Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

REG > R1P3/4- Ind.Tax > Flashcards

R1P3/4- Ind.Tax Flashcards

1
Q

Characterize the following carryover: Passive Activity Loss

A

No carryback

Can carry forward indefinitely

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What income can passive losses offset on a 1040?

A

Only passive income such as rental income or limited partnership income.

Note: Wages are ACTIVE (cannot be offset by passive) and Interest/Dividends are PORTFOLIO (cannot be offset by passive)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Are interest and dividends active or passive income?

A

Neither. They are portfolio income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

When are life insurance premiums of an employee includable in income?

A

Premiums paid by an employer for coverage in excess of $50,000 per employee are includable in income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Which personal insurance premiums are not deductible as medical expenses on Schedule A?

A

Accident or disability insurance premiums are not deductible.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Are workman’s compensation insurance benefits taxable?

A

No - similar to an award for damage to make a person whole.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How is minor income taxed at a parent’s rate calculated (AKA kiddie tax)?

A 
Child's unearned income 
- early withdrawal penalties
- $950.00
-  Greater than $950 or child's itemized deduction related to unearned income
= Amount taxed at parents' rate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What investment interest is never deductible?

A

Investment interest expense on tax-free securities is not deductible.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Which of the following are taxable: Child Support, Divorce Property Settlements, Alimony

A

Alimony IS taxable.

Child support and divorce property settlements are NOT taxable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How are Net Operating Losses (NOLs) utilized?

A

Can be carried back 2 years

If any left, can be carried forward 20 years.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Which farming costs related to land are Deductible?

A

Deductible: Costs incurred to PRESERVE soil/water

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Which farming costs related to land are Non-Deductible?

A
  • Costs incurred to drain wetlands or prep for irrigation (i.e. improve land)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Which depreciation table is used for personal tangible property related to farming?

A

MACRS 150

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Is Roth IRA contributions Nontaxable?

A
  • All Qualified benefits received are NOT deductible (Nontaxable)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Which itemized deductions are not subject to Phaseout based on income or other factors?

A

Medical
Casualty
Gambling
Investment Interest Expense

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How much social security income can be taxed for individuals in higher income brackets?

A

Up to 85%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the 3 Nontaxable Income Exemptions?

A
  • Social Security
  • Tax-exempt Interest Income
    (State& Municipal interest )
  • Tax-exempt Scholarships
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Which damages awarded in lawsuits are taxable?

A

Any payments for punitive damages ARE taxable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Which damages awarded in lawsuits are NOT taxable?

A

Payments made to make you whole are NOT taxable

(i.e. to pay for losses of property, body parts or earning ability)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Interest Income element on deferred payout arrangement is Taxable or not?

A

Fully Taxable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Premium Payments for Accident/Medical & Health Benefits are Excluded from the employee’s Income when?

A
  • The Employer paid the insurance premiums
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is it called when Employees have the ability to elect to have part of their salary deposited pretax into a flexible account?

A
  • Flexible Spending Arrangement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

In a Flexible Spending Arrangement, When do Funds Forfeit when not used?

A
  • Not used within 2 1/2 months after Year-end
    OR
  • Within a time period (usually 6 months)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Premiums received for opening a Savings account Taxable?

A

YES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Interest paid by the Federal or State Gov’t for late payment of a Tax Refund Taxable?

A

YES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Interest on Series EE Savings Bonds is Tax-Exempt when?

A

It is used to pay for higher Educ. of the taxpayer, spouse or dependents.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

At what value are Cash & Property Dividends taxed at?

A
  • Cash= Amount Received

- Property= Fair Market Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What Dividend/Distribution items are Exempt from Gross Income?

A
  • Return of Capital
  • Stock Split
  • Stock Dividend
    (unless cash or other property option)
  • Life Insurance Dividend
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What is Capital Gain Distribution?

A
  • Distributions by a Corp that has No Earnings & Profits
    &
  • Shareholder has recovered their entire basis
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

State or Local Tax refunds Itemized in Prior Year then?

A
  • Is Taxable
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

State or Local Tax refunds; Standard Deduction used in Prior Year then?

A
  • Nontaxable state or local refund
  • Only Interest is Taxable
  • 1040EZ form
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

To be Deemed Alimony under Tax Law:

A
  • Payments must be legally required pursuant to a written divorce
  • Payments must be in Cash or Equivalent
  • Payments can’t extend beyond the death of the payee-spouse
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Child Support

A
  • Non-taxable (receiving spouse)

- Payment applies First to Child Support

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Business Expenses that are Deductible

A
  • COGS
  • Salaries & Commissions paid to others
  • Business meal & Entertainment expenses at 50%
  • Interest Expense on business loans
  • Bad Debts actually written off for Accrual basis taxpayer only.
35
Q

Business Expenses that are NOT Deductible:

A
  • Salaries paid to the sole proprietor
  • Federal Income tax
  • Bad Debt expense of a Cash Basis taxpayer
  • Personal Portion of: Health Insurance of a Sole Proprietor.
    (Reported as a Adjustment to AGI)
36
Q

What are the 2 Net Business Income Taxes?

A
  • Income Tax

- Federal Self-Employment (S/E) Tax

37
Q

What Items under Uniform Capitalization Rules are required to be Capitalized?

A
  • Direct Materials
  • Direct Labor
  • Factory Overhead:
    ~ Warehousing, storage, engineering, repackaging, scrap, etc
38
Q

What Items under Uniform Capitalization Rules are required NOT to be Capitalized?

A
  • Selling, General & Administrative
  • Research & Development
  • Marketing
  • Officer Compensation
39
Q

Cost to Cost Method to determine percentage is calculated as?

A
  • Ratio of the Total Cumulative Costs incurred to date at the end of the tax yr divided by the total expected costs to be incurred under the Contract
40
Q

Gross Income Recognition Calculation; to calculate amount of income that will be recognized under the contract in a given tax year?

A
  • Multiply the Ratio (from Cost to Cost Method) By the total contract price
    &
  • Subtract the amount of income that was recognized in prior years for the Contract.
41
Q

Farming Cash Basis Inventories that are NOT considered?

A

Expense Inventory

Ex- Produce &Livestock

42
Q

Farming Accrual Method is Required for?

A
  • Certain Corporate & Partnerships Farmers
    &
  • All Farming Tax Shelters
43
Q

Farming Accrual Method Inventories Must be?

A
  • Used & Maintained
44
Q

Is Traditional Non-Deductible IRA Taxable?

A
  • Principal: NonTaxable

- Accumulated Earnings: Taxable when Withdrawn

45
Q

What % is charged when a premature distribution is taken from an IRA?

A
  • Penalty tax of 10% + Regular Income Tax
46
Q

Exceptions to Penalty Tax but still subject to ordinary Income Tax when used to pay?

A
  • 1st Time Home Buyer
  • Medical Insurance & Expenses
  • Disability
  • Education
  • Death
47
Q

Annuities: Live longer then Actuarial Payout Period

A
  • If lives longer then # Months then further payments are Fully Taxable
48
Q

Annuities: Death before Full Recovery

A
  • If Dies before the # payments are collected then:

Un-recovered Portion is a Misc. itemized deduction &
not subject to 2% of AGI floor.

49
Q

When a vacation home is Rented LESS then 15 Days then the Income is?

A
  • Rental Income is Excluded from Income
50
Q

When a vacation home is Rented MORE then 15 Days then the Income is?

A
  • Expenses must be Prorated betwn personal & rental use

- Rental Use expenses are deductible only to the extent of rental income

51
Q

A Net Passive Activity may NOT be Deducted against?

A
  • Wages, Salaries & other active income or against portfolio
52
Q

If Non-Deductible PALs property are unused, suspended losses become fully tax deductible?

A
  • In the year the property is disposed of.
53
Q

Mom & Pop Exceptions for ‘Active’ Net Passive Losses May deduct up to ?

A
  • $25,000 per year
54
Q

How much social security income can be taxed for individuals in low income brackets?

A
  • NO Social Benefits are taxable

- Income below $25K, Married: $32K

55
Q

Prizes & Awards is Taxable Income at what value?

A
  • Fair Market Value
56
Q

Prizes & Awards when winner has not entered into the contest & assigns winnings to Gov’t or Charity then Income is?

A
  • Not Taxable
57
Q

Gambling Winnings are included in?

A
  • Gross Income
58
Q

Gambling Losses may be deducted to the extent of?

A
  • Gambling Winnings.
59
Q

Punitive Damages are Fully taxable as ordinary income when it is in context with?

A
  • In a Business context or loss of personal reputation
    &
  • Received in a personal injury case
60
Q

State law has limited Wrongful Death awards to?

A
  • Punitive Damages only
61
Q

Degree-Seeking Student Grants & Scholarships are excludable only up to?

A
  • Amounts actually spent on Tuition, fees, books & Supplies.
  • NOT on Room & Board
62
Q

Grant & Scholarships are excludable when?

A
  • The Grant s made to a Degree-Seeking Student

- No Services are to be performed as a condition to receiving the grant.

63
Q

Non-taxable Misc. Items:

A
  • Life Insurance Proceeds
  • Gifts & inheritance
  • Medicare Benefits
  • Worker’s Compensation
  • Personal injury or illness award
  • Accident Insurance- Premiums Paid by Taxpayer
64
Q

When does the Holding Period begin for Employee Taxation WITH Readily Ascertainable Value?

A
  • Begins at Exercise Date
65
Q

When is Employee Taxation WITH Readily Ascertainable Value Taxable?

A
  • Taxable at Grant Date
66
Q

When does the Employer deduct the value of the Stock Option?

A
  • In the Same Year that the Employer Reports Income.
67
Q

Under what accounting basis are individual tax returns prepared?

A

Cash Basis. Note: This basis is NOT allowed for Corporations, Partnerships with a C-Corp partner, or for inventories.

68
Q

When are scholarships not taxable?

A

When they are not in return for services rendered,

AND

The money is used only for tuition and books

Note: Scholarships for room and board are includable in income.

69
Q

What interest income is tax free?

A

State & municipal bond interest

US EE Savings Bond interest (note: HH bond interest is taxable)

70
Q

Which dividend income is tax free?

A

S-corporation (actually distributions)

Life insurance

71
Q

Is unemployment compensation taxable?

A

Yes.

72
Q

Adoption expenses - Are they deductible?

A

NO, they are not deductible.

However tax benefits are available through the adoption CREDIT.

73
Q

Allowable amount of Gambling Losses are deductible in what Schedule & what kind of deduction?

A
  • Sch. A as an Itemized Deduction
74
Q

When does the Holding Period begin for Employee Taxation WITHOUT Readily Ascertainable Value?

A
  • Begins at Exercise Date
75
Q

When is Employee Taxation WITHOUT Readily Ascertainable Value Taxable?

A
  • Taxable at Exercise Date
76
Q

What 2 Conditions have to be met for a Real Estate Professional to be deemed to have material participation?

A
  • More then 50% of the taxpayer’s personal services during the year
    &
  • Taxpayer performs more than 750 hrs of services.
77
Q

If deemed to have Material Participation & not considered passive, The taxpayer can fully deduct losses from Rental Activities against?

A
  • Other income.
78
Q

Under the Uniform Capitalization Rules Applicable to Property acquired for Resale do not apply when Avg. Gross receipts do not Exceed?

A

-$10,000,000 annually

79
Q

What is included in Rental Income for a Landlord?

A
  • Money received for canceling a Lease
  • First & Last Month’s Rent
  • DO NOT include Security Deposits
80
Q

What is the Maximum amount that can be deducted from AGI for a ‘Capital Loss’?

A
  • $3,000 in each year.

- Loss retains its character (STCL or LTCL).

81
Q

What will happen to the Bond’s Basis when the Taxpayer amortizes the Premium on the Bond that yields taxable interest?

A
  • The Bond’s Basis is reduced by the Amortization
82
Q

For a Cash Basis Taxpayer, Gain or Loss on a yr-end sale of listed stock arises on what date?

A
  • Trade Date
83
Q

When a Taxpayer withdraws from Trad. IRA before the age of 59.5, what is the Total Tax Liability % rates?

A
  • Marginal Tax Rate + 10% Penalty Tax

REG (25 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions