R1 Flashcards
What are the requirements for Qualifying Child?
CARES…1. Close Relative 2. Age limit(19 OR 24+college) 3.Residency test (same principal abode as taxpayer 4.Exclude gross income test 5. Support test (child does not support over 50%)
What are the requirements for Qualifying Relative?
SUPORT… 1.Support Test 2. Under gross income limitation (less than $4200)3.Precludes dependency filing 4. Only US Citizens 5.Relative OR Taxpaxer lives with individual for whole year
When is the qualifying widower status used?
Two years after the spouses death & have to have dependent for WHOLE tax year. In the year of spouses death still MFJ
What is the interest earned on Series EE bond?
Interest used to pay tuition & fees from taxpayer, spouse, or dependent enrolled in higher education
What in the interest exclusion on Series EE bond reduced by?
Interest exclusion is reduced by qualified scholarships that are exempt from tax and other nontax payments for edu expenses
What is an Accruable expense?
Services have been received/performed but have not been paid for by end of reporting period
On what date does the G/L on y/e sale of listed stock occur on?
Trade date
What is the equation for an annuity and what amount is taxable income?
Equation: Investment/years= “x”…. anything over “x” amount is included in income
How are early withdrawal penalties calculated from IRA?
- amount is taxed at marginal tax rate 2. Add additional 10% penalty tax for early withdrawal UNLESS it is apart of HIMDEAD: (Homebuyer- first $10k to first home, Insurance- medical, Medical expenses in excess of 10% AGI, Disability, Education, and Death)
What is special about interest on U.S. obligations & interest on income on Fed tax refund?
The interest income on refund is taxable income but the refund itself is not
How is prepaid interest allocated?
Prepaid interest must be prorated for which payment is made… deduct when both incurred and paid
How are personal expenses treated?
Nondeductible from Schedule C, Adjustment to AGI
Name some examples of business expenses
Work uniforms for taxpaxer & their employees, subscriptions for periodicals for patients and continuing edu expenses
What are the uniform capitalization rules applied to?
DM,DL,MOH, off-site storage, repackaging costs
Define a Guaranteed Payment
Salary or other payment to a partner that is not calculated w/ respect to partnership income
What is the formula for QBI?
- Lessor of: 20%TI OR QBI20%| 2. Limitation= Greater of: 50%W2 OR 25%W2 +2.5%* qualified property| 3. P/O= taxable income - threshold(160700S,321400MFS) = “x”, “x” / P/o(50k S, 100k MFJ)
How is ordinary income from S corporation treated?
Ordinary income from S corp is taxable income to the individual or their own tax return but not to SE tax
Define Passive Activity
Passive activity is any activity in which the tax payer does not materially participate. A Net passive activity loss generally may be deducted against other types of income.
What is the mom& pop exception?
Taxpayers may deduct up to $25k per year of net passive losses attributable to rental real estate if they own more than 10% of the rental activity. P/o= 100k-150k. reduced by 50% of excess AGI over 100k.
How is the PAL Cfwd treated?
Any excess would be CFWD indefinitely as a suspended PAL.
The rule limiting the allowability of PAL and credits applies to what org structure
PSC
What are the 2 rules for the inclusion of Social Security benefits?
- If combined income (AGI plus interest on tax-exempt bonds and 50% of SS) > threshold amount –> the amount taxed is the lessor of 1) amount above + 85% of excess of combined income OR 85% of benefits
- If combined income (AGI plus interest on tax exempt bonds and 50% of SS) < Threshold amount –> 1)50% of the benefits OR 50% of the excess of the combined income over the threshold.
Which is included in taxable income?
Unemployment Vs Workers comp
Unemployment
What are the conditions that must be met for tax exemption of accumulated interest on Series EE bonds?
- Purchaser of the bonds must be the sole owner of the bonds (or joint w/ spouse)
- post- 1989 bonds–> the taxpayer is over the age of 24 when issued and used to pay for higher edu
- reduced by tax-free scholarships of taxpayer, spouse, or dependents
If you receive a state tax refund that is greater than the taxes paid, how much is included in income for the CY?
Under the tax benefit rule, the refund up to the amount of taxes paid in the PY will be able to be included on the CY tax return
Is consideration for canceling the lease counted towards rental income?
Yes, counts as prepaid rent
What are examples of costs not required to be capitalized under uniform capitalization rules?
selling, advertising, marketing, research, officer comp
What are the following types of property that the uniform capitalization rules apply to?
- Real or tangible personal property produced by the taxpayer for use in a trade or business
- Real or tangible personal property produced by the taxpayer for sale to customers
- Real or personal property acquired by taxpayer for resale
- . property acquired for resale if taxpayer’s annual gross receipts for preceding 3 yrs exceed 25 mill
What form can a Guaranteed Payments be deducted on?
1065
What form are guaranteed Payments included on as income?
K-1
What is the overall limitation to the QBI deduction?
Lessor of: combined QBI or 20% of the taxpayer’s taxable income in excess of net capital gain
Which is subject to self-employment tax: Guaranteed payments or ordinary income from an Scorp?
GP
What is the tax treatment of net losses in excess of the at-risk amount for an activity?
Any losses in excess of the at-risk amount are suspended and CFWD w/o expiration and deductible against income in future years from that activity.
At risk amount = basis
When is income realized in an nonqualified stock?
Individual reports ordinary income at the date of grant (if has readily ascertainable value) - as if traded on established market
Individuals Basis in stock = exercise price +recognized ord income
Individuals LTCG = SP - adj basis
Employer can deduct ord income that individual recognized
When someone recoeves an ISO, will they have to report compensation in the yr received?
No, no recognition of comp with ISO
Is S corporation income subject to self- employment taxes?
no
What is the individual income tax formula?
Gross income - Adjustments \_\_\_\_\_\_\_\_\_\_\_\_ Adjusted gross Income -STD or Itemized deduction (Greater of 2) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Taxable income before QBI deduction - QBI deduction \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Taxable income
what is the requirement of surviving spouse?
same as qualifying widow(er): can be claimed the 2 years after spouse death and must have dependent child
What is the exclusion for prizes and awards so that they are not included in income?
The exclusion from income applies when the winter is selected for the award without entering into a contest and then assigns the award directly to a governmental unit or charitable organization
What is an example of active participation in passive activity
Rental real estate
How are employer contributions treated in respect to AGI?
only amounts distributed are taxable income
is interest income from US obligations taxable?
yes (like treasury certificates)
How does the employee receiving s nonqualified stock option recognize ord income?
the value of the option if traded on established market
What is not included in income in a defined contribution plan?
Employer contributions and earnings
How much income should be included for rental residence for less than 15 days?
none. prorate if over 15
What is an example of non deductible expense for Schedule c?
no personal expenses are allowed (personal use of automobile, health insurance for owner and family)
What is the excess business loss limitation amount?
259k anything over is carryforward
