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REG > Section 1: Individual Taxation > Flashcards

Section 1: Individual Taxation Flashcards

1
Q

“For AGI” Adjustments (I-EMBRACED EHF)

A

Interest on student loans

Employment Tax -50%, Med. Premiums -100%

Moving Expenses

Business Expenses (Sch C)

Rent/Royalty & Flow-Through Entity (Sch E)

Alimony (CANNOT)

Contributions to Retirement (KEOGH/IRA)

Early Withdrawl Penalty

Jury Duty pay

Education - $4,000

Health Savings Accounts (HSA)

Farm Income (Sch F)

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2
Q

Itemized Deductions - Sch A

(COMMITT)

A

Charitable Contributions

Other Misc.

Misc. Expenses (2%)

Medical Expenses

Interest

Taxes

Theft or Casualty

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3
Q

1040 Tax Return

A

Gross Income

+- “For AGI” Adjustments (I-EMBRACED EHF)

AGI

  • Deductions (Itemized Ded(Sch A)) (Std Ded)

- Net Exemptions

Taxable Income

x Tax Rate

Tax Liability

  • Credits

+ SE Tax

+ AMT

  • Withholdings

- Prepayments

Tax Due

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4
Q

1040X Due

A

3 years after original return was filed

2 years after actual tax was paid

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5
Q

Statute of Limitations for IRS

A

3 years - Error/Simple Negligence

6 years - Gross Negligence OR 25% of income not included

Unlimited - Fraud OR Failure to File

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6
Q

Who can use Cash Basis Accounting

A

Service type businesses whose gross income does not exceed $10M

Includes most individuals, S Corp, individually owned Partnerships, personal service corps

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7
Q

Who is prohibited from using Cash Basis Accounting?

A
  • C Corps with gross receipts exceeding $5M
  • Partnerships that have a C Corp as a partner exceeding $5M
  • Tax Shelters
  • Certain Trusts
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8
Q

When is a group term life insurance policy taxable?

A

Premiums are taxable when they exceed $50,000

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9
Q

Taxaxtion of Stock Options

A

Non-Qualified - Taxed when exercised, treated as compensation for excess of FMV over excercise price

Qualified (Incentive Stock Option (ISO)) - Taxed when sell stock, treated as capital gain or loss on diff. btw sale price and excercise price

  • For AMT, ISO taxed when excercised
  • ISO must be held for 2 yrs from grant date and 1 yr from exercise date
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10
Q

Taxation of Injury Awards

A

Non-Physical - TAXABLE

  1. Age, Race, discrimination
  2. Punitive Damages
  3. Lost Business Profits

Bodily Injury - TAX FREE (Blood)

  1. Pain & Suffering for physical injury
  2. Worker’s Comp
  3. Reimbursement of medical expenses pd and not itemized on Sch A
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11
Q

Taxation of Prizes and Awards

A

Taxable at FMV unless all conditions satisfied:

  1. No services required of recipient
  2. Selected without any action on recipient’s part
  3. Payment assigned by recipient and never actually rec’d by recipient
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12
Q

Taxation of Social Security Benefits

A

A person collection S.S. who has less than $25,000 of provisional income can exclude all S.S. benefits, while taxpayers with provisional income exceeding $60,000 usually are subject to the max. 85% inclusion

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13
Q

Taxation of Pensions and Annuities

A

Cost of Annuity / Expected Total Annuity Payments = % of each payment that is excluded from taxes

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14
Q

Taxation of Tax Refunds

A

Federal

  • Refund - NOT taxable
  • Interest - YES, Taxable

State

  • Refund - If itemized in PY, taxable in CY.
    • If didn’t itemize in PY, not taxable in CY
  • Interest - YES, Taxable
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15
Q

Taxation of Capital Assets (Sch D)

A
  • LT Capital Gains get special tax rates if held > 1 yr
    • 10-15% bracket - 0% tax rate
    • 25-35% bracket - 15% tax rate
    • 39.6% brackey - 20% tax rate
  • Held <= 1 yr, ordinary tax rate
  • Net Capital Loss up to $3k against ordinary income
    • Unused carried indefinitely
    • Corps get $0 net capital loss, can carry back 3 yrs and forward 5 yrs. No special rate
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16
Q

Net Operating Losses (NOL)

A

Carryback 2 yrs and carryforward 20 yrs

Same for individuals and corps

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17
Q

Schedule A

A

Itemized Deductions (Personal and Employee Expenses)

18
Q

Schedule B

A

Interest and Dividend Income

19
Q

Schedule C

A

Profit and Loss from a Business (Employer Expenses/1099 Income)

20
Q

Schedule D

A

Capital Gains and Losses (S/T and L/T investments)

21
Q

Schedule E

(RRF-COP)

A

Supplementary Income or loss

  • Rental Income
  • Royalties
    • Copyrights
    • Oil/Gas Leases
    • Patents
  • Flow-Through Entities
    • S Corps, Partnerships, Estates and Trusts
22
Q

Schedule F

A

Profit and Loss from Farming

23
Q

1040X

A

Amended Return (3 yrs)

24
Q

1116

A

Foreign Tax Credit

25
Q

4562

A

Depreciation and Amortization

26
Q

4797

A

Sales of L/T Business Property

27
Q

Business Expenses

A
  • All costs of running a business
  • Interest pd in advance is not deductable
  • Gifts to customers up to $25 per recipient per year
  • 50% of meals and entertainment
  • 100% of travel
  • $4 per promotional item
  • No profit in 3 of 5 yrs, loss not deductable - Hobby Loss
    • Net Income (Other Income) line 21
    • Expenses on Sch A (Misc 2%)
28
Q

Moving Expenses

A

New work must be 50 miles further from old home, each way.

Direct cost of moving you and stuff, not meals, house hunting costs, or temp living expenses

Must work 39 weeks (9 mo.)

29
Q

Vacation Home

A
  • Rented less than 15 days - income is excluded and expenses are deducted on Sch A
  • Personal use more than 14 days OR 10% of days rented - income is included and deductions are limited to gross rental income.
    • Unused deductions may be carried forward to future years
  • Personal use is not more than 14 days OR 10% of of days rented. Rental income is included and all expenses allocated to the rental portion are allowed. Expenses in excess of income are subject to passive activity loss limits
30
Q

Alimony

(CANNOT)

A
  • Cash only or its equivilant (not property)
  • Apart when payments are made (not living together)
  • Not child support
  • Not designated as property settlement
  • Own return for pater and payee
  • Terminates on death of recipient
31
Q

Traditional IRA

A

Deductible to get to AGI, unless,

  1. Individual actively participates in another plan
  2. Exeeds threshold
    1. Single - $69k
    2. Married - $115k
32
Q

Roth IRA

A

Not deductible

33
Q

Early Withdrawl from IRA

A

10% penalty if before 59 and half years old.

  • No penalty, but included as income, if payment of medical is greater than 7.5% (>=65), or payment for higher education costs
34
Q

Charitable Contrbutions

A

Cash or property given to charity

Mileage and parking are included

Limited to 50% AGI (10% of ATI for Corps), carried for 5 yrs

35
Q

Other Misc. Expenses

A

Not subject to 2% AGI

Gambling winnings and losses

Estate taxes on income in respect to a decedent

36
Q

Misc. Expenses (BIT)

A

Deductible to extent total exceeds 2% of AGI

Unreimbursed Biz expenses

Investment Expenses (Safety deposit box)

Tax preparation/ Legal advice related to TAXABLE income

37
Q

Medical Expenses

A

Deductable for amounts that exceed 10% of AGI

38
Q

Theft and Casualty Losses

A

Must exceed 10% of AGI

Minus: $100 per event

Minus: Reimbursements

39
Q

Underpayment Penalty

A

Owes more than $1,000 as of Apr 15

No penalty if:

  • Withholdings and estimated taxxes exceeds 100% of prior yr (110% if tax income >150k)
  • 90% of current tax liabilty
40
Q

AMT

A

Regular Income

+- Adjjustments and preferences

AMTI before exemotion

- exemption

AMTI

X Tax Rate (26%/28%

Tentative Minimum Tax

-Regular Tax

AMT

41
Q

AMT Adjustments and Preferences (SIMPLE-PIE)

A

Standard deduction - not claimed

Interest on home equity loans - not deducted unless main home

Medical expenses under 10% of AGI - cannot reduce AMTI, adj. equal to diff. between 10% and 7.5% for those 65 and older

Personal and dependent exemptions - not allowed

Local and state income taxes, all prop taxes and sales taxes - not allowed

Employee (2% BIT) - not allowed

Private activity bond interest - fully taxable

Incentive stock options - taxed on diff btw exercise pricce and FMV

Excess depreciation on personal property

REG (20 decks)

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