REG - 6/12 Part III Flashcards
How are Tips treated?
If an individual receives LESS THAN $20 in tips during one month while working for one employer, the tips DO NOT HAVE TO REPORTED TO EMPLOYER and the tips are included in the individual’s gross income when received.
If an individual receives $20 OR MORE in tips during one month while working for one employer, the individual MUST REPORT TOTAL AMOUNT TO EMPLOYER BY 10TH DAY OF NEXT MONTH.
Then the tips are included in gross income for the month in which they are reported to the employer.
True or False: Punitive damages are generally not allowed in contract law
True
What does Revocable mean?
Capable of being revoked or canceled.
How is Risk of Loss treated in the case of a Merchant Seller?
Provided there is no agreement to the contrary and neither party is in breach, risk of loss will in the case of a merchant seller, pass to the buyer on physical receipt of the goods.
Can a Donee Beneficiary bring action against the promisor?
Yes
How is a MACRS deduction for an office building treated?
The MACRS deduction for nonresidential real property must be determined using the mid-month convention (i.e., property is treated as placed in service at the midpoint of the month placed in service) and the straight-line method of depreciation over a 39-year recovery period. Here, the $264,000 cost of the office building must first be reduced by the $30,000 allocated to the land, to arrive at a basis for depreciation of $234,000. Since the building was placed in service on August 1, the midmonth convention results in 4.5 months of depreciation for 2018. The MACRS deduction for 2018 is [$234,000 × (4.5 months) / (39 × 12 months)] = $2,250.
What is an Incidental Beneficiary, and what are there rights to enforce a contract?
An incidental beneficiary is a third party whom a contract was not intended to benefit, but who nevertheless may receive an incidental benefit. An incidental beneficiary has no rights to enforce the contract which gives him those unintended benefits.
*Only creditor and donee beneficiaries are able to enforce a contract.
What is the maximum amount of deduction that a married couple earning $40,000 in earned income be allowed for contributions to their individual retirement accounts?
If neither Husband nor Wife is a participant in a qualified retirement plan, they are eligible to make deductible contributions to their IRAs. They may contribute and deduct a total of $11,000 to their individual retirement accounts. Up to $5,500 can be deducted for contributions to the IRA of each spouse (even if one spouse is not working), provided that the combined earned income of both spouses is at least equal to the amounts contributed to the IRAs
What amount can be excluded in determining the amount of a donor’s taxable gifts?
The first $15,000 of gifts of a present interest made to a donee during a calendar year are excluded in determining the amount of a donor’s taxable gifts.
What is the limit for tuition or medical expenses paid on behalf of a donee?
There is an unlimited exclusion for tuition or medical expenses paid on behalf of a donee.
