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Becker REG > R1 > Flashcards

R1 Flashcards

1
Q

Due date for return

A

April 15

*automatic 6 month extension for filing only

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2
Q

Qualifying Widow(er) (Surviving Spouse) with dependent child requirements

A
  1. have a qualifying dependent child
  2. child must live for the WHOLE year
  3. pay for over 50% of the household costs
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3
Q

Head of Household

A
  • individual must live for over HALF of the year and falls into these categories:
    1. single mother
    2. nursing home for parents (if they don’t live with you, you must pay costs for entire year of residence)
    3. dependent relatives (no freeloading friends)
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4
Q

Spouse as Personal Exemption on a Separate Return

A
  1. spouse has no income

2. spouse cannot be claimed by another taxpayer

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5
Q

Phase-Out of Personal and Dependency Exemptions

A

2% for every $2,500 increment over limit

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6
Q

Qualifying Child Requirements

A 
C lose relative
A ge (under 19 or 24 if full-time college student) (5 different months must be spend at college)
R esidency (primary residence) 
E liminate Gross Income Test
S upport test changes
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7
Q

Qualifying Relative Requirements

A

S upport test ( > 50%)
U nder exemption amount ($3,950) (TAXABLE income)
P recludes filing joint unless filing for a refund
O nly citizends of US or residents of US, Mexico, or Canada
R elative
T axpayer that lived with the individual for the entire year

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8
Q

General Rule - Custodial Parents

A

parent who has custody of the child for the greater part of the year takes the exemption

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9
Q

Multiple Support Agreements

A
  1. aggregate must be over 50%

2. claiming individual must contribute at least 10%

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10
Q

Four types of income

A
  1. Ordinary
  2. Portfolio
  3. Passive
  4. Capital
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11
Q

Partially Taxable Fringe Benefits - Life Insurance Premiums

A

*premiums above the first $50,000 of coverage are taxable income to the recipient

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12
Q

Nontaxable Fringe Benefits

A
  1. medical insurance
  2. life insurance proceeds
  3. de minimis fringe benefits
  4. meals and lodging
  5. employer payment of employee’s education expenses
  6. qualified tuition reductions
  7. qualified pension, profit-sharing, and stock bonus plans (benefits are taxable when distributed)
  8. flexible spending arrangements
    * *up to $2,500 and expires 2 1/2 months after year end
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13
Q

Taxable Interest Income

A
  1. federal, industrial, and corporate bonds
  2. premiums received for opening a savings account
  3. interest paid for late payment of a tax return
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14
Q

Tax Exempt Interest Income

A
  1. state/local bond interest

2. Series EE Bonds (must be used for higher education and taxpayer must have ownership)

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15
Q

Kiddie Tax

A

First $1,000 excluded
Second $1,000 taxed at child’s rate
Thereafter at parent’s rate

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16
Q

Is forfeited interest a deduction or an adjustment?

A

adjustment

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17
Q

Tax-Free Distributions

A
  1. stock dividends
  2. stock splits
  3. return of capital
  4. life insurance dividends
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18
Q

Requirement to include state refund from prior year in income

A
  1. itemized last year
    AND
  2. received a refund

*amount is the lesser of the refund or the amount by which the itemized deduction exceeded the standard deduction

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19
Q

Is alimony income for the receiving spouse?

A

Yes

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20
Q

Is alimony a deduction or an adjustment for the paying spouse?

A

adjustment

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21
Q

Is child support included in income?

A

No

*look for what percentage is excluded past the age of 18

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22
Q

How are property settlements treated persuant to a divorce?

A

Nontaxable

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23
Q

For Schedule C, which method must be used for inventory?

A

accrual method

24
Q

Nondeductible expenses for Schedule C

A
  • federal income tax
  • salary paid to you
  • personal portion of other expenses
  • bad debt for cash basis
  • charitable contributions
25
Q

Two taxes on self-employment income

A
  1. income tax

2. Federal self-employment tax

26
Q

Net Operating Loss for Individuals

A

*can offset any other type of income
Carryback 2
Carryforward 20

27
Q

Uniform Capitalization Rules

A

Capitalized

  • direct materials
  • direct labor
  • manufacturing overhead

Period Expense

  • R&D
  • selling
  • general
  • administrative
28
Q

Long-Term Contracts for Schedule C

A
  • requires use of % of completion unless:
  • *small contractors
  • *home construction contractors
  • *professional services
  • *services performed under warranty and maintenance
29
Q

Cost-to-Cost Method

A

costs incurred in period / total expected costs

30
Q

Gross Income Recognition Method for LT Contracts

A

Cost-to-Cost % times contract price (cumulative)

31
Q

Farming Income

A

Schedule F
Cash Basis (most)
**inventories of produce, livestock, are not considered

Accrual Basis
**must be used and maintained

32
Q

IRA Income

A

*cannot be withdrawn until the individual reaches the age of 59 1/2

33
Q

IRA Income Penalty

A

10% for early withdrawal

34
Q

IRA Income Penalty Exclusions

A 
H ome buyer (1st time)
I nsurance (medical)
M edical expenses
D isability 
E ducation 
a nd
D eath
35
Q

Annuities should be treated like _____

A

Depreciation (i.e. portion is recovered principle)

36
Q

Basic Formula for Net Rental Income/Loss

A

Gross Rental Income
Prepaid Rental Income
Rent Cancellation Payment
Improvement In-Lieu-of Rent

37
Q

Rules for Vacation Home

A

Rented less than 15 days
**rental income is excluded
Rented more than 15 days
**pro rate expenses

38
Q

Rental Use Expenses are limited by

A

Rental income; cannot be a rental loss

39
Q

Passive Activity Losses

A
  • net passive activity loss cannot be deducted
  • carry forward without limit
  • suspended losses are used to offset passive income in future years
  • become fully tax deductible in the year the property is sold
40
Q

Mom and Pop Exclusion

A

Rental Activity Income with Active Participation

  • $25,000 can be deducted
  • phased out by 50% of the excess over $100,000
41
Q

Rental Income/Loss is what type of income

A

Passive

42
Q

Is rental activity for a real estate professional passive or active?

A

Active so long as:

  • 50% of services are performed in real estate
  • performs more than 750 hours for real property services
43
Q

Is unemployment compensation taxable?

A

Yes

44
Q

Social Security Income (general income exclusion rules)

A

Low Income = 0%

High Income = 85% (15% was deducted out so this amount should be excludable)

45
Q

Taxable Miscellaneous Income

A

Prizes and awards
Gambling Winnings and Losses
Business Recoveries
Punitive Damages

46
Q

Partially Taxable Miscellaneous Items

A
  1. Scholarships for Degree-Seeking Student
    * *excludable up to amount spent on tuition, fees, books, and supplies
    * *no services can be performed
47
Q

Nontaxable Miscellaneous Items

A

Life Insurance Proceeds (interest income is taxable though)
Gifts and Inheritanes
Medicare Benefits
Workers compensation
Personal (Physical) Injury or Illness Award
Accident Insurance

48
Q

unemployment benefits vs. workers compensation

A

unemployment = taxable

worker’s compensation = nontaxable

49
Q

Are punitive damages included in gross income?

A

Yes

50
Q

Employee Stock Option Types

A

Qualified Options
**Incentive Stock Option (ISO)
**Employee Stock Ownership Plan (ESOP)
Nonqualified

51
Q

Taxation for Nonqualified Employee Stock Options

A

With Ascertainable Value = taxed at grant
**ordinary income for FV of option
**basis = taxable income recognized + exercise price
Without Ascertainable Value = taxed at exercise
**ordinary income for difference between FV and option price
**basis = exercise price + ordinary income

52
Q

Employer taxation for nonqualified employee stock options

A

deductible in the year in which the employee reports income

53
Q

Taxation for Qualified Employee Stock Options

A

ISO

  • taxed when ultimately sold
  • exercise price may not be less than the FMV of the stock
  • employer gets no deduction
  • basis = exercise price

ESOP

  • taxed when ultimately sold
  • cannot be sold to someone owning more than 5% combined voting power
  • employer gets no deduction
  • basis = exercise price
  • exception; income if option price is less than the FMV of the stock on grant date
54
Q

Employer Payment of Employee’s Educational Expenses

A

*limited to $5,250 and is nontaxable up to that amount

55
Q

Conditions needed to exclude prize money from gross income

A
  1. did not enter into the competition

2. all proceeds go to charity

56
Q

Qualified Dividend Holding Period Requirement

A

60 days

Becker REG (9 decks)

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