R1-Gross Income Flashcards
1
Q
Wages – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
2
Q
Interest – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
3
Q
Dividends – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
4
Q
State Tax Refund – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
5
Q
Alimony Received – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
6
Q
Business Income – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
7
Q
Capital Gain/Loss – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
8
Q
IRA Income – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
9
Q
Pension and Annuity – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
10
Q
Rental Income/Loss – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
11
Q
K-1 Income/Loss – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
12
Q
Unemployment Compensation – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
13
Q
Social Security Benefits – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
14
Q
Other Income – Gross Income? Adjustment? Itemized Deduction
A
Gross Income
15
Q
Education Expense – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
16
Q
IRA – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
17
Q
Student Loan Interest Expenses – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
18
Q
Tuition & Fee Deduction – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
19
Q
Health Savings Account – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
20
Q
Moving Expenses – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
21
Q
What is the Exemption for 2014 per Taxpayer, Spouse, Dependent?
A
Itemized Deduction
22
Q
Self-Employment Health Insurance – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
23
Q
Self-Employment Retirement – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
24
Q
Interest Withdrawl Penalty – Gross Income? Adjustment? Itemized Deduction
A
Adjustment
25
One Half Self Employment Tax -- Gross Income? Adjustment? Itemized Deduction
Adjustment
26
Alimony Paid -- Gross Income? Adjustment? Itemized Deduction
Adjustment
27
Medical in excess of 10% of AGI -- Gross Income? Adjustment? Itemized Deduction
Itemized Deduction
28
State/Local Taxes -- Gross Income? Adjustment? Itemized Deduction
Itemized Deduction
29
Interest Expense -- Gross Income? Adjustment? Itemized Deduction
Itemized Deduction
30
Charity -- Gross Income? Adjustment? Itemized Deduction
Itemized Deduction
31
Casualty/Theft (in excess of 10% of AGI) -- Gross Income? Adjustment? Itemized Deduction
Itemized Deduction
32
Miscellaneous (in excess of 2% of AGI) -- Gross Income? Adjustment? Itemized Deduction
Itemized Deduction
33
Is there an adjustment for Foreited Interest? What is the Penalty?
Bank credits the interest to the taxpayers' account and then removes certain interest as a penalty for withdrawing the funds before maturity. This is an adjustment.
34
How is Dividend Income taxed?
Source determins taxability.
35
Dividends: Earnings & Profits/Current is distributed by
Current Year End
36
Dividends: Earnings & Profits/Accumulated is distributed by
Distribution Date
37
Dividends: Return on Capital is taxed as
No earning & profit
38
Dividend: Capital Gains Distribution
No Earnings & Profits/No Basis
39
Taxable Dividends: Cash is taxed by
Amount Received
40
Taxable Dividends: Property is taxed by
Fair Market Value
41
What type of Dividends get a Special (Lower) Tax Rate?
Qualified Dividends - Stock must be held for more than 60 days during the 120 dya period that begins 60 days before the ex-dividend date (the date on which a purchase share no longer is entitled to any recently declared dividends)
42
What are the Tax Rates for Dividends in 2014 for Low, Most, and High Income Taxpayers?
15% for Most Taxpayers ﾅ 0% for Low Income (those in 10/15% ordinary income) ﾅ 20% for High Income Taxpayers (those in the 39.6% ordinary income)
43
Are tax-free distributions exempt from Gross Income
Yes
44
Name 4 types of Tax Free Distributions for Dividends
1. Return of Capital - 2. Stock Split - 3. Stock Dividends (unless cash or other property option/taxable FMV) - 4. Life Insurance Dividend
45
Return of Capital Exists when a company distributes funds but has no _______
Earnings and profits
46
What are the 3 types of Dividends? Describe them?
Taxable Dividends, Tax-Free Distribution, and Capital Gain Distribution
47
Capital Gains Distribution are distributions by a corporation that has no ________ and shareholder has ___________
Capital Gains Distribution are distributions by a corporation that has no earning & profits and shareholder has recovered his or her entire basis.
48
What is the Medicare Tax?
Certain Unearned Income is subject to 3.8% Medicare Tax. Tax is levide on the lesser of Taxpayers net investment income or excess of modified AGI for the tax year over the threshold of $200,000.
49
Taxable or not? Itemized in prior yaer = state or local refund is __________
Itemized in prior yaer = state or local refund is taxable
50
Taxable or not? Standard deduction used in prior year = _________ state or local refund
Standard deduction used in prior year = nontaxable state or local refund
51
1040EZ is synomous with what deduction
Standard
52
Interest Income for State or Local Refund is or isn't taxable
Interest Income is Taxable
53
Alimony/Spousal Support is taxable or not taxable?
Taxable
54
What are the 6 things needed to be deemed Alimony under Tax Law?
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55
Is Child Support taxable or not taxable?
Nontaxable to Ex-Wife receiving the money
56
When husband pays Alimony and Child Support - Where does the Payment go first?
Payment always goes to Child Support first, then when fully met, it goes to Alimony
57
Does the Deadbeat Dad loses adjustment for alimony?
Yes
58
Property Settlement is taxable or not taxable?
Not Taxable
59
Net Income from self-employment is computed on _______
Schedule C. The net income from the sole properiorship is then transferred to Form 1040 as one amount
60
Schedule C - What is Part I? What is Part II?
Part I is Income. Part II is Expenses.
61
Schedule C - What is Part III? What is Part IV?
Part III is Cost of Goods Sold. Part IV is Information on your Vehicle. Part V is other expenses.
62
Schedule C - How is inventory booked in Cost of Goods Sold in Part III
Must use Accrual Method for Inventory for Cost of Goods Sold
63
Gross Income - Property is taxed by
Fair Market Value
64
Cancellation of debt is income? Expense? Nondeductable expense?
Gross Income
65
Expense or Nondeductable Expense (on Sch C)? Cost of Goods Sold
Expenses
66
Expense or Nondeductable Expense (on Sch C)? Salaries and commissions paid to others
Expenses
67
Expense or Nondeductable Expense (on Sch C)? Salaries and Commissions paid to yourself
None. You are taxed on "Net Profits"
68
Expense or Nondeductable Expense (on Sch C)? State or Local Business Taxes Paid
Expenses
69
Expense or Nondeductable Expense (on Sch C)? Office Equipment
Expenses
70
Expense or Nondeductable Expense (on Sch C)? Actual Automobile Expenses
Expenses
71
How much can you automobile depreciation can you claim on your taxes
Limited to only that portion used for business
72
What kind of Automobile expenses can you claim?
Actual Automobile Expenses (depreciateion expense is limited to only that portion used for business) or Standard Milerage Rate (56c in 2014)
73
Expense or Nondeductable Expense (on Sch C)? Business Meal and Entertainment Expenses. What percent?
Expensed. 50% and 100% may be deducted as an itemized deduction for charitable contributions.
74
Expense or Nondeductable Expense (on Sch C)? Depreciation of business assets.
Expenses
75
Expense or Nondeductable Expense (on Sch C)? Interest expense on business loans
Expenses. Interest expenses paid in advance by cash basis taxpayer cannot be deducted until the tax year/period to which the interest relates.
76
Expense or Nondeductable Expense (on Sch C)? Bad debts actually written off for an accrual basis taxpayer only.
Direct writeoff method, not the allownace method, is used for tax purposes
77
Expense or Nondeductable Expense (on Sch C)? Employee Benefits
Expenses.
78
Expense or Nondeductable Expense (on Sch C)? Legal and Professional Services
Expenses.
79
Expense or Nondeductable Expense (on Sch C)? Salaries paid to the sole proprietor
Nondeductible expense (They are considered a "draw")
80
Expense or Nondeductable Expense (on Sch C)? Federal Income Tax
Nondeductible expense
81
Expense or Nondeductable Expense (on Sch C)? Personal Portion of Auto, Travel, Vacation Expenses
Nondeductible expense
82
Expense or Nondeductable Expense (on Sch C)? Personal meals and entertainment expenses
Nondeductible expense
83
Expense or Nondeductable Expense (on Sch C)? Interest Expense
Nondeductible expense. Itemized deduction if mortgage interest or investment interest is paid
84
Expense or Nondeductable Expense (on Sch C)? State or Local Tax Expense
Nondeductible expense. Report as an itemized deduction on Schedule A
85
Expense or Nondeductable Expense (on Sch C)? Health Insurance of a Sole Proprietor
Nondeductible expense. It is reported as an adjustment to arrive at AGI
86
Expense or Nondeductable Expense (on Sch C)? Bad debt expense of a cash basis taxpayer
Nondeductible expense
87
Expense or Nondeductable Expense (on Sch C)? Charitable Contributions
Nondeductible expense
88
What are the two taxes on Net Business Income
Income Tax and Federal Self-Employment (S/E) Tax (Social Security)
89
Can you deduct business loses against other sources of income? Carryover/Carryback?
Yes. 2 years back then 20 years forward.
90
Can Husband and Wife who operate a business together file seperetly or partnership income tax?
aaaaa
91
What is the Uniform Capitalization Rules?
When you make inventory, you have to capitlizate all the direct material, direct labor, and factory overhead
92
What are the 3 rules for Capitalizing Inventory?
Direct Materials, Direct Labor, Factory Overhead.
93
Whare are the 4 rules for Period Expenses
Selling, General, Administrative, Research & Development.
94
How is income recognized for long term contracts?
Percentage of Completion
95
What are some exceptions for income recognition for Long Term Contracts
Small Contractors, Home Construction Contractors, Long Term Construction Contract, Services provided by architect, engineer, designers, construction manageres, etc. PgR1-31
96
What other methods to determine taxable income other than Long Term Contract can Small Contractors use?
Completed Contract Method,
97
How is the Production Period Defined for Cash-Basis taxpayers?
Date on which the contractor incurs cost is Start Date. End Date is when the contract is complete (per contract) or 95% complete under contract
98
What is a calculation for Percentage of Completion Method Income Recognition
Cost-to-Cost Method (to determine percentage) & Gross Income Recognition Calculator.
99
What is the Cost to Cost Method?
Ratio of Total Cumulative Costs incurred to date at the end of tax year divided by total expected costs to be incurred under the contract. This determines percentage complete.
100
What is the Gross Income Recognition Calculator?
Multiply the ratio determined using the Cost-to-Cost Method by the total contract price and subtract the amount of income that was recognized in prior years. Builds cumulatively
101
In Longterm Contracts - Corporate earnings and profits must be calculated using the ___ method
Percentage of Completion
102
In Longterm Contracts - Can you change accounting method?
No
103
What portion of Social Security do you pay as Self-Employed?
Both.
104
What is the difference in Schedules for Self Employed and Farms?
Schedule F for Farms.
105
For Farmers- Inventories of produce, livestock, etc considered inventory for Cash Basis Taxpayers?
No. Expense Inventory.
106
For Farmers- Inventories of produce, livestock, etc considered inventory for Accrual Taxpayers?
Yes. Must use inventory.
107
What is Gains and Losses on Disposition of Property?
Amount Received minus Adjusted Basis of Asset Sold = Gain or Loss Realized
108
What is IRA Income?
Withdrawing funds from IRA
109
When can IRA be withdrawn?
59 1/2 years old
110
What happens if you withdraw from your IRA early?
10% penalty tax on top of any increase in regular income tax
111
How is a regular IRA taxed?
Funds will be taxed as ordinary income when received.
112
How is Roth IRA taxed?
Nontaxable
113
How is a Traditional Nondeductible IRA taxed?
Principle is not taxable. Accumulated earnings are taxable when withdrawn.
114
What are the Exceptions to the Roth IRA 10% Penalty Tax
H I M D E A D - Home Buyer, Insurance (Medical) if unemployed 12 consecutive weeks / self employed, Medical Expenses in excess of 10% of AGI, Disability, Education, and, Death
115
Annutieis are treated as
Depreciation
116
Annuities - If you live longer than Actuarial Payout Period?
Fully Taxable
117
Annuities - If you die before the Actuarial Payout Period?
The unrecovered portion is a miscellenous itemized deduction on the annuitants final income tax return, not subject to 2% of AGI floor.
118
What type of passive income goes on Schedule E?
Rental Real Estate, Royalties... (The following are from K-1s) Partnership & Limited Liability Companies, S Corporations, Estates, Trusts.
119
What is the basic formula for net rental income or loss?
Gross Rental Income + Prepaid Rental Income (Nonrefundable Deposit/ Last Month Rent) + Rental Cancellation Payment + Improvement in Lieu of Rent - Rental Expenses.
120
How many days do you need for a Vacation Home to be treated as a Vacation Home?
15 or more
121
How are expenses treated if Vacation Home is rented more than 15 days?
Prorated
122
If Rented less than 15 days, is Rental Income included in your income
Yes
123
Rental Use Expenses are deductible only to the extent of _________
Rental Income. No Rental Loss Allowed.
124
Can Net Passive Activity Loss be deducted against other active income or portfolio?
No
125
If you have a Nondeductible Passive Activity Loss (PAL), can it be carried back/forward?
Carry forward without any time limit (R1-43)
126
What is the Passive Activity Loss Mom and Pop Exception?
May deduct $25,000 per year of net passive losses but have to be ACTIVE. Anything over $25K is carried forward forever/land sold.
127
What is the Passive Activity Loss Mom and Pop Exception Phase Out Rule?
If Taxpayers AGI, without consideration fo this loss deduction, is over $100K. Eliminated completely at $150K.
128
What is the Passive Activity Loss Mom and Pop Exception Phase Out Rule Exemption?
If you are a Real Estate Professional (50% and 750 hrs), because it is not passive.
129
Is Unemployement Compensation taxable or taxfree?
Taxable
130
Is Workers Compensation taxable or taxfree?
Tax-Free
131
What are the ranges for Social Security Benefits? Low/ Middle/ Upper?
0% at 25K/32K - Middle Income Over $25K - 50% - Upper 85% over $34K
132
Are Prizes and Awards Taxable? Exclusions?
Yes at FMV. Exclusion from income if did not apply (such as Nobel Prize)
133
Gambling Winnings Taxable?
Yes
134
Gambling Losses Deductable?
Yes to the extent of gambling winnings on itemized deduction.Not subject to 2% AGI
135
Business Recovery - Taxable or Not Taxable?
Damage award is compension for lost profit - the award is Income. Taxable.
136
Punitive Damages taxable?
Yes. Taxable except in Wrongful Death cases.
137
Scholarships and Fellowships? Taxable?
Excludable up to amount actually spent on tuition, fees, books, supplies. Taxable if services are required. Taxable Room and board).
138
Gifts and Inheritance- Taxable or Not Taxable?
Nontaxable for person receiving. Party paying gift/inheritance that pays tax.
139
Medicare Benefits
Nontaxable
140
Personal (Physical) Injury or Illness Award? Taxable or Non-Taxable?
Nontaxable
141
Accident Insurance. Premiums Paid by Taxpayer?
Nontaxable
142
How much can a taxpayer working abroad exclude from their income?
$99,200 (2014) - Must be resident of foreign country for full year and present for 330 days.
143
What is the difference between Nonqualified and Qualified Stock Options?
aaaaa
144
What is Nonqualified Stock Options?
A Nonqualified option is taxed when gratned if the option has a readily ascertainable value when granted. Otherwise, taxed when exercised.
145
How do you know if a nonqualified stock option is readily available?
1. The Option is Transferable - 2. Option is exercisable immedietly in full when granted - 3. No condition or restriction - 4. Fair Value of option privilege is readily ascertainable.
146
How is Employee Taxation of Readily Ascertainable Value of Stock Options done?
Taxable at Grant. Recognized Ordinary Income in that amount in the year granted.
147
How is Employee Taxation of Without Readily Ascertainable Value of Stock Options done?
Taxed at Exercise. Holding Period begins at exercise date. If option lapses, no tax consequence.
148
How does an employer treat the value of a Stock Option when employee recognizes option?
Employer may deduct value of stock option as a business expense in the same year that employee is required to recognize option as ord. income.
149
What are the two types of Qualified Options?
Incentive Stock Option & Employee Stock Purchase Plan
150
What is an Incentive Stock Option?
ISO is granted to key employees and is a right to purchase the stock at a discount.
151
What is the Employee Taxation on Incentive Stock Options?
Not Taxable as Compension. Capital Gain/Loss when sold. (Sale Price - Purchase = Gain or Loss)
152
What is the Employer Taxation on Incentive Stock Options?
No Tax Deduction because it is not considered income to employee.
153
What is the Employee Taxation on Employee Stock Option Plans?
Not Taxable as Compension. Capital Gain/Loss when sold. (Sale Price - Purchase = Gain or Loss)
154
What is the Exemption on Employee Taxation on Employee Stock Option Plans?
If option price is less than FMV, then ordinary income is recognized as the lesser of the difference of the FMV of the stock when sold and the exercise price.
155
What is the Employer Taxation on Employee Stock Option Plans?
No Tax Deduction because it is not considered income to employee.
