look for work

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43
Q

Child and Dependent Care Credit:

Eligibility requirement, married tax payer

A

Married taxpayer must file joint return

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44
Q

Child and Dependent Care Credit:

Eligibility requirement, if divorced or separated…

A

Credit available to parent having custody for longer time during the
year

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45
Q

Child and Dependent Care Credit:

Eligibility require,net, a qualifying individual must have…

A

The same principal place of abode as taxpayer for more than 1/2
Of tax year

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46
Q

Child and Dependent Care Credit:

Qualifying individual 2

A

1 taxpayer’s qualifying child under age 13

2 dependent or spouse who is physically or mentally incapable of
self-care

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47
Q

Child and Dependent Care Credit:

Qualifying expenses, are expenses incurred for…2

A

1 care of qualifying individual and

2 household services that partly care for qualifying individual
To enable taxpayer to look for work/work

48
Q

Child and Dependent Care Credit:

Maximum amount of expenses that qualify for credit is least of…2

A

1 actual expenses incurred or

2 $3,000 for one, $6,000 for two or more qualifying individuals

49
Q

Earned income credit is a…

A

Refundable tax credit for eligible low income workers

50
Q

What would qualify you for an earned income credit?

A

Qualifying child would qualify you

51
Q

Foreign tax credit:

Foreign income taxes on US taxpayer’s can either be…2

A

1 deducted or

2 used as credit by taxpayer each year

52
Q

Child tax credit:

The amount of the credit is…

A

$1,000 per qualifying child

53
Q

Child tax credit (CTC):

A qualifying child is a U.S. citizen or resident who is the taxpayer’s child, eligible foster child, stepchild, step-sibling or descendent who is…

A

Is less than 17yrs old at end of calendar year

54
Q

A child tax credit is subject to…

A

Phase out

55
Q

American Opportunity Credit

A

For first 4 years of postsecondary school program

56
Q

American Opportunity credit can be used towards…4

A

1 qualified tuition, fees, books

2 can’t be used towards room and board

57
Q

40% of the American Opportunity credit is…

A

Refundable

The remaining balance is nonrefundable

58
Q

For tax year, the tax payer can choose between…2

A

1 The American Opportunity Credit (AOC) credit
or lifetime learning credit

2 can’t use both

59
Q

Lifetime Learning credit is a…

A

Nonrefundable 20% tax credit available up to $10,00 qualified tuition

60
Q

Lifetime learning credit can be claimed…

A

Unlimited number of years

61
Q

Both Lifetime Learning credit and AOC credit are subject to…

A

Phase out

62
Q

For both lifetime leaning and AOC credit, if a student is claimed as a dependent of another taxpayer…

A

Only the taxpayer may claim education credit for student’s qualified tuition and related expenses

63
Q

An individual whose regular and alternative minimum tax liability is not sufficiently covered by withholding on wages must…2

A

1 Pay estimated tax in quarterly installments

2 or be subject to penalty

64
Q

For 2013, individuals (other than high income individuals) will incur no penalty if the: amount of tax withheld + estimated payments

Are at least equal to the lesser of…2

A

1 90% of current year’s tax or

2 100% of prior year’s tax

65
Q

For 2013, individuals (other than high income individuals) will incur no penalty if the: amount of tax withheld + estimated payments

When 100% of prior year’s tax is used, if you had no tax…

A

You don’t need to make estimated payments

66
Q

For 2013, high income taxpayers (AGI over $150,000) will incur no penalty if the: amount of tax withheld + estimated payments

Are at least equal to the lesser of…2

A

1 90% of current year’s tax or

2 110% of prior year’s tax

67
Q

Estimated tax payments:

Generally no penalty if…3

A

1 total tax due is under $1,000

2 taxpayer had no liability for prior year

3 IRS waives penalty because failure to pay is result of casualty
Or disaster

68
Q

An automatic six month extension of time for filing the return can be obtained by…2

A

1 filing form 4868 and

2 paying estimated tax due

69
Q

Taxpayer may begin tax litigation in any…3 courts

A

1 U.S. Tax Court

2 U.S. district courts or

3 U.S. court of federal claims

70
Q

Tax court 2

A

1 court of national jurisdiction

2 hears only tax cases

71
Q

Although a jury trial is not available, a major advantage of Tax Court is that…

A

Tax does not have to be paid before taxpayer goes to court

72
Q

Tax Court issues regular and memo decisions which both can be used as…

A

Precedent

73
Q

The IRS has adopted an acquiescence policy for regular Tax Court decision that?..

A

It loses

74
Q

Acquiescence indicates that the IRS will…

A

Follow decision in future situation involving similar facts/issues

75
Q

Non Acquiescence indicates that IRS will…

A

Not follow previous court decision and

Is expected to litigate

76
Q

Decisions of Tax Court are appealed to…

A

U.S. Court of Appeals

77
Q

Golsen Rule

A

Tax court will follow law of circuit to which case is appealable

78
Q

A taxpayer may take a case to the Small Tax Case Division if the disputed amount does not exceed…

Small Tax Case Division decisions are…

A

$50,000

Binding

79
Q

Each state has at least 1 U.S. district court which is independent of other district courts. District courts adjudicate…

A

All types of cases, not just tax cases

80
Q

District court is the only court in which…

A

A jury trial is available

81
Q

Unlike a proceeding in the Tax Court, taxpayer’s must first pay tax and then…

A

File suit in district court for refund

82
Q

Decisions of district court are appealed to…

A

U.S. Court of Appeals

83
Q

The losing party in U.S. Court of appeals may…

A

Appeal to US Supreme Court

84
Q

U.S. Supreme Court normally hears tax cases only if they involve…

A

Conflict regarding treatment of an item between circuits of the
Appeals courts

85
Q

Decisions of Supreme Court are the law of the land and take…

A

Precedence over all other court decisions

86
Q

Normal period for assessment of tax deficiency is the later of…

A

1 three years after due date of return or

2 three years after return is filed

87
Q

Assessment period is extended to 6 years if…

A

Gross income omission exceed 25% of gross income stated on

The return

88
Q

There is no time limit for assessment if…3

A

1 no return is filed

2 return is fraudulent

3 there is willful attempt to evade taxes

89
Q

Income tax refund claims are made on form…

A

Form 1040X

90
Q

Refund claim must be filed within the later of…2

A

1 within 3 years from date return was filed or

2 two years from payment of tax

91
Q

If return is filed before due date, the return is treated as…

A

Filed on due date

92
Q

The 3 year period for claims of refunds is extended to 7 year period under the Statute of Limitations for claims resulting from…

A

1 business bad debts

2 worthless securities

93
Q

If IRS fails to act on refund claim within 6 months, the taxpayer may…

A

Treat refund claim as disallowed

94
Q

Life time learning credit is not available on a per student basis, it’s available on a…

A

Per taxpayer basis

95
Q

If understate gross income by 25%, the statute of limitations…

A

Extends from 3 years to 6 years

96
Q

Form 1045 is for

A

Net operating loss carryback

97
Q

To claim refund for erroneously paid income taxes use form…

A

Form 1040X

98
Q

Form 843 is used for…

A

Getting refund from withholding of taxes

99
Q

Taxpayer penalties may be imposed for…3

A

1 late filing

2 failure to file

3 late payment of tax

100
Q

Tax payer penalties:

Late filing or failure to file penalty

A

5% of net tax due per month (up to 25%)

101
Q

Tax payer penalties:

Late payment of tax penalty is…

A

0.5% of net tax due per month (up to 25%)

102
Q

Tax payer penalties:

For returns not filed within 60 days of due date (including extensions), the IRS may assess a minimum late filing penalty which is the lesser of…

A

$100 or amount of net tax due

103
Q

Tax payer penalties, accuracy related penalty of 20% of underpayment applies if under payment of tax is attributable to:

Negligence or…

A

Disregard of rules and regulations

104
Q

Tax payer penalties, accuracy related penalty of 20% of underpayment applies if under payment of tax is attributable to:

Any substantial understatement of…

A

Income tax

105
Q

Tax payer penalties, accuracy related penalty of 20% of underpayment applies if under payment of tax is attributable to:

Any substantial valuation…

A

Valuation overstatement

106
Q

Tax payer penalties, accuracy related penalty of 20% of underpayment applies if under payment of tax is attributable to:

Any substantial overstatement of…

A

Pension liabilities

107
Q

Tax payer penalties, accuracy related penalty of 20% of underpayment applies if under payment of tax is attributable to:

Any substantial gift or…

A

Estate tax valuation understatement

108
Q

Tax payer penalties:

Accuracy related penalty does not apply if…

A

Underpayment is due to reasonable cause

109
Q

Tax payer penalties:

Substantial understatement of income tax penalty applies if understatement exceeds the greater of…2

A

1 10% of tax due or

2 $5,000 ($10,000 for most corporations)

110
Q

Substantial understatement income tax penalty can be avoided if…2

A

1 adequate disclosure of position has reasonable basis or

2 substantial authority of position taken

111
Q

Substantial valuation misstatement penalty may be imposed if the value (or adjusted basis) of property stated on return is…

A

150% or more of amount determined to be correct

112
Q

Substantial overstatement of pension liabilities penalty applies if amount of stated pension liabilities is…

A

200% or more of amount determined to be correct

113
Q

Gift or estate tax valuation misstatement penalty applies if the value on gift or estate tax property is…

A

50% or less of amount determined to be correct

114
Q

Separate accuracy related penalty on tax shelter transactions 2

A

1 30% of tax understatement if failure to disclose

2 20% of tax understatement if disclose

115
Q

Separate accuracy related penalty on tax shelter transactions, the penalty may be waived for…

A

Reasonable cause if tax payer made accurate disclosure

116
Q

Civil fraud penalty

A

75% of underpayment attributable to fraud

117
Q

Does the accuracy related penalty apply to portion of underpayment subject to fraud penalty?

A

No

Yaeger REG (77 decks)

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