REG 1C Flashcards
How is the real estate tax deduction calculated when real estate is sold?
Amount is apportioned between buyer and seller according to the number of DAYS that each held the property that year.
What different types of losses can reduce passive activity income?
Only passive activity losses; however, it need not be limited to a certain type of passive income. For example, S- corp income can be used to reduce rental passive activity loss.
How far past the end of the calendar year can an accrual-method taxpayer deduct compensation paid and still list it within the same calendar year?
Up to 2 1/2 months.
When property is sold to a relative for less than FMV, how is the sale listed?
Part Sale, amount under FMV is a gift, and total selling price is new basis to relative. Seller doesn’t deduct loss, and relative excludes gift from income.
A cash-method tax payer should report receipt of property how?
The same way they report receipt of cash, when it is actually or constructively received
Define constructive receipt, as with cash or property.
Constructive receipt means that an item is available only to you without restrictions.
What is alimony recapture?
If alimony payments fall off drastically over a 3 year period of time more than $15,000 per year, the paying spouse must reclaim prior alimony as income and pay income taxes on it.
How is alimony recapture calculated?
1.) 2nd year recapture equals 2nd year alimony
minus (3rd year alimony+$15,000 base). 2.)Add 2nd year alimony(-recapture) and 3rd year alimony and divide by 2. Add $15,000 base; subtract total from yr 1 alimony. Add two totals together to get total alimony capture.
How can time test for moving expenses be bypassed?
If taxpayer dies, is laid off for reasons other than willful misconduct, or new job ends because of disablility
How is a non-business casualty loss calulated?
The lesser of: [(1.) Adjusted Basis of the property, or (2.) Decline in FMV ]; this amount is reduced by any money received from insurance, a $100 floor, and 10% of taxpayers AGI
What determines how much interest expense can be deducted?
The amount of net investment income from interest, dividends, and short term capital gains.
A tax deficiency can bring interest and penalties. What associated with a tax deficiency is deductible?
NOTHING! Even the interest expense is non-deductible because it is considered personal interest.
Are educational IRA’s deductible?
No, they are like ROTH IRA’s : they are paid with after-tax dollars, and grow tax-free if the money is used for educational purposes.
What types of items are deductible under “ moving expenses”?
Only direct cost of moving your and your stuff; no temporary housing, house-hunting trips, or meals.
How Is tax calculated for a child that has ONLY interest income?
Total interest income -standard deduction*2.
What is the acronym for AMT?
SIMPLE-PIE
What does SIMPLE-PIE stand for?
Standard deduction;Interest on home equity loans for purposes other than remodel or improve;Medical expenses over 10%;Personal and dependent exemption;Local, state property &personal property tax; Employee business expenses under 2%;Private activity bond interest;Incentive stock options;Excess depreciation on personal property
How do you calculate Net Operating Loss?
Operating loss-yearly income=NOL. No deductions are allowed for personal or dependency exemptions, and capital loss also cannot be deducted.
Who can qualify as a dependent under “qualifying Child”?
Taxpayer’s child(even step) or sibling(any type) or sibling’s child
What is the mnemonic for qualifying child?
JARRS- Joint return,no;Age;Residency;Relationship;Support tests
What is mnemonic for qualifying relative?
C-IRS-Jack you, Citizen;Income;Relationship;Support;Joint filing-no
