REG 1A

Question 1

If a dependent is supported by more than one person who can claim the deduction?

Answer 1

Anyone that furnishes over 1/2 of the dependents support. If no one can claim over 1/2 then anyone that furnishes more than 10% support can take the deduction with a signed release from the other supporters.

Question 2

If mistakes are made on a tax return? resulting in a deficiency how long does the IRS have to assess additional taxes?

Answer 2

Normally 3 years after the original due date of the return. If the amount is greater than 25% of gross income then it is extended to 6 years past date of return.

Question 3

What is passive activity income?

Answer 3

Income derived from activities that one does not materially participate in. One can only deduct passive activity losses against passive activity income with the loss being carried forward indefinitely until it’s finally used up.

Question 4

Explain passive activity losses in regards to rentals.

Answer 4

Up to $25,000 per year in rental passive loss is allowed with this amount being reduced 50% with any amount over a modified AGI of $100,000. If fully phased out the passive loss can still be used to reduce the amount of any taxable passive income in that same year.

Question 5

What are the carry back and carryforward limits for net operating loss?

Answer 5

2 years back, 20 years forward.

Question 6

What are the carry back and carryforward limits for a general business credit?

Answer 6

1 years back, 20 years forward.

Question 7

What generally are considered valid deductible medical expenses?

Answer 7

doctors and hospitals, insurance premiums, and prescription medications

Question 8

How do accounts receivable figure into the taxes of a cash method taxpayer?

Answer 8

They don’t!

Question 9

Is state tax withheld from an employees paycheck a deductible expense?

Answer 9

Only if it is itemized

Question 10

What other kinds of property tax qualify as deductibles?

Answer 10

Both real and personal property tax qualify if itemized

Question 11

What 2013 amount of gross income disqualifies a person as a dependent?

Answer 11

$3900

Question 12

How far forward can one carry the prior year’s alternative minimum tax liability?

Answer 12

Indefinitely, to help offset regular tax liability

Question 13

What is the distance and time test for the moving deduction expense?

Answer 13

Greater than 50 miles from former residence and employed at least 39 weeks out of 12 months following the move.

Question 14

When should an accrual based taxpayer report income?

Answer 14

When events have occurred to establish taxpayer’s right to the money, and the amount can be reasonably estimated.

Question 15

Which type of depreciation schedule is allowed for land depreciation?

Answer 15

LAND DOES NOT DEPRECIATE!!!

Question 16

What depreciation convention and time limits are used on non-residential real property?

Answer 16

mid-month convention, and 39 year life

Question 17

Is the adoption credit refundable or nonrefundable?

Answer 17

nonrefundable

Question 18

What qualifies a child for the adoption credit?

Answer 18

under age 18, or mentally or physically handicapped

Question 19

What is the annualization method of computing taxes?

Answer 19

The way individuals must do it. Either through employer withholding, or estimated tax payments.

Question 20

How much income tax must one pay to avoid penalties by the IRS?

Answer 20

Either 90% of current tax year owed, or 100% of prior years taxes paid.

Question 21

When improvements on rental property are left by a tenant, is the value of improvements an above-the-line or an under-the-line expense?

Answer 21

Neither.Doesn’t needed to be included in gross income. But I feel this question is over the line!

Question 22

Define American Opportunity Credit

Answer 22

1. 100% first $2000 plus 25% of next $2000-max $2500
2. per student
3. 1st 4 years post-secondary education
4. must be enrolled half-time
5. Cannot receive Lifetime learning credit in same year

Question 23

With cash based owners of rental property, which item though received need not be included in gross income

Answer 23

Security deposits, though they will be included if not returned

Question 24

How is depreciation for real property determined using MACRS determined?

Answer 24

Straight line. Residential over 27.5 years. Non-residential (business or investment) property over 39 years.

Question 25

What must occur for an individual to exclude prize money from gross income?

Answer 25

1. individual chosen without any action on his part.
2. Recipient not required to render future service
3. Money is transferred by Payor to government unit or charitable organization