REG 2 BK

Question 1

Carry forward for charitable contributions not used?

Answer 1

5 years

Question 2

How to calculate medical expense deduction?

Answer 2

Amount in excess of 10% of AGI

Question 3

Next most important source of rules after Internal Revenue Code?

Answer 3

IRS regulations

Question 4

When is the taxpayer required to make estimated tax payments?

Answer 4

1. When tax owed is more than $1,000 more than withholdings. 2. When taxpayer’s withholding is less than the lesser of 100% of last year’s tax or 90% of current year’s tax. Basically, when withholdings are too low.

Question 5

How are penalties on early withdrawal of savings treated with regards to deductibility?

Answer 5

Adjustment to arrive at AGI

Question 6

Interst on home equity loans of how much is deductible?

Answer 6

Lesser of $100,000 or equity in home. Proceeds from home equity loan can be used for anything.

Question 7

Aggregate charitable contribution limit for individuals?

Answer 7

50% of AGI

Question 8

Limit for foreign tax credit?

Answer 8

Lesser of: foreign taxes paid or

taxable inc from all foreign op’s/(taxable income + exemptions) * US tax

Question 9

For moving expenses to be deductible, how long out of the following year must you stay in the new place?

Answer 9

75% of the year

Question 10

Deductibility of estimated tax payments and withholdings?

Answer 10

Both deductible.

Question 11

Maximum allowable deduction for someone who donates cash? And for someone who donates FMV property?

Answer 11

50% AGI for cash, 30 % AGI for property, 50% in aggregate

Question 12

Is a babysitter an eligible expense for the child/dependent care credit?

Answer 12

Yes, if she enables the taxpayer to be gainfully employed.

Question 13

Medical expenses for whom qualify as deductible?

Answer 13

For taxpayer, spouse, and a dependent who receives over 1/2 of their support from the taxpayer.

Question 14

When can an individual file an amended tax return?

Answer 14

Within 3 years of the date the original return is filed or within 2 years of the date the tax is paid, whichever is later.

Question 15

Nondeductible taxes?

Answer 15

Federal taxes, inheritance taxes, business and rental property taxes (“FIB”)

Question 16

Limit for student loan interest deduction?

Answer 16

$2,500

Question 17

What is the Lifetime Learning Credit for? How long is it good for?

Answer 17

The credit is available for students’ tuition/fees (but not books) at an educational institution. It is available for an unlimited number of years.

Question 18

What is the American Opportunity Credit designed for?

Answer 18

Students’ tuition, fees, books, etc. for their first 4 years of post-secondary education.

Question 19

When can job-related educational expenses be deducted?

Answer 19

1. When required by employer to retain job 2. When incurred to maintain or improve skills at current job

Question 20

Acquisition indebtedeness and deductibility?

Answer 20

Deductible up to aggregate amount of $1 million if a purchase lien or subsequent lien used to “substantially improve home.”

Question 21

When will an individual not be permitted to deduct an IRA contribution?

Answer 21

When they are rich AND actively participate in another retirement plan.

Question 22

What is the amount of the increase in the standard deduction for: 1) a taxpayer over 65? 2) a blind taxpayer?

Answer 22

$1200 in each case

Question 23

How is general property valued for purposes of deduction when donated to charity?

Answer 23

Lesser of basis or FMV (ie it would normally be basis or cost, but if FMV is less than cost, then the IRS won’t let you get a deduction for an amount that the item is not worth).

Question 24

How much is the adoption credit?

Answer 24

$13,190 per child

Question 25

Date used for statute of limitations for IRS penalty?

Answer 25

Later of due date or filing date

Question 26

For how many years may a student deduct student loan interest?

Answer 26

For the duration of time that interest is paid.

Question 27

Taxes that are deductible as itemized deductions?

Answer 27

1. State and local income taxes or local sales tax 2. Real estate taxes 3. Personal property taxes 4. Foreign taxes

Question 28

Are Coverdell Education Savings Accounts contributions deductible? Are distributions deductible?

Answer 28

Contributions are nondeductible, but distributions are tax-free. (Like with a Roth IRA).

Question 29

What expenses can Coverdell Education Savings Accounts be used for?

Answer 29

Qualified education expenses through high school, including room and board.

Question 30

What is the taxability of investment interest?

Answer 30

It is deductible from AGI. The deduction is limited to net investment income (ie income from investments minus related investment expenses, not including investment interest expense). Like rules for gambling winnings, no “negative money” is allowed as a deduction.

Question 31

Name some misc. itemized deductions

Answer 31

1. Unreimbursed business expenses 2. Travel, meals and lodging for overnight business travel 3. Transportation expenses for work, commuting doesn’t count 4. Meals/entertainment expense (50% deductible) 5. Uniforms 6. Subcription to Professional Journals

Question 32

Who qualifies for the child and dependent care credit?

Answer 32

1. A child qualifying under “CARES” who is under 13 2. A disabled dependent 3. A disabled spouse

Question 33

Amount of child and dependent care credit?

Answer 33

For one dependent, it’s $3,000. For two or more dependents, it’s $6,000. You must have eligible expenses up to $3,000 for one dependent or $6,000 for 2 dependents. Then, you take this amount times 20% to get the amount of the credit.

Question 34

Who qualifies for the credit for the elderly and/or permanently disabled? How much is the credit?

Answer 34

15% of eligible income for those who are 65 and over or under 65 and retired due to permanent disability.

Question 35

Do medical expenses count for adoption credit?

Answer 35

No, as they are an itemized deduction.

Question 36

Who qualifies under the child tax credit? How much is the credit for?

Answer 36

Any child qualifying under “CARES” who is under 17 and a US citizen. Credit is for $1,000.

Question 37

Is withholding tax a credit?

Answer 37

Yes, any withholdings are a credit against the taxpayer’s tax liability.

Question 38

What may the AMT credit offset? What is the carryforward/carryback?

Answer 38

May be carried forward forever and may only offset regular tax, not AMT.

Question 39

What are the AMT credits that are allowable for reduction of AMT?

Answer 39

“FACCE” sounds like “BOCCE” in this AMT game– Foreign tax credit, Adoption Credit, Child Tax Credit, Contribution to retirement plans credit, Earned income credit

Question 40

Statute of limitations for 25% + understatement of gross income?

Answer 40

6 years

Question 41

Statute of limitations for bad debts?

Answer 41

7 years (“Bad luck”= 7 years)

Question 42

What standard must a tax preparer meet for advice on a position?

Answer 42

He must believe that it has a realistic possibility of being sustained. Lacking this is ok, but in that case he must believe that there is a reasonable basis for the opinion.

Question 43

Name adjustments for AMTI calculations

Answer 43

“PANIC TIMME” =

PANIC= passive activity losses, accelerated depreciation, net operating loss, installments sales, contracts–percentage completion vs completed contract. These could increase or decrease AMTI.

TIMME= tax deductions, interest deductions on home equity loans, medical deductions (in excess of 10% of AGI), miscellaneous expenses, earned income credit. These only increase AMTI.

Question 44

What are the deductions to arrive at AGI?

Answer 44

“SHAMRS” –student loan interest, health savings accounts, moving expenses, retirement plan contributions, self-employed stuff

Question 45

How is child support taxed to the payor? To the payee?

Answer 45

Nondeductible to payor, deductible to payee

Question 46

What is the statute of limitations regarding a taxpayer’s right to a tax refund?

Answer 46

3 years from the later of due date or filing date or 2 years from the time the tax was paid (if no return was filed).

Question 47

Are medical insurance premiums deductible?

Answer 47

Yes, if they provide reimbursement for medical care.