Module 4: Tax Implications of Special Circumstances Flashcards
What are the criteria for couples who can file jointly?
Both individuals’ tax years begin on the same day, they are not legally separated on the last day of the year, and neither is a nonresident alien at any time during the year.
What does joint and several liability mean WRT MFJ status?
Each spouse is responsible for the entire tax liability and not just half of the liability due.
On what day of the year is tax filing status dtermined?
On the last day of the year.
What does it means for deductions to be congruous?
Each person must use the same deduction method: standard or itemized.
What is innocent spouse relief?
When an individual is relieved of their spouse’s tax burden if that spouse improperly reported or omitted items from the joint tax return.
What is relief by separation of liability, and what are the requirements?
When an individual allocates any understatement of tax between them and their spouse. The individual is only responsible for their own portion of the underpayment. Must be either no longer married to the spouse with whom the joint return was filed, or not a member of the same household when they filed.
What is equitable relief ?
Not meeting the innocent spouse relief or relief by separation of liability, but still not having to pay.
What is injured spouse relief?
Similar to innocent spouse relief, but filed when the refund on a jointly filed return has been frozen or seized to satisfy some past-due obligation, which in most cases, preexisted the marriage. the spouse can recover their portion of the tax refund.
What familial relationship allows the taxpayer to qualify their member as a dependent even if they don’t live in the same household or assisted living facility?
Parent, and the living facility must be in North America.
What is the maximum gross income for a dependent? How does social security play in?
The maximum is $4,400, and social security is excluded if that is the elder’s only source of income.
What is the minimum that a taxpayer must provide for a dependent?
50% of their support.
What is the tax benefit for an elderly parent?
$500
What is the aging parent tax credit / child and dependent care credit?
$600, and if the qualifying relative is incapable of self-care.
How are medical expenses for elder parents who are eligible dependents treated?
They can be taken as itemized deductions.
What is difficulty of care income? How is it treated?
Wages from a qualified Medicaid facility for providing full time care to a parent in their own home. These wages are excluded from taxable income, but still treated as earned income for IRA contributions.
How are transfers of property incident to a divorce treated for tax purposes?
They are tax free, and no gain or loss is recognized. The property is treated as a gift.
What is done if a beneficiary cannot be removed from a trust?
They must agree for the grantor to be able to create a new trust and then decant the assets to that new trust.
What do some jurisdictions require that a spouse that owes alimony purchase?
A life insurance policy on themselves.
What is the ownership of the interest accrued under a retirement plan during marriage?
Half belongs to the spouse, regadless of whether the rights of the participating employee have vested as of the divorce state in a community property state. In a noncommunity property state, the interest is marital property.
What is used to divide qualified retirement plan assets among spouses?
A qualified domestic relations order.
When must a QRDO be paid?
The earlier of (1) the earliest date that benefits are payable to the participant under the plan, or (2) the later of the date when the participant reaches age 50 or the date on which the participant could start receiving benefits if separating from service.
What is the rule for receiving a QRDO and not having it be taxable as ordinary income?
It must be rolled into another qualified plan or IRA within 60 days.
How are alimonty and separate maintenance payments treated? before and after December 31, 2018??
They WERE deductible for AGI for the payor and includable in the gross income of the payee. They are no longer.
Can alimony payments extend beyond death?
No.
