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REGULATION > R2 - Individual > Flashcards

R2 - Individual Flashcards

0
Q

What are deductibility requirements for traditional IRA?

A

BOTH conditions are met:

  1. High AGI (112k max for MFJ)
  2. Active participation in ER plan

Both spouses are evaluated individually UNLESS super rich (AGI over 183K)

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1
Q

What qualified educator expenses must be reduced by?

A
  • excludable Series EE bond interest
  • non taxable earnings from Coverdell
  • non taxable qualified state tuition program earnings
  • any reimbursement NOT reported on W-2
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2
Q

Minimum age to get an additional IRA catch-up contribution?

A

50 years

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3
Q

IRA mandatory distributions begin at the age of?

A

70.5 years

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4
Q

When are earnings distributions from a Roth IRA non taxable?

A

Made at least 5 years after the 1st day of the year of 1st contribution AND:

  1. After you are 59.5 years old
  2. Or disabled
  3. Or you are the beneficiary of the deceased Roth
  4. Or you are a first time homebuyer
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5
Q

Maximum contribution to Coverdell IRA?

A

2,000 per beneficiary

Independent of other IRA contribution limitation

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6
Q

Coverdell IRA limitations?

A
  1. For kids under 18
  2. 2,000 per kid
  3. MUST be distributed by the age of 30:
    • to beneficiary - taxable + 10% penalty
    • roll over to another family member - no tax or penalty
  4. Subject to phase out
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7
Q

Coverdell IRA benefits?

A

Per kid
Can be used for room and board
Can be combined with AOC!!!
Both principal and earnings non taxable

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8
Q

Student loan interest expense maximum amount?

A

2,500 subject to phase-out (80k/160k cutoff)

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9
Q

Tuition and fees deduction maximum amount?

A

4,000 subject to phase-out

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10
Q

Who qualifies for Archer MSA?

Limitations?

A

Self-employed or employees of small businesses (BTR)
Must be high deductible plan
Contributions lower than in HSA - 2,100 and 4,200

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11
Q

Moving expenses limitations

A

39-week in one year if employee
78 weeks in two years if self-employed

Travel & lodging and transporting household goods ONLY

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12
Q

Non deductible moving expenses?

A

Meals
House hunting
Breaking the lease
Temporary living expenses

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13
Q

Keogh maximum contribution and deduction?

A

Both limited to the lesser of 50,000 or

  1. 20% of SE income before Keogh deduction - for deduction
  2. 100% of net earnings (deduction amount 4X) - for contribution
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14
Q

How do you report attorney fees paid in discrimination cases?

A

Adjustment to AGI, limited to the amount claimed as income from judgement

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15
Q

Dependent’s standard deduction?

A

The GREATER of:
950
OR earned income + 300 (not to exceed regular st.deduction)

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16
Q

Dependent for medical deduction purposes?

A

SNR/T
Support - over half by TP
North American citizen
Whole taxable year lived with TP or a relative closer than a cousin/foster parent

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17
Q

Which insurance premiums do and do NOT qualify as deductible?

A

Accident insurance is OK

Life or against loss of earnings insurance - NOT OK

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18
Q

What part of real estate taxes is non deductible?

A

Street
Sewer
Sidewalk assessment taxes

I.e. anything outside your house except school

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19
Q

How are mortgage points deducted?

A

acquisition of indebtedness - deductible immediately

Refinancing - amortize over the loan period

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20
Q

What is investment income for investment interest deduction purposes?

A

Interest and dividends
Rents
Royalties in excess of expenses
Net STCG and LTCG - if elected to be taxed at marginal tax rate

Dividends automatically become ordinary when purchased with borrowed funds and are used in calculating the limitation for IIE

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21
Q

How is prepaid interest accounted for payee and payer?

A

Payer, borrower - spread over the life of the loan

Payee, lender - include all when received

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22
Q

Rules for deductibility of appreciated property?

A

At FMV if held over a year
At basis if held less

Limited to 30% of AGI

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23
Q

How is a contribution of services deducted?

A

Disallowed - value of time

Allowed - out-of-pocket expenses including mileage at 14 cents

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24
Q

Foreign exchange full-time student deduction (Kristiane deduction)?

A

Full-time
K-12 or under
$50 per each full month (15+ days)

25
Q

Charitable contribution carryover timeframe?

A

5 year carryforward

26
Q

What is the base for calculating casualty loss?

A

The lesser of adjusted basis or decrease in FMV

27
Q

When a casualty loss of personal property canNOT be deducted?

A

If you have insurance and you didn’t notify the insurer.

28
Q

Casualty loss is not allowed for?

A

Lost
Misplaced
Broken! property

29
Q

When educational expenses are deductible as a miscellaneous deduction?

A
  • maintain or improve skills (CPE credits)
  • keep the job (employer requirement)

But not to meet minimum requirements!

30
Q

Business use of home deductibility requirements (3)?

A

Used for work exclusively, on a regular basis and for the convenience of the employer

31
Q

Which job hunting expenses are not deductible?

A

Finding a first job or an entirely new job

32
Q

Tax prep fee deductibility limitation?

A

Non deductible if incident to divorce

UNLESS related to tax planning or pursuing taxable income

33
Q

When does a hobby become an activity for-profit?

A

Shows profits in any 3 out of 5 years preceding the tax year

Horses - 2 out of 7

34
Q

Miscellaneous deductions NOT subject to 2% AGI?

A

Gambling losses

Federal estate tax paid on income in respect of a decedent

35
Q

Individual tax rates?

A

10, 15, 25, 28, 33, 35

36
Q

Refundable credits?

A 
Child tax credit
Earned income credit
Long-term unused minimum tax credit
AOC
Adoption credit
37
Q

How is child and dependent care tax credit calculated?

A

20-35% of qualified expenditures, BOTH parents are working

Maximum amount of qualified EXPENDITURES:
3,000 - one child
6,000 - two or more children

38
Q

Child and dependent care amount limitation?

A

Lesser of:

Earned income of spouse with lesser amount
Actual expenditure
Maximum amount (3,000/6,000)

39
Q

Child and dependent care credit - definition of child and dependent

A

Qualifying child under 13!!!
Any disabled person - if more than half of the support provided by TP (doesn’t apply to disabled spouse)

Disabled = unable to take care of himself

40
Q

Elderly and/or permanently disabled credit eligibility?

A

65 or older
Or retired because disabled

15% of eligible income

41
Q

How is elderly and disabled credit calculated?

A

Base amount (5000 or 7500)
LESS: social security
LESS: one half of excess of AGI over 2nd base (7500 or 10000)

15% of balance is your credit

42
Q

Describe AOC

A

100% of the first 2,000
25% of the next 2,000

40% refundable (1,000 max)

Not available if the student is convicted of a drug offence

43
Q

Describe lifetime learning credit

A 
20% of qualified expenses up to 10,000 
ONE credit per family
Unlimited years, but books not eligible
MBA or CPE ok
phase-out higher than for AOC
44
Q

Describe adoption credit amount limitation and expense eligibility

A

12,650 per child, sick OR special needs

Medical expenses NOT OK - go itemize
Not for adopting spouse’s child or surrogate parenting

45
Q

Describe retirement savings contribution plan eligibility (3)

A

At least 18 by year end
Not a full-time student
Not a dependent

Maximum amount of contribution 2,000
Maximum credit - 1,000 (i.e. 50% before phase out)

46
Q

Describe foreign tax credit calculation and carryovers

A

Lesser of:

  1. Foreign taxes paid
  2. Foreign income/ Total income * US tax

Carryback 1, carryforward 10

47
Q

General business credit limitation?

A

Take 100% on the first 25,000 of tax

75% on amounts over 25,000 of tax

48
Q

Describe Work Opportunity Credit amount and eligible groups

A

40% of first 6,000 of first year’s wages
40% of first 3,000 of certain summer youth

Handicapped
18-24 year olds from poor families
Vietnam veterans from poor areas
Food stamps people

49
Q

Describe child tax credit amount and eligibility

A

1,000
CARS except must be under 17!!!

May be used against FICA and MediCare taxes paid if a very low income family

50
Q

Earned income credit age limitation and refundability?

How does having a qualifying child affect EIC?

A

26-64, both spouses if there are no qualifying children

QC increase the percentage of earned income credit

51
Q

What are EIC percentages?

A

7.65 up to 45%

Cannot take if you have “disqualified income” over 3,100
Passive, portfolio, capital

52
Q

Small employer startup costs credit amount

A

500 maximum

100 or less employees

53
Q

How is AMT applied?

A

26% on the first 175,000

28% on the rest

54
Q

Name AMT adjustments

A 
P - passive activity losses
A - accelerated depreciation post-1986
N - NOL
I - installment contract of a dealer
C - contract percentage of completion
T - tax deductions
I - interest on home equity loans
M - medical, floor raised to 10%
M - miscellaneous
E - exemptions and/or standard deductions
55
Q

AMT exemption formula?

A

33,750 - 0.25(AMTI - 112,500) single

45,000 - 0.25(AMTI - 150,000) MFJ

56
Q

AMT tax preference items?

A

Always add-backs:

P - pre-1987 accelerated depreciation
P - private activity bond interest
P - percentage depletion in excess of basis

57
Q

How is credit for elderly and permanently disabled calculated?

A

5,000 or 7,500 (MFJ and both qualify)
Less: excludable social security
Less: 50% of the excess of taxable income over 7,500/10,000

And then 15% of the balance is the credit

58
Q

What is the statute of limitations for refund claims?

A

The later of:

Regular statute
Or 2! Year from the time tax was paid if not with the return

59
Q

What is the statute of limitations to claim a refund related to bad debt or worthless securities?

A

7 years from the later of:
Due date
Filing date

60
Q

When are estimates required?

A

Tax owed is 1,000 or more

W-2 with holdings are less than 90% of current year or 100% of last year’s tax (110% if AGI is over 150K)

61
Q

How does a nonaccountable reimbursement plan work?

A

No proof of expenses
All allowance is included in gross income
Any expenses taken against gross income (mileage, reimbursements etc) are itemized deductions subject to 2%

REGULATION (4 decks)

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