Tax Type Flashcards
Death benefit from a variable life insurance policy
Generally free of income tax
Death benefit from a variable annuity policy
Tax is ordinary income, not earned income
Alimony received from a divorce executed on January 15th, 2019
Not earned income
Alimony before 2019
Earned income
Sole proprietorship
Schedule C of form 1040 - earnings
Partnerships
Flow through of income and losses
General partnership - no liability protection
Limited partnership - liability is limited to the already invested + committed, but not contributed funds
Limited liability company
Not recognized as a classification for federal tax purposes.
One member LLC = Schedule C
Partnership LLC = Form 1065 and Schedule K for member’s income or loss.
If corporation, typically files as s-corp
C corporation
Only business taxed; generally pays income tax under 21%.
Tax return filed is form 1120
Double taxation: Pays income tax, then dividends + dividends are taxable to the shareholder
50% dividend exclusion on dividends from other companies.
S Corp
Subchapter S Corp
Treated the same as partnerships; shareholders receive schedule K-1 for income or loss
Tax return filed is form 1120S
Partial withdrawal of cash value from a variable life insurance policy
FIFO (first in, first out) - no tax consequences until the amount withdrawn exceeds the cost basis in the policy
Partial withdrawal of cash value from an annuity
LIFO - taxes due
Unit 24
Social security taxable benefits
As much as 50%
- single, base income over $25,000
- married, income over $32,000
85% subject to income tax
- single, income over $34,000
- married, income over $44,000
ILIT - Irrevocable Life Insurance Trust
Life insurance policy is placed inside this trust to remove the life insurance proceeds from the estate of the insured
Premiums may qualify for the annual gift tax exclusion about 16k
DNI
Distributable Net Income
Taxable income of a trust or estate, or beneficiaries.
Gross estate
All interests in property held by an individual at time of death.
- Property transferred to spouse or charity are generally not subject to Fed estate tax
Adjusted Gross Estate (AGE)
Deduction examples:
- funeral expenses
- charitable contributions
- debts of the decedent.
Excise tax
Legislated tax on specific goods or services at purchase such as fuel, tobacco, alcohol
