REG 1 Flashcards
Included in taxable gross income:
- Interest income on a fed & state refund
- Unemployment compensation
- General investment accounts
- Compensation for services and damages received for non-physical injury
- Grants paid for participation in research projects
- Employee achievement awards not in the form of tangible personal property (staying is bosses condo)
- Treasure troves to the extent of its value in the US currency ( money found somewhere)
- Any tuition reimbursement from an employer over 5,250.
- Any scholarship money spent on anything other than tuition, books, material (room and board are not tuition)
If a couple has been legally separated and maintained separate households for the entire year, what is their filing status?
Single
What amount of group term life insurance is taxable?
amount exceeding $50,000 taxed based on IRS tables.
i.e. $200,000 coverage
Less: $50,000
Div: 1,000 (2.76 per $1,000 of coverage)
Times: 2.76
Which costs are included in inventory under the Uniform Capitalization rules for goods manufactured by the taxpayer?
- Warehousing costs
- Quality control
- Taxes excluding income taxes
Or
DL, DM, and Factory OH (the above are OH costs)
What is included in self-employment tax?
Guaranteed payment from services rendered to a partnership.
- Ordinary income from S-Corp is not included
Is the State tax refund, interest or both taxable?
Interest only
Where is the deduction for QBI applied in the individual tax formula?
As a deduction from AGI separate from the standard and itemized deduction
Cash contribution limitations
limited to 60% of AGI, the excess is carried forward 5 years and must be donated to a charity (needy family doesn’t count)
- Property needs to be substantiated (check, receipt, etc.)
- Services, cash for tuition, or cash donated outside the US are not deductible.
Property contribution limitation
- Held for more than one year = FMV limited to 30% of AGI
- Help for less than one year = lesser of the adjusted basis or FMV limited to 30% of AGI
- If the charity immediately sells the property, the deduction is limited to the gross proceeds the charity receives from the sale or the cost basis
What is the transaction loss deduction calculation for casualty loss?
- only deductible if qualified as casualty or theft
(Lesser of the adjusted basis or decrease in FMV)
Less: Insurance Recovery
Less: $100
Less: 10% of AGI
Itemized items include:
- Mortgage interest
- State taxes paid
- Medical expenses
- Property tax on automobile
- Estimated tax liability paid
Taxable interest on insurance policy received (deceased loved one)
Amount received in the current year
Less: (death benefit / years)
S-Corporation passive income deduction limitation
Passive losses are offset by passive income. The remaining loss is carried forward until utilized.
“mom and pop” exception for S-Corps passive income deduction
- AGI under $150,000. can deduct max $25,000
Phase out
25,000 max
Less: (AGI - 100,000 Threshold x 0.5)
QBI for single taxpayers within the limitation phase-in range (182,100 - 232,100) calculation:
Taxable income
Less: Threshold
Divide: 50,000 (Phase-in range)
Times: Excess amount ( QBI x 20% - W2 wages limit (W2 wages x 50%)
Equal: Reduction amount
QBI deduction (QBI x 20%) - reduction amount
Basis of gifted securities sold
- If the sales price exceeds the donor’s cost basis, donee’s basis equals the donor’s cost basis
- If the sales price is less than the donor’s bases but greater than FMV at the gift, the donor’s basis equals the sales price
- If the sales price is less than the donor’s basis and the FMV, donee’s basis equals FMV
- No gain or loss is recognized when stock sold for less than basis but higher than FMV
When can a taxpayer claim a parent as a dependent
When the taxpayer provides more the half support and the parent’s gross income meets the limitation (SS income is nontaxable and not included in gross income)
What are the dependent rules under CARES?
- under the age of 19
- or under 24 at end of year AND a full-time student during the year
- Or permanently and totally disabled at any time during the year, regardless of age or if they live with you, if you provide more than 50%, support.
(A non-relative you provide more than 50% support and doesn’t make any money, counts as a dependent under SUPPORT)
Filing status for a guy unmarried and provides all the support for his girlfriend who lives with him but has no taxable income.
Single
- the girlfriend is not a qualifying child, parent, or relative.
Gain on sale of personal residence excluded from gross income
- The gain on the sale of up to 250,000 for a single taxpayer is excluded from gross income if the taxpayer used the home as a personal residence for 2 of the 5 prior years before the sale.
- any amount over 250k for a single taxpayer will be included in gross income
Taxable amount of an annuity calculation
original investment
div: expected value ($ per month x months)
equal: exclusion ratio
100% Less: exclusion ratio
Times: Total payments received in the current year
Equal: taxable annuity
Taxable social security benefits
Lessor of 50% of SS benefits
Or 50% of modified AGI ((AGI + tax-exempt interest + one-half SS benefits - 25,000?) x 50%)
Business interest expense deduction calculation:
- Limitation applies to taxpayers with average annual gross receipts of $29 million or more for the prior 3 years.
Adjusted taxable income
Times: 30%
Plus: business interest income
Plus: floor plan financing interest expense
Equal: deduction limitation
Interest expense
Less: deduction limitation
Equal: Amount disallowed; Carryforward indefinitely
Adjustment to self-employment tax paid calculation?
Self-employment income (gains from sales are not included)
Times: 92.35% (built into Sec. SE)
Equal: Net earnings
Times: (Social Security tax up to $160,200 income + Medicare tax)
Equal: Self-employment tax
Times: 50%
Equal: Self-employment tax deduction
QBI for taxpayers above the threshold calculation
The greater of:
- 50% of business W-2 wages
or - 25% of the W-2 wages + 2.5% of the taxpayer’s share of the UBIA qualified property
The deduction is limited to the amount of the QBI x 20%
- Sole proprietorship income is excluded for taxpayers over the threshold
Contributing Stock to Charity Limitations?
If held more than 1 year, the contribution is the FMV
- If held less than 1 year, the contribution is the lesser of the FMV or cost basis
Medical expense deduction
The deduction is the excess of qualifying expenses paid during the year over 7.5% AGI
Qualifying medical expenses include:
Necessary expenses charged in the current year.
- Premiums paid on GROUP life insurance. (disability premiums and normal life not included)
- Lodging, meals, and treatment at a treatment center
- Contacts, glasses
- Job-related injuries
- Transportation to and from
- co-pays
- home improvements deemed necessary in excess spent over increase value of the home. plus operation and upkeep expenses
Maximum itemized deductions allowed for taxes paid?
$10,000
- includes state income taxes and real estate taxes (fed taxes not included)
Stock included on W-2 calc
Salary
Plus: Bonus (can be in the form of stock)
Plus: stock purchased from the company (value of stock per share - stock option plan price)
Dependent’s income taxed at parent’s marginal rate calc
income
Less: dependent standard deduction
Less: 1,250 taxed as child’s marginal rate
What is the basis of inherited assets?
The FMV at date of death
How may taxes paid by an individual to a foreign country be treated?
As a credit against federal income taxes due
What is the basis of gifted securities/ assets resold?
- If the sales price exceeds the donor’s cost basis, donee’s basis equals the donor’s cost basis
- If the sales price is less than the donor’s basis but greater than FMV of the gift, donor’s basis equals the sales price. no gain or loss recognized
- If the sales price is less than the donor’s basis and the FMV, donee’s basis equals FMV
What tax credit can offset tax liability but cannot result in a refund?
Lifetime learning credit
