Reg Review

Question 1

Credit can result in refund

Answer 1

Earned Income Tax Credit

Question 2

Adoption Expenses Not Used for Credit

Answer 2

Medical ( Take on Sch A )

Question 3

Taxes Paid to A foreign County Can be Treated as

Answer 3

A Credit towards Federal Income Taxes Due

Question 4

Child & Dependent Care Cr - Refundable or Not?

Answer 4

Not Refundable

Question 5

Filing Status that Negates the Earned Income Cr

Answer 5

Married Filing Separately

Question 6

What do you do if two or more employers withhold excess social security?

Answer 6

Claim the excess as a credit on their tax return

Question 7

“tax preference items” example - Are or Are not added back for AMT

Answer 7

Non-taxable items, ex. municipal bonds

They ARE added back for AMT computation

Question 8

Home Mtg Interest - Is or Is not added back for AMT?

Answer 8

Is Not Added Back for AMT computation

Question 9

Charitable Deductions - Are or Are Not Added back for AMT?

Answer 9

Are Not Added Back for AMT computation

Question 10

Credit for Prior Yr AMT tax liability may be carried —-?

Answer 10

Carried Forward forever. (Note - certain permanent differences cannot be carried forward)

Question 11

The Alternative Minimum Tax is computed as the

Answer 11

The Excess of the AMT over the Regular Tax

Question 12

Medical % of AGI threshold for AMT if over 65

Answer 12

7.5 % if over 65 (otherwise threshold is 10%)

Question 13

If your AGI was above $150,000 last year only way to avoid underpayment of tax penalty.

Answer 13

Pay in 110% of prior yrs tax in 4 equal installments

Question 14

Statute of limitations for understatement of Gross Income by more than 25%

Answer 14

Statute of limitation is 6 yrs

Question 15

Required amounts to pay in for tax if your prior years AGI was less than $150,000

Answer 15

90% of the current years tax or 100% of the prior years tax.

Question 16

Hierarchy of Authority in the Tax Law

Answer 16

IRS Tax Code
IRS Regulations
Tax Court Decisions
IRS Agents’ Reports

Question 17

What decides whether a CPA gives oral or written advice to a client?

Answer 17

The client’s tax sophistication.

Question 18

Levels of Support for recommending a tax position

Answer 18

1) Reasonable basis standard (least stringent).
2) Realistic possibility standard
3) Substantial authority standard
4) More-likely-than-not standard (most stringent).

Question 19

Charitable Cash Deduction - Maximum Allowable

Answer 19

50% of AGI (can carry forward excess)

Question 20

Charitable Property Deduction - Property held for less than 1 year.

Answer 20

First take the lesser of the property’s basis or its fair market value at the time of contribution. Maximum is 30% of AGI

Question 21

Charitable Property Deduction - Held for more than 1 yr

Answer 21

Deduct at FMV if held for more than 1 yr. Limited to 30% of AGI If given to a public charity, and 20% of AGI if given to a non-operating private foundation.

Question 22

Combination Rules for Charitable Donations

Answer 22

The Total Deduction for All gifts (to include LT Cap Gains Property, Cash and other property) cannot exceed 50% of AGI.

Question 23

Casualty Loss Computation

Answer 23

Lesser of basis in property or decrease in FMV.
Minus insurance proceeds received
Less $100 per casualty loss
  Subtotal is Eligible Loss
Less 10% of AGI limitation
  Deductible Loss

Question 24

Casualty Loss Requirements

Answer 24

Must be “Unexpected” can’t be controllable & avoidable as in example - dog broke a vase.

Question 25

Investment Interest Expense is limited to

Answer 25

“Net” Investment Income - which includes all investment income less investment expenses (other than inv int). If investment exp is a business itemized deduction, then only those over 2% of AGI are considered.

Question 26

Child Care Credit Limitations

Answer 26

1) Age - Child must be < 13 yrs old (No teenagers)
2) Qualified Day Care
3) Must have dual income, take the lower of the 2
4) Compare lowest inc. to childcare exp & use lower of 2
5) If AGI < $15K get 35% of #4
6) If AGI > $15K, decrease 1% for ea. $2k increment with a minimum of 20%