Tax

Question 1

Dependent standard deduction

Answer 1

Greater of:
Earned income + $400 (13,850 max) or
$1,250

Question 2

Kiddie tax

Answer 2

Unearned income over $2,500 taxed at parents tax rate
All earned income taxed at child’s tax rate

Question 3

Inherited property basis

Answer 3

Basis = FMV at date of death
Long term holding period

Question 4

Basis of gifted property

Answer 4

Basis same as donors
Except
1) fmv less than basis
2) appreciated property with gift tax paid

Question 5

Section 1250 gain

Answer 5

Recapture of excess depreciation taxed as ordinary income

Question 6

AGI

Answer 6

Gross income less deductions

Question 7

Taxable income

Answer 7

AGI less standard or itemized deductions

Question 8

Dependent child

Answer 8

Under age 19 or 24 if student
Provided at least 50% of support
Lived in household at least half year

Question 9

Related party transaction

Answer 9

Sellers loss disallowed
Basis: FMV for loss, sellers basis for gains

Question 10

Personal Resident Gain exclusion

Answer 10

Own and use home for primary residence for 2 of last 5 years
Single: exclude $250k
Married: exclude $500k

Question 11

Personal residence exclusion exeptions

Answer 11

1) change in employment
2) change in health
3) unforeseen circumstances

Pro rate exclusion for number of months the requirement was met

Question 12

Alimony (pre dec 2018)

Answer 12

Alimony paid is deduction
Alimony received is earned income

Question 13

Alimony (post 2018)

Answer 13

Not deductible, not included in income

Question 14

section 179 deduction

Answer 14

The Section 179 deduction limit for 2023: $1,160,000 and the
total equipment purchase limit: $2,890,000

equipment over limit will have reduced deduction in amount of excess purchase
DEDUCTION LIMITED TO AMOUNT OF BUSINESS INCOME

Question 15

Accounting Methods

Answer 15

Cash Basis: recognize income when received (no inventory, only cash transition)
Accrual Basis: recognize income when it is earned (mandatory for purchases and sales of inventory)

Question 16

Constructive Receipt Doctrine

Answer 16

when income is readily available to the taxpayer, (no subject to limitations or restrictions) is is deemed to be received and should be taxed

Question 17

Residential Rental Loss Deduction (NonVacation)

Answer 17

Max $25k loss per year for taxpayers with AGI up to $100k
-reduced by $1 for every $2 for AGI between $100k and $150k

EX: AGI of $130k, max deduction would be $10K [(130 - 100 = 30) (30/2 = 15 reduction)]

Question 18

Vacation Home Rented LESS than 15 days

Answer 18

no gross income and no deductible rental expenses
Mortgage interest and property taxes treated as personal residence
(do not need to report as rental if rented for less than 15 days)

Question 19

Vacation Home Rented MORE than 14 days

Answer 19

treatment depends on personal use
- if personal use is NOT more than 14 days or 10% of rental days, can deduct ALL expenses

Question 20

Preference Items for AMT (Increase AMTI)

Answer 20

1) Percent Depletion
2) Intangible Drilling Costs
3) Interest on Private Activity Bonds

Question 21

Failure to File Penalty

Answer 21

5% per month up to 25%
- if return filed more than 60 days late, min failure to file penalty is $485 or amount of tax due

Question 22

Failure to Pay Penalty

Answer 22

0.5% per month up to 25%

• if both failure to pay and failure to file both apply, failure to file penalty is reduced by Failure to pay penalty

Question 23

Property Classes for Depreciation

Answer 23

5 Year: Computers, Autos
7 Year: Office Equipment
27 1/2 year: Residential Rental Property
39 Year: Non-residential real property

Question 24

Deductible Loss for Casualty Losses

Answer 24

Must be declared a Natural Disaster
Lesser of basis or FMV - insurance coverage - $100 - 10% of AGI

Question 25

Basis formula for gifted appreciated property

Answer 25

Donors basis + [(appreciation /taxable gift) x gift tax paid]

Question 26

Medicare contribution tax

Answer 26

Additional tax for investment income
3.8%

Question 27

Average tax rate calc

Answer 27

Total tax / gross income