Module 2 Flashcards
1
Q
Salaries and Wages
A
- Money
- Property
- Cancellation of Debt
- Bargain Purchase: Difference between selling price and FMV will be consider employee’s income
- Guaranteed Payments: Compensation to a partner for services
- Taxable Fringe Benefits
- Portion of life insurance Premiums: Over 50,000 of coverage
2
Q
Nontaxable Fringe Benefits
A
- Life Insurance Proceeds : Interest on deferred payout is fully taxable
- Health Insurance
- De Minimis
- Meals and Lodging: for the employer convenience
- Employer payments to employee’s educational expense: up to $5,250
- Tuition reduction
- Employee Discounts
- Qualified Pension, profit-sharing and stock bonus plan : Payments by employer - Nontaxable , Benefits received - Taxable
- Flexible spending arrangements
3
Q
Tax-Exempt Interest Income
A
- State and Local government Bonds/Obligations
- Bonds of U.S. Possession
- Series EE
- Veterans Administration Insurance: Interest on insurance dividends.
4
Q
Dividend Income Source
A
- Earnings and Profits/current
- Earnings and Profits/accumulated
- Return of Capital
- Capital Gain Distributions
5
Q
Special (lower) tax rate for qualifies dividends
Pg R1-23
A
- Holding period: Stock must be held for more than 60 days during the 120 day period that begins 60 days before the ex-divided date.
- Tax Rates: 0% for (10% and 15% ordinary income tax bracket - 20% (39.6% ordinary income tax bracket) - 15% for most taxpayers
6
Q
Tax-Free Dividend Distributions
A
- Return of Capital
- Stock Split: allocate basis over the total # of shares
- Stock dividend: only when no option of cash or property is available. Same stock - basis is allocated, Different stock - Basis allocated based on FMV
- Life Insurance Dividend
7
Q
State and Local Tax Refunds
A
Added to income only when the taxpayer used the deduction by choosing itemized deduction
8
Q
Payments Pursuant to a Divorce
A
- Alimony - Taxable to recipient, Deducted to contributor
- Child Support - Nontaxable - No deducted
- Property Settlements - Nontaxable
9
Q
IRA Income
A
- Traditional Deductible IRA - funds will be taxable
- Roth IRA - All benefits Nontaxable
- Traditional Nondeductible IRA - Principal - Nontaxable, Accumulated Earnings - Taxable
10
Q
IRA distributions - Penalty and Exceptions
A
- 10% Penalty
- Exception on Penalty
Home buyer - first time 10,000 maximum
Insurance (medical) - Unemployed 12
consecutive weeks. Self-employed
Medical expenses in excess of 10% of AGI
Disability
Education
And
Death
11
Q
Annuities
A
Original investment - nontaxable
Extra income - Taxable
- Taxpayer live longer - fully taxable after collection all the original investment
- Death before full recovery - Unrecoverable original investment becomes and itemized deduction
12
Q
Business Income or Loss
A
Schedule C or C-EZ
13
Q
Farm Income
A
Schedule F
14
Q
Rental Income
A
Schedule E
15
Q
Unemployed Compensation
A
Full amount Taxable
