Taxation Flashcards
1
Q
Tax
- Gross income
A
- First step in determine liability
- Income from whatever source derived
- Realization - Gain must be realized, actual receipt or change in form
2
Q
Tax
- Deduction of property later recovered
A
- If deduction taken for tax benefit and property recovered, includable in the year recovered. Failed gift.
3
Q
Tax
Alimony and child support
A
- Alimony - Deductible by payor and includable by payee
- Front end loading -
- Child support - Not deductible or includable
4
Q
Tax
- Child income
A
- Child’s income included in child income even if paid to parents
- May include child under 18 in parents income, if
a. between $950-$9500
b. solely from interest and dividends - If child no income, no file return
5
Q
Tax
Prizes and awards
A
- Includable unless for recognition of charitable, religious, science, art, literary and person selected w/o action
- Employment award for length of service or safety excludable if under $400
6
Q
Tax
Damage awards
A
- Damages for physical personal injury are excludable, even if paid as lost earnings due to injury
- Damages for non-physical are included
- Emotional distress - When combined with physical injury, but not when combined w/ non - discrimination
- Punitive damages - taxable
7
Q
Tax
Paid employment expenses
Unemployment
A
- Meals, lodging - non included if furnished for convenience of employer and on premises of employer
- unemployment - over $2,400 then taxable
8
Q
Tax
Employee benefits and expenses
A
- Working condition - Not taxable if employee could deduct as business expense if paid for it for own income seek
- de minimis - tiny items allowed for personal use, excludable, pencils
- no-additional cost services and discounts - excludable, employer gives employee the service that was not paid for, empty airplane seat
9
Q
Tax
Deductions
A
- Individuals - Two types
1. deduction from gross to get AGI
2. deduction from AGI to get taxable income - Corporation - No AGI, all expenses business and deducted from income
10
Q
Tax
AGI business deductions
A
a. Business deductions - ordinary and necessary, common or accepted in that business
b. portion of residence only if: regularly uses portion exclusively as principal place in the normal course (provide the service to others there)
- No other place where does substantial admin or management activities
- employees - may deduct if reimbursements are included in income
11
Q
Tax
Depreciation
A
- Exhaustion of property capital for war and tear
- Property for production of income
- Usually cannot deduct full value, must deduct over depreciation period, exemption for up to $133, for small business depreciable property
12
Q
Tax
Depreciation
A
- Exhaustion of property capital for wear and tear
- Property for production of income
- Usually cannot deduct full value, must deduct over depreciation period, exemption for up to $133, for small business depreciable property
13
Q
Tax
Itemized deductions
A
- Subtracted from AGI
- interest incurred in purchase of investment property
- Mortgage interest
- Taxes - State and local
- Casualty and charitable
- Capital losses
- Medical - exceed 7.5% of AGI - may aggregate spent for spouse, kids if joint return
- Production of income expenses
- Business travel - Must be away from city of principal place of business
- 50% of meals, 100% lodging, 100 travel
14
Q
Tax
Casualty loss as itemized deduction
A
- Must exceed 10% of AGI - and $100
- Sudden and unexpected
- Difference in value before and after
15
Q
Tax
Charitable contributions
A
- charitable giving - cash or property
- maximum - 50% AGI, 30 for long term cap. gain prop to public charity, 20 if to private foundation
- Corp. 10% of taxable income limit
- excess gifts can be carried over for five
