R1-M3 Gross Income 2

Question 1

what are considered as rental income of the CY?

Answer 1

• rental income of the CY
• cancelation payment of the lease paid in CY
• last month rent paid in CY
• security deposits held in a segregated account is not considered income of CY

Question 2

what is a treatment for interest paid in advance by cash basis taxpayer?

Answer 2

• Interest paid in advance by a CASH basis taxpayer on business loans cannot be deducted until the tax period to which the interest relates
• The interest must be both paid and incurred in order to be deducted

Question 3

what are a few special items for business needs to pay attention?

Answer 3

• Meals: 50%
• Wages paid to owner: consider a draw, not an expense
• Health insurance paid for owner: not deducted on Sch. C. 100% is an adjustment for AGI
• Business bad dent loss: direct write off only for ACCRUAL basis taxpayers
• State income taxes for business: not deducted on Sch. C. It’s an itemized deduction

Question 4

what rules of self-employment tax?

Answer 4

No self-employment tax is owed if self-employment income, after multiplying by 92.35% , is less than $400

Question 5

what are uniform capitalization rules of code sec.263A?

Answer 5

• real or tangible personal property produced by the taxpayer for use in his or her trade or business
• real or tangible personal property produced by the taxpayer for sale to his or her customers
• real or tangible personal property acquired by the taxpayer for resale, provided the taxpayer’s annual average gross receipts for the preceding 3 years exceed $29M (2023)

Question 6

what are rules about rental income on residence home?

Answer 6

• if personal use on the residence is more than 14 days, any net loss from the rental of the property will be disallowed.
• all related expenses including depreciation must be prorated b/w personal and rental portion