REG 2

Question 1

For casualties:

Answer 1

First take off 100 dollars for each casualty loss, then take off 10% of AGI for all the casualty losses together, but FMV of loss is limited to the basis of the property

Question 2

lifetime learning credit, retirement savings contribution credit, elderly disabled credit:

Answer 2

Cannot result in refund, but ctc can

Question 3

For investment interest expense:

Answer 3

The deduction is limited to

taxable investment income, just like gambling

Question 4

Charity:

Answer 4

Cash is subject to 60%, Ordinary Income Property is 50%, LTCG is 30%

Question 5

For estimated tax payments:

Answer 5

90% of current year tax or 100% of prior year. But if you make 150k in prior year, then 110% of tax of prior year

Question 6

An employee who has had Social Security tax withheld in an amount greater than the maximum for a particular year may claim the excess as a credit against income tax:

Answer 6

If that excess resulted from correct withholding by two or more employers.

Question 7

Gambling losses are:

Answer 7

Deductible as a miscellaneous itemized deduction (from AGI) limited to gambling winnings. Same for Investment Interest Expense

Question 8

If CPA willfully understates return, penalty is:

Answer 8

75% of fee or 5,000, whichever is greater

Question 9

Foreign taxes can be used either:

Answer 9

As a credit to federal income tax, or as an itemized deduction

Question 10

Social Security benefits:

Answer 10

If poor(less than 25k) not taxable. If more than 60k then 85% is taxable. Calculate AGI + Interest + 50% of SS received

Question 11

Interest for mortgages or home improvements:

Answer 11

Is deductible

Question 12

Auto loan interest:

Answer 12

Not deductible

Question 13

Medical Expenses:

Answer 13

Only 7.5 of AGI and up are deductible

Question 14

Penalties on not pre-paying tax is only:

Answer 14

If tax is 1,000 after withholdings

Question 15

For SEP IRA:

Answer 15

First deduct 50% of SE Taxes, then take 20% of that, as long as this final number is below 50k

Question 16

Child care credit:

Answer 16

Ranges from 20 to 35 % of AGI, max of 3k per dependent

Question 17

For IRA:

Answer 17

Up to 2000 max. As long as taxpayer is 18 by end if year

Question 18

Life Insurance:

Answer 18

Not taxable unless transferred. Then take proceeds - contributions

Question 19

For Capital Assets:

Answer 19

LT is over year. ST is ordinary income, LT is 0,15,or 20. Loss can be carried forward forever - up to 3k per year. For Corp it’s go back 3 and forward 5.

Question 20

For NOL:

Answer 20

Can be carried forward indefinitely - up to 80% of taxable income

Question 21

For annuities:

Answer 21

Depends if bought with pre-tax (then proceeds are fully taxable) or post tax dollars - then use Exclusion ratio -divide the Investment by the Expected return and multiply that ratio by this years’ proceeds

Question 22

Partnership’s deduction is lesser of:

Answer 22

Basis at end of year or amount at risk

Question 23

Cosmetic surgeries are deductible if:

Answer 23

It’s to correct a mistake from previous cosmetic surgery - even if that one was non-deductible

Question 24

For ESPP:

Answer 24

Option must be Exercised within 27 months of Grant Date.

Question 25

S-Corps can have W2. Partnerships:

Answer 25

No W2, only guaranteed payments reported on K-1