REG individual taxation Flashcards
passive activity lossess
e.g. partnership with no active participation. rental activities, limited partnerships are also passive activities regardless of the participation. Cannot be deducted but carried over to future
Interest income on US series EE bond, if the taxpayer was more than 24 years old at the time of purchase, proceeds used for education of self, spouse or dependent
non taxable
Interest income on US series EE bond to high earning individuals
taxable
dividend received in the form of shares when the taxpayer had the option of taking cash
taxable, otherwise stock dividend from shares are not taxable
Dividends on mutual fund reinvested in the fund
taxable
Dividends on life insurance policies
Exempt
Dividends on life insurance policies-treatment
reduction in expense of policy
Federal income taxes paid-itemized deduction or not
not deductible on federal return
employer’s contribution to group term life insurance
not taxable fringe benefits only upto a coverage of $50,000
Deductible expenses for rental property
depreciation, interest on loan, insurance, repairs and maintenance
employer provided health insurance premium
not taxable
debt forgiven by employer
taxable
payments from employer- breach of contract damages, jury duty fees, unemployment compensation
taxable
gambling losses
itemized deduction from gambling winning, cannot exceed winnings. However is the taxpayer takes std deductions, no itemized deduction for losses
stock dividend -partly common stock and partly preferred stock
taxable
prizes and awards rewarded based on efforts on the part of recipient or with no effors
taxable
rental income if the property is rented for less than 15 days
non taxable. However, the expenses and property taxes would be deductible
Proceeds from life insurance, child support money
exempt
Social security benefits if the AGI is relatively low
Not taxable. 50% or 85% for the prescribed higher levels of income
Cafeteria plans
employees are allowed to choose cash or benefits to be received
Value of benefits received under cafeteria plans
not taxable
cash received under cafeteria plans
taxable
Alimony received as per legal decree or divorce agreement
taxable
Money received as a property settlement during separation
not taxable
Passive losses which are not deductible in the current year
can be carried forward indefinitely
Interest on US treasury bonds, jury duty serving fees
taxable
Cash dividends from corporation or mutual funds
taxable
Taxpayer receives asset as revenue e.g. rent received in advance
advance amount is taxable at the time received
Life insurance premiums paid by the taxpayer
not deductible
passive losses on rental activities
deductible up to $25,000 as long as the owner is an active participant in the management.
Hobby loss rule
if the operation fails to earn a profit in any three of the most recent five years including the tax year
Hobby loss rules application
individuals, S corporations, partnerships, estates, and trusts that are attributable to an activity not engaged in for profit
Scholarships that cover part or all of college tuition
tax free
scholarships-if the recipient is not seeking a degree.
taxable
scholarships- if the person is required to perform work in exchange.
are also taxable
Points paid on a home equity loan used to improve the property
(such as by adding a swimming pool) are deductible when paid.
points paid to refinance an existing mortgage or Points paid on home equity loan where the proceeds are not used for home improvements
must be amortized over the life of the loan
Prepayments of mortgage interest
to be matched with the tax years to which the interest applies
A casualty loss
caused by theft, vandalism, fire, storm, or similar causes, and boat, car, and other accidents.includes a loss caused by the insolvency or bankruptcy of a financial institution
casualty loss amount to be deducted as itemized deduction
lower of the tax basis of the property or the drop in value. To be further reduced by any insurance payment , $100 , 10 percent of adjusted gross income
