R1 - Individual Tax - Income/Individual Taxation: Gross Income Flashcards
Uniform Capitalization Rules
Capitalized as Inventory:
Direct Materials, Direct Labor, Factory Overhead
Period Expenses:
Selling, General, Administrative, and Research & Development.
When do cash basis taxpayers deduct interest?
In the year paid, or the year to which the interest relates, whichever is later.
When are scholarships nontaxable?
For degree seeking students tho the extent that the proceeds are spent on tuition, fees, books, and supplies.
Under the uniform capitalization rules, purchasers of inventory for resale may:
Deduct their marketing costs but must capitalize their off-site storage costs.
What is an accruable expense?
One in which the services have been received/performed but have not been paid for by the end of the reporting period.
How does the kiddie tax work?
Calculate by taking child’s total interest income and reduce it by child’s standard deduction. The next amount (equivalent to standard deduction) is then taxed at the child’s rate, and the balance is then taxed at the parent’s rate.
Rule for vacation residence
If a vacation residence is rented for less than 15 days per year, it is treated as a personal residence. The rental income is excluded from income, and mortgage interest and real estate taxes are allowed as itemized deductions. Depreciation, utilities and repairs are not deductible.
For a cash basis taxpayer, gain or loss on a year-end sale of listed stock arises on the:
Trade Date
Passive activity general rules
Passive losses may generally only offset passive income for a tax year. The phase out provision is between AGI’s of 100,000 to 150,000. $0.50 on the dollar for the phase out.
Early withdrawal of an IRA rules
Generally, retirement money cannot be withdrawn until the individual reaches the age of 59.5. Premature distribution is subject to a 10% penalty tax (in addition to the applicable regular income tax that applies to all distributions.)
Interest received from state and municipal bonds is:
Not taxable
Exceptions to the penalty tax on early distribution of an IRA
HIM DEAD
Home buyer (1st time)
Insurance
Medical expenses in excesss of 10% of AGI
Disability
Education
And
Death
The Uniform Capitalization Rules of Code Sec. 263A apply to retailers whose average gross receipts for the preceding three years exceed what amount?
$10,000,000
Partially Taxable Fringe Benefits rules:
Premiums above the first $50,000 of coverage are taxable income to the recipient and normally included in the W-2 wages.
Suspended loss rules for capital losses:
$3,000 of suspended losses can be utilized each year against portfolio income.
