R2 - Individual Taxation

Question 1

What taxes are nondeductible?

Answer 1

FIB

1) Federal taxes (including SS)
2) Inheritance taxes for states
3) Business (on Schedule C) and rental property taxes (on Schedule E)

Question 2

Is interest on federal, state, or local tax underpayments tax deductible?

Answer 2

NO

Question 3

Is educational loan interest an itemized deduction?

Answer 3

NO

EXPLANATION: It’s an adjustment.

Question 4

Gambling losses remain fully deductible, but only to the extent of what?

Answer 4

Gambling winnings

Question 5

Taylor, an unmarried taxpayer, had $90,000 in AGI for the current year. During the year, he donated land to a church and made no other contributions. He purchased the land 15 years ago as an investment for $14,000. The land’s FMV was $25,000 on the day of the donation. What’s the max amount of charitable contribution that Taylor may deduct as an itemized deduction for the land donation for the current year?

Answer 5

$25,000

Question 6

Is the earned income credit a refundable credit?

Answer 6

YES

Question 7

Which credit can result in a refund even if the individual had no income tax liability?

Answer 7

Earned income credit

Question 8

Which form is used for alternative minimum tax - individuals?

Answer 8

Form 6251

Question 9

The credit for prior year alternative minimum tax liability may be carried forward for how long?

Answer 9

Indefinitely

Question 10

A calendar-year taxpayer files an individual tax return for Year 2 on March 20, Year 3. The taxpayer neither committed fraud nor omitted amounts in excess of 25% of gross income on the tax return. What is the latest date that the IRS can assess tax and assert a notice of deficiency?

Answer 10

April 15, Year 6

Question 11

State the alternative minimum tax formula.

Answer 11

Taxable income
\+/- Certain adjustments
\+ Tax preferences
- Exemption allowance
= AMTI
* Tax rate
= AMT (the greater of AMT or regular tax is the total tax liability)

Question 12

Who published the seven “Statements on Standards for Tax Services”?

Answer 12

AICPA’s Tax Executive Committee

Question 13

What do the SSTSs set forth?

Answer 13

the ethical tax practice standards for members of the AICPA

Question 14

Identify some refundable tax credits.

Answer 14

• child tax credit
• earned income credit
• withholding taxes
• excess SS paid

Question 15

Identify some nonrefundable tax credits.

Answer 15

• foreign tax credit
• child and dependent care credit
• elderly or disabled credit
• education credits
• adoption credit
• retirement plan contribution credit
• general business credit
• LT unused minimum tax credits

Question 16

Name some adjustments for AMTI calculations. PANIC TIMME

Answer 16

• Passive activity losses
• Accelerated depreciation
• NOLs
• Installment income of a dealer
• Contracts (%completion vs. completed contract)
• Tax deductions
• Interest deductions on some home equity loans
• Medical deductions (limited to excess over 10% AGI)
• Misc. deductions not allowed
• Exemptions (persona) and standard deduction

Question 17

List the deductions for AGI.

Answer 17

• Educator expenses
• SE health insurance
• SE retirement
• Student loan interest expenses
• Interest withdrawal penalty
• Tuition and fee deduction
• Alimony paid
• Attorney fees paid in certain discrimination and whistleblower cases
• Health savings account
• Moving expenses
• 1/2 SE FICA
• Domestic production activities deduction

Question 18

Name some tax preferences for AMTI calculations.

Answer 18

• Private activity bond interest income
• Percentage depletion
• Pre-1987 accelerated depreciation

Question 19

List the topics covered in the Standards.

Answer 19

• tax return positions
• answers to questions on returns
• certain procedural aspects of preparing returns
• use of estimates
• departure from a position previously concluded in an administrative or court hearing
• knowledge of error: return preparation and administrative proceedings
• form and content of advice to taxpayers

Question 20

What are the child/dependent care credit limitations?

Answer 20

• Up to 35% of eligible expenditures OR $3,000 maximum ($6,000 for two or more dependents)
• Maximum of $15,000 AGI (reduced by 1% for each $2,000 increment over $15,000, to a minimum of 20%)

Question 21

What credits are allowed against the AMT?

Answer 21

• foreign tax credit
• adoption credit
• child tax credit
• contributions to retirement plans credit
• earned income credit
• small business health care tax credit

Question 22

Is a deduction allowed for utilities costs or insurance for a personal residence that is not used for rental purposes?

Answer 22

NO

Question 23

Could ad valorem tax on a personal automobile be claimed as an itemized deduction?

Answer 23

YES

Question 24

Could real estate tax on a personal residence be claimed as an itemized deduction?

Answer 24

YES

Question 25

True or false.

Qualified mortgage interest paid is an adjustment to arrive at AGI.

Answer 25

FALSE

EXPLANATION: It’s deductible on Schedule A as an itemized deductible.