R1 - Gross Income: Pt 1 Flashcards
FMV Vs NBV
Taxable Item = Tax on FMV = Basis
Nontaxable = No tax and NBV = Basis
Accrual Method
Required when revenue is >25MM
- Accrual Exp = when services have been received/performed but not have been paid for by year-end.
What’s included in Gross income (that I’m not aware of)?
- Taxable Fringe Benefits i.e. personal use of a company car.
- Life insurance premiums above the first 50,000 of group-term life insurance i.e. what happened to me at BDO.
Non-Taxable Fringe Benefits (that I’m not aware of)?
- Employer paid educational expenses: up to $5,250 (BS and MBA).
- Qualified tuition reduction: Undergrad employees of schools may exclude tuition tuition reduction from income, but GRADUATE can only exclude it if they teach or research and if the tuition reduction is in addition to their research and teaching payment.
- Employer provided parking and transit passes: up to $270 per month.
- FSA: Up to $2,750 deposited into an FSA. (Use it or lose it by 3/15 next year)
Interest Income
Include:
- Interest from Federal bonds
- Gift received to open bank account
- Interest from U.S. Treasury Certificates
- Interest from Federal U.S obligations
Tax-Exempt Interest Income
Include:
- Series EE: Tax-Exempt when use to pay Education Expense for TP, SP or DPs, TP is >24yo, MFJ, and income does not phase out (PHO $82,350 S; $123,550 MFJ, HOH - Range: 15K - $30K)
- Veterans admin insurance divs is TE.
- Interest from State U.S obligations
- Life insurance proceeds (corp) on the life of an officer when the corporation is the owner and beneficiary
- Life insurance proceeds (indv) generally not taxable.
- Kiddie Tax = Int and Div income of children >18 is taxed at estate and trust rates.
Forfeited Interest (Adjustment)
- CDT early withdrawals would be an ATL adjustment.
Dividend Income
- Taxable from Earnings and Profits (Corp)
- Nontaxable when reducing basis (return of cap)
- No Earnings and Profits, no basis = Cap Gain
- Tax rate 0%, 15%, 20%
Nontaxable Dividends
- Stock Split
- Stock Div; unless cash or prop is an option regardless of choice.
- Life insurance dividend
Alimony
- Must be legally required
- Must be cash or its equivalents: Credit Card Bills or College Fees
- Payments apply first to Child Support
IRA Early Withdrawal Penalty
- Before age 59 1/2.
- 10% penalty + reg tax (marginal rate)
- Roth IRA must be held for >5yrs
IRA Early Withdrawal Penalty: Exemptions
HIMDEAD!!!!
…Still subj to regular tax tho
H = Homebuyer; $10,000 max towards payment of 1st home I = Insurance (med) if unemployed for 3mo or SE. M = Med Exp >10% AGI D = Disability E = Education Exp A = Adoption or Birth (within 1yr, $5K max exclusion) D = Death
Annuities
Fixed Annuity: Ex: $60K annuity that pays $750/mo for 10 years.
$750 * 120mo = 90K –> 90-60/90 = 33.33% (taxable %)
750 * 33.33% = $250 taxable amount per month.
Life Annuity: Treat your paid investment as basis and depreciate it over your expected life (exclude from income).
- Exclusion formula = Annuity / # of months of expected recovery
- If you live longer than actuarial period = amounts are fully taxable.
- IF you die B4, then Sch A
Social Security Income
Low income = non taxable Lower Middle Income = <50% is taxable Middle Income = 50% is taxable Upper Middle Income = >50% < 85% is taxable Upper Income = 85% is taxable.
Awards
If immediately donated to charity, not included in income
