Reg - Individual Tax 5

Question 1

A general business credit in excess of the limitation amount is carried __________

Answer 1

back 1 year and forward 20 years

Question 2

general business credit is comprised of

Answer 2

(1) investment credit (energy and rehabilitation), (2) work opportunity credit, (3) small employer health insurance credit, (4) alcohol fuels credit, (5) research credit, (6) low-income housing credit, (7) enhanced oil recovery credit, (8) disabled access credit, (9) renewable resources electricity production credit, (10) empowerment zone employment credit, (11) Indian employment credit, (12) employer social security credit, (13) orphan drug credit, (14) new markets tax credit, (15) small-employer pension plan startup cost credit, (16) the employer-provided child care credit, and (17) the energy efficient home credit.

Question 3

general business credit is allowed to the extent of

Answer 3

“net income tax” less the greater of (1) the tentative minimum tax or (2) 25% of “net regular tax liability” above $25,000.

Question 4

if an individual taxpayer’s passive losses and credits relating to rental real estate activities cannot be used in the current year, they may be carried

Answer 4

forward indefinitely or until the property is disposed of in a taxable transaction

Question 5

how are annuities and pensions excluded from taxable income?

Answer 5

to the extent they represent a return of capital, recovered pro rata over the life of the annuity.

Question 6

calculate casualty loss without consideration of any “floor” or other limitation on tax deductibility

Answer 6

the amount of a personal casualty loss is the lesser of (1) the adjusted basis of the property or (2) the decline in the property’s fair market value resulting from the casualty

Question 7

Net operating loss (NOL)

Answer 7

generally a business loss but may occur even if an individual is not engaged in a separate trade or business (i.e can be created by a personal casualty loss)

Question 8

NOL may be carried

Answer 8

back 2 years and forward 20 years

Question 9

the following cannot be included in the computation of NOL

Answer 9

(1) Any NOL carryforward or carryback from another year
(2) Excess of capital losses over capital gains. Excess of nonbusiness capital losses over nonbusiness capital gains even if overall gains exceed losses
(3) Personal exemptions
(4) Excess of nonbusiness deductions (usually itemized deductions) over nonbusiness income

Question 10

how does an individual qualify as a taxpayer’s dependent for purposes of the medical deduction?

Answer 10

individual is of specified relationship or a member of the taxpayer’s household

is a US citizen or resident

the taxpayer provides more than half of the individual’s support

Question 11

How is unearned income of a child under age 18 taxed?

Answer 11

In excess of a threshold amount, generally taxed at the rates of the parents.

The threshold amount is normally twice the amount of the applicable standard deduction for a dependent who has only unearned income.

Question 12

How much is deductible for a nonbusiness theft loss?

Answer 12

To the extent that each loss is in excess of $100 and the taxpayer’s net nonbusiness casualty and theft losses exceed 10% of AGI.

Question 13

Are benefits received from an employer-financed unemployment fund (to which the employee did not contribute) taxable?

Answer 13

Yes, as wages and are subject to withholding for income tax.

Question 14

Is compensation from a state unemployment compensation plan taxable?

Answer 14

Yes

Question 15

What is the carryback and carryforward of NOL?

Answer 15

Carryback 2 years

Carryforward 20 years

Question 16

What is the overall limitation for contribution deductions?

Answer 16

50% of AGI

Contributions of long0-term capital gain property to charities have a 30% of AGI limit

Question 17

How is the depreciation deduction for nonresidential real property, placed in service in 2016, determined for regular tax purposes using MACRS?

Answer 17

Straight-line method over 39 years

Question 18

AMTI Adjustments

Answer 18

a. For real property placed in service after 1986 and before 1999, the difference between regular tax depreciation and straight-line depreciation over 40 years.
b. For personal property placed in service after 1986, the difference between regular tax depreciation using the 200% declining balance method and depreciation using the 150% declining balance method (switching to straight-line when necessary to maximize the deduction)
c. For long-term contracts, the excess of income under the percentage-of-completion method over the amount reported using the completed-contract method
d. The installment method cannot be used for sales of dealer property
e. The medical expense deduction is computed using a 10% floor (instead of the 7.5% floor that might have been used for regular tax)
f. No deduction is allowed for home mortgage interest if the loan proceeds were not used to buy, build, or improve the home
g. No deduction is allowed for personal, state, and local taxes, and for miscellaneous itemized deductions subject to the 2% floor for regular tax purposes
h. No deduction is allowed for personal exemptions and the standard deduction

Question 19

To whom do passive activity limitations apply?

Answer 19

individuals, estates, trusts, closely held C corporations, and personal service corporations.

Question 20

passive acuity loss limitations are intended to

Answer 20

prevent taxpayers from sheltering personal service income by creating pecs and acquiring passive activity losses at a corporate level