SU 3 Individual Taxation & GI

Question 1

MFJ

Answer 1

spouses can use diff accounting methods
can’t use diff tax years
legally married, living apart (not legally sep or divorce decree)
spouse dies during year & living spouse doesn’t remarry

Question 2

Qualifying Widow(er) or Surviving Spouse

Answer 2

available for 2 years after death of spouse if

• didn’t remarry
• qualified for MFJ in year of spouse’s death
• maintains household for year & >50% of costs when are principal abode for dependent (not foster child)

Question 3

HOH

Answer 3

can't file as qualifying widow(er)
can't be married unless
-files separately
-pays >50% for household for last 6 months when spouse not member of household, principal abode, can claim dependency exemption for child
nonresident aliens can't file

Question 4

Qualifying Child

Answer 4

Relationship- son, daughter, adopted, foster

Age- 50% of own support

Question 5

Qualifying relative

Answer 5

Relationship or residence
-live w/ TP for whole year
-blood immediate/extended relationship (parent, child, sibling, grandparent/child, uncle/aunt, nephew/niece)
NOT cousins
Gross TI- 50% for the year
-includes welfare, SS (not included for GTI)
-includes necessities, medical/dental, education, childcare, vacations

Question 6

Personal exemption phaseout

Answer 6

reduce 2% for each 2500 that AGI > threshold
completely phased out when AGI> cap
MFJ
-threshold=309,900 cap=432,400
HOH
-threshold=284,050, cap=406,550
Single
-threshold=258,250 cap=380,750

Question 7

Rent

Answer 7

ppd rent-income w/o restriction is income when rec’d

don’t include if rental residence rented

Question 8

Dividend reinvestment plan

Answer 8

basis of stock rec’d b/c of DRP= FMV

if buy stock

Question 9

Alimony

Answer 9

include in GI if

• pd in cash
• pd b/c of written divorce/separation
• ends @ death of recipient
• not child support
• not pd to member of same household

Question 10

Subpart F income

Answer 10

include in income for US sh
CFC- foreign corp owned by > 50% US sh
qualified income
-foreign personal holding co
-foreign based co sales/svcs income
–sales income excluded if item manufactured/sold within country of CFC
–svc income excluded if svc performed w/in co of CFC

Question 11

Social Security benefits

Answer 11

PIABA- include 85% of SSB
MFJ- BA=32k ABA=44k
S/HOH-BA=25k ABA=34
PI=AGI + tax exempt interest + 50% SSB

Question 12

Original Issue Discount

Answer 12

excess of redemption price @ maturity over issue price (based on effective interest rate method)

Question 13

Nonaccountable vs accountable employee reimbursement plans

Answer 13

non-advances included in GI
-expenses deducted fro AGI (2% floor)
accountable-submit request for reimbursement
-reimbursemt > exp are included in GI

Question 14

Annuity

Answer 14

expected return= annual pmt * expected return multiple
exclusion ratio= investment (or cost) divided by expected return
current exclusion= exclusion ratio * amnt rec’d during yr

Question 15

Employee achievement award

Answer 15

nonqualified plan- award

Question 16

Compensation included for injury

Answer 16

include in GI

• compensation for slander
• damages for lost profits
• punitive damages
• damages for emotional distress
• interest on award for personal injury

Question 17

Foreign earned income exclusion

Answer 17

exclude max 100,800 of foreign earned income & housing allowance
qualify
-residence of 1 or more foreign countries for whole year or be there 330 days during 12 month consecutive
-prorate amnt if not there in whole year

Question 18

Parsonage

Answer 18

ministers exclude rental value or allowance from GI

include in self-employment tax income if nonretired