R1: Individual Tax - Income

Question 1

Example of an accrued expense

Answer 1

A repair completed prior to year end but not invoiced.

Question 2

SUPORT mneumonic

Answer 2

S - support (over 50%)
U - under a certain income ($4,000)
P - precludes depending filing joint return
O - only citizens of US/Canada/Mexico
R - relative -or-
T - taxpayer lives with individual for whole year

Question 3

How are passive activity losses deducted?

Answer 3

Only to the extent of passive activity income, then carried forward until used - except in the year of disposal, then any accumulated passive activity loss carry-forward is deductible.

Question 4

List some requirements of an ESPP

Answer 4

1- option cannot be lesser than 85% of the FMV of the stock when granted or exercised
2- Option cannot be exercised more than 27 months after the grant date
3- No EE can purchase more than $25,000 during the year.

Question 5

General rule for uniform capitalization

Answer 5

1- product costs are generally capitalized (direct material, direct labor, factory overhead)
2- period expenses are generally not capitalized (G&A, selling, R&D, marketing)

Question 6

Charitable contributions for a self-employed individual

Answer 6

NOT deductible on schedule C - only schedule A