REG 1D Flashcards
Qualifications for qualifying dependent?
C-IRS-Jack you: Citizen(of USA) or resident of usa, mexico or canada;Income-less than$3950; Relationship or household member–not a cousin;Support - over half of annual support;no Joint return
summarize adoption credit
Child must be under 18, or mentally or physically handicapped;expenses can be deducted after adoption is finalized, even in a subsequent year;max is 1
$13,190;credit is nonrefundable
For a cash-basis self employed worker, how is salaried employment used in figuring total self-employment income?
Self-employment pay would be received in cash from customers,salary would be added and deductible expenses subtracted on to that to arrive at total self-employment income.
Where can special city or county levied assessments be deducted(sewer)?
Assessments of this type are added to property basis only, and not deducted.
What is the difference between the annualization and seasonal tax filing method?
The seasonal method is available only to corporations; annualization is available to individuals.
Can a person always avoid a tax penalty by making sure this year’s tax payment is 100% of last years?
No, if he earns over $150,000 he must pay at least 110% of the prior years taxes owed.
If a customer dies before payment of a bill, how does the accounting method of the contractor affect the tax treatment?
If accrual-based, money is collected when work is done. IF cash-based, money is collected when received. If the customer dies before payment, a cash-based business could not collect because they have not “received the income”.
What are mid-year and mid-quarter conventions?
Methods on applying MACRS depreciation. If 40% or more of all business purchases are made in last quarter of the year, then the mid-quarter convention must be used.
Which classes use MACRS 200% and which use 150%?
3, 5, 7, and 10 yr classes use the 200%. 15 and 20-yr property use 150%.
How much capital loss is one person allowed annually?
Any one taxpayer can claim up to $3,000; amounts higher than that are allowed to be offset by passive income.
What is the mnemonic for Schedule A deductions? What does it stand for?
COMMITT - Charitable contributions; Other miscellaneous; Misellaneous expenses(2%); Medical expenses; Interest; Taxes; Theft or Casualty loss
Property donated to charity is subject to what limitations?
Long term held property (over 1 year) may be sold at higher FMV but is limited to 30% AGI in that tax year.
What is AMT computed as?
Excess of tentative AMT/regular tax
Charitable contributions are limited to 50% AGI. If one gives more, is it carried forward? If so how far forward?
5 years
Taxpayer accrues income in yr 1, estimates too low; receives it in the next year, but is more than reported. How much time does he have to report it to IRS?
With an accrual based taxpayer, he can just include it in his 2015 filing or quarterlies.
Regardless of proportional and phase out rules, what is the amount that anyone can contribute to an IRA?
$200 per person/$400 total if married
What are rules for a 179 deduction?
1.) Allowed to expense up to $500,000 in one year. 2. Deduction reduced dollar-for-dollar once total equipment purchases pass $2 million.
Are any type if taxes deductible even if deficient?
Yes, state and local taxes are, but no the penalties and interest associated with them. Federal taxes are NEVER deductible, even if deficient.
Why is MACRS called a “Modified” type of depreciation?
Because it differs from standard GAAP depreciation.
How does MACRS differ from GAAP depreciation
1.) Useful life of the property is shorter, in most cases. 2.) New and Used property treated the same. 3.) Salvage value is ignored.
Describe Section 1250 depreciation.
REAL property-residential rental depreciated over 27.5 yrs, business or investment over 39 years. Straight line. Salvage value ignored. MID-MONTH convention used: all property treated like it is purchased or sold in middle of month.
Describe Section 1245 property.
Tangible non-realty - can be depreciated over 3, 5, 7, 10, 15 or 20 yrs. STRAIGHT line or MACRS.
DESCRIBE Section 197 depreciation.
Intangibles - For the most part, intangibles are depreciated straight-line over 15 years.
Describe MACRS depreciation.
3-10 year life property use 200% double-declining balance MACRS depreciation. 15 & 20 yr life propert use 150% MACRS depreciation.
