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Yaeger REG > Mod 35 Individual Taxation Pt. 2 > Flashcards

Mod 35 Individual Taxation Pt. 2 Flashcards

1
Q

Material participation vs. active participation

A

Material participation involves more hours than active participation

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2
Q

NOL may be carried back…

Carried forward…

A

Carried back 2 years

And carried forward 20 years

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3
Q

An NOL carryback is first made…

A

To second preceding year

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4
Q

Taxpayer may elect for NOL…

A

Not to carry back, only to carry forward 20 years

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5
Q

Losses and credits from passive activities may generally only be used…

A

Offset income from passive activities

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6
Q

Passive losses may not be used to offset…2

A

1 active income

2 portfolio income

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7
Q

3 examples of active income

A

1 wages

2 salaries

3 professional fees

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8
Q

4 examples of portfolio income

A

1 interest
2 dividends
3 annuities
4 royalties

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9
Q

Passive income:

Loss from partnership which individual does not participate in may be offset against…

A

Income from limited partnership

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10
Q

Losses and credits from passive activities apply to…5

A 
1 individuals 
2 estates
3 trusts
4 closely held C corporations
5 personal service corporations
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11
Q

Closely held C corporations, distinguishing characteristic

A

1 five or fewer shareholders owning more than 50% of stock

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12
Q

Personal service corporation is an incorporated service business with…

A

More than 10% of its stock owned by shareholder employees

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13
Q

Passive activity is 3

A

1 trade or business where taxpayer doesn’t materially participate

2 rental activity

3 limited partnership interest

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14
Q

If there is insufficient passive activity income to absorb passive activity losses…

A

Excess losses are carried forward indefinitely

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15
Q

If there is insufficient passive activity income in subsequent years to fully absorb the loss carry forwards, the unused losses from passive activity may be deducted when…2

A

1 Activity that gave rise to unused losses is disposed of

2 in fully taxable transaction

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16
Q

Rental activity, special rule permits

A

Individual to offset $25,000 of income that is not from passive
activities

by losses or credits from rental real estate if actively participates
In rental real estate activity

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17
Q

Rental activity, the $25,000 is phased out

A

By 50% AGI in excess of $100,000

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18
Q

AGI is computed for phase out of $25,000 of income that is not from passive activities before including…1
Deducting 1
Excluding 1

A

1 including taxable social security

2 deducting IRA contributions

3 exclusion of interest of series EE bonds used for higher education

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19
Q

What does MACRS stand for?

A

Modified Accelerated Cost Recovery System

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20
Q

MACRS is mandatory for most property…

A

Placed in service after 1986

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21
Q

MACRS:

Salvage value is…

A

Completely ignored under MACRS

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22
Q

MACRS:

The method of cost recovery and the recovery period are…

A

The same for both new and used property

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23
Q

MACRS:

5 year, 200% class applies to…4

A

1 computers
2 equipment
3 machinery
4 cars + trucks

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24
Q

MACRS:

7-year, 200% class, applies to…

A

Furniture and fixtures

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25
Q

MACRS:

27.5 year, straight line class includes…

A

Residential rental property

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26
Q

Residential rental property depreciated over 27.5 years straight line is building or structure with…

A

80% or more of its rental income from dwelling units

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27
Q

MACRS:

39 year, straight line class includes…2

A

1 Non residential property or

2 class life of less than 27.5 years

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28
Q

Averaging convention

A

Compute depreciation in first year or year disposed

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29
Q

MACRS:

Personal property is treated as placed in service or disposed of at…

A

Midpoint in year, resulting in half year depreciation

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30
Q

MACRS:

Mid quarter convention must be used if…

A

More than 40% of all personal property is placed in service during
Last quarter of taxpayer’s taxable year

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31
Q

MACRS:

Real property is treated as placed in service or disposed of…

A

In middle of month (half month depreciation)

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32
Q

Bonus (additional first year) depreciation is equal to…

A

50% of adjusted basis of qualified property

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33
Q

Bonus (additional first year) depreciation:

Qualifying property is property acquired after…

A

December 31, 2007 and placed in service before 2014 or 2015

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34
Q

Bonus (additional first year) depreciation:

Qualified property includes new MACRS property with a…

A

Recovery period of 20 years or less

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35
Q

Bonus (additional first year) depreciation:

Qualified property includes we MACRS property and 3 other things

A

1 tangible personal property

2 off shelf computer software

3 qualified leasehold property

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36
Q

Bonus (additional first year) depreciation:

Original use of qualified property must…2

A

1 begin with taxpayer and

2 property’s business use must exceed 50%

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37
Q

Bonus depreciation is computed before…

2) but after…

A

Before MACRS depreciation

2) after amount expensed under Sec. 179

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38
Q

Bonus (additional first year) depreciation:

There is no…

A

No annual dollar limit on amount of bonus depreciation that can be
Taken

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39
Q

2 situations where NOLs occur

A

1 loss on schedule C (sole proprietor)

3 casualty loss on schedule A

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40
Q

Bonus depreciation is not affected by…2

A

1 short tax year or

2 date during year property was placed in service

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41
Q

Bonus depreciation deduction and regular MACRS on bonus depreciation property are…

A

Allowed in full for AMT purposes

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42
Q

Leaseholds are depreciated…

A

Over 15 years using straight line method

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43
Q

Self employment tax is on…2

A

1 social security

2 Medicare

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44
Q

Self employment tax is computed on what form?

A

Schedule S/E

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45
Q

A self employed individual has 2 choices for medical insurance premiums

A

1 deduct 100% medical insurance premiums to arrive at AGI

2 can subtract medical insurance premiums in computing self employment tax

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46
Q

IRAs:

You can have…

2) what is the max contribution to both?

A

Both traditional and Roth

2) $5,500 or $6,500

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47
Q

Can contribute to Roth IRA as long as…

A

Person is alive

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48
Q

If you roll over a traditional IRA into a Roth…2

A

1 contributed deductibles and earnings are taxable

2 no 10% penalty

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49
Q

What date is an individual required to open and fund a 2014 IRA by?

A

4/15/15

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50
Q

Leasehold improvement costs made by lessee generally must be recovered over the…

A

MACRS recovery period of underlying property without regard to
Lease term

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51
Q

Qualified leasehold improvement property includes improvements to qualified…3

A

1 nonresidential real property

2 restaurant property

3 retail improvement property

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52
Q

Leasehold improvements are depreciated over a 15 year period using the straight line depreciation and…2

A

1 half year convention or

2 mid quarter convention

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53
Q

Upon expiration of a lease, any unrecovered adjusted basis in abandoned leasehold improvements is…

A

Treated as a loss

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54
Q

Sec. 179 expense election, in which taxpayer may elect to…2

A

1 Treat cost of qualifying depreciable property as expense

2 rather than a capital expenditure

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55
Q

Sec. 179 expense applies to…2

A

1 Tangible personal property acquired by purchase from an
unrelated party

2 not real estate

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56
Q

Sec. 179 expense election:

The maximum cost that can be annually expensed is…

2) reduced dollar for dollar for…

A

$500,000

2) amounts exceeding $2 million

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57
Q

Business start up costs 4 examples

A

1 survey of potential markets
2 expenses of securing prospective distributors/suppliers
3 advertising
4 employee training

58
Q

Business start up costs are deductible in year paid or incurred if…

A

Taxpayer is currently in similar line of business as start up business

59
Q

If not in similar line of business and new business is not acquired by taxpayer…

A

Start up costs are not deductible

60
Q

If not in similar line of business and new business is acquired by taxpayer…

A

Start up costs must be capitalized

61
Q

Amortization:

For startup costs a tax payer may elect to…

A

Deduct up to $5,000 in year business begins

62
Q

Deduction of $5,000 for business startup costs is phased out…

A

Dollar for dollar if startup costs exceed $50,000

63
Q

For startup business costs, the remaining expenditures, after the $5,000 deduction, are…2

A

1 Deducted ratably over 180 month period

2 starting in first month business begins

64
Q

Research and experimental expenses may be amortized…

A

Over 60 months or more

65
Q

Research and experimental expenses may be amortized. Alternatively they may be…2

A

1 Expensed at election of taxpayer

2 if done so for year such expenses are first incurred and paid

66
Q

Intangible assets for which the Cod does not specifically provide for amortization are…

A

Amortizable over their useful lives

67
Q

Most acquired intangible assets are to be amortized over a…

A

15 year period, beginning month it is acquired

68
Q

Section 197 applies to most intangibles acquired either in…2

A

1 stand alone transactions or

2 as part of acquisition of trade or business

69
Q

An amortizable sec. 197 intangible is any qualifying intangible asset which is acquired by taxpayer and which is…

A

Held in connection with conduct of trade or business

70
Q

Qualifying intangibles include…5

A 
1 goodwill
2 government licenses and permits
3 franchises
4 trademarks
5 trade names
71
Q

Certain assets qualify as Sec. 197 intangibles only if acquired in connection with the acquisition of a trade or business. These include…

A

Covenants not to compete

72
Q

Above the line deductions

A

Taken from gross income to determine adjusted gross income

73
Q

A self employed individual can deduct…

A

Deduct 50% of self-employment taxes in arriving at AGI

74
Q

Self employed individual can deduct 100% of…

A

Premiums for medical insurance

75
Q

Self employed individual can deduct 100% of of the premiums for medical insurance for the…4

A

1 individual
2 spouse
3 dependents
4 child under age 27 at close of tax year

76
Q

Deduction for medical insurance premiums can also be…

A

Subtracted in computing individual’s self employment tax

77
Q

Moving expenses, distance from former residence and new job must be…

A

At least 50 miles

78
Q

Following a move, the employee must be employed at least…

A

39 weeks out of 12 months following the move

79
Q

Maximum deduction for individual’s contribution to IRA in 2013

A

$5,500

80
Q

For married taxpayers filing a joint return put to $5,500 can be deducted for contributions to IRA of…2

A

1 each spouse, even if one spouse isn’t working

2 provided combined earned income of each spouse is at least
amount contributed to IRA

81
Q

IRA catch up contributions

A

Individual age 50 or over can contribute and deduct an extra
$1,000 to IRAs/yr.

$6,500

82
Q

IRA penalty

A

10% penalty on early withdrawals before 59.5 years old

83
Q

10% penalty does not apply to amounts withdrawn for…4

A

1 qualified higher education expenses
2 first time home buyer expenses ($10K limit)
3 distributions to unemployed for health insurance premiums
4 distributions where medical expenses exceed 7.5% of AGI

84
Q

Contributions to Roth IRA are…

A

Not deductible

85
Q

Eligibility for a Roth IRA

A

There are threshold limitations for AGI

86
Q

Traditional IRA contributions can’t be made after…

A

Age 70.5

87
Q

Qualified distributions from Roth IRA are…

A

1 not included in gross income

2 not subject to 10% early withdrawal penalty

88
Q

Qualified distribution from Roth IRA is a distribution that is made…

A

After 5 year period beginning with first tax year contribution was
made

89
Q

Qualified distribution of Roth IRA, 4 possible ones

A

1 after age 59.5
2 beneficiary after individuals death
3 after individual becomes disabled
4 first time home buyer (spouse, children, grandchildren up to 10K)

90
Q

For tax year beginning before 2010, tax payers with AGI of less than $100,000 could convert assets in traditional IRAs to roths without…

2) Although the deemed…

A

Paying 10% tax on withdrawals

2) distribution of IRA assets is included in income

91
Q

For IRAs (traditional and Roth) For tax years beginning after December 31, 2009, the…

A

AGI and filing status limitations are eliminated

92
Q

For IRAs (traditional and Roth) For tax years beginning after December 31, 2009, the AGI and filing status limitations are eliminated, allowing…

A

Higher income tax payers to convert traditional IRAs to Roths

93
Q

Self-employed are either…2

A

1 individual who files schedule C or

2 general partner

94
Q

Limited partner is considered…

A

An investor (not self-employed)

95
Q

Self-employed:

Keogh plan is a retirement plan where…2

A

1 contributions are limited

2 contributions are deducted

96
Q

A loan to a related party to pay for eduction is…

A

Not a qualified education loan

97
Q

Deductible medical expenses:

A

1 insurance premiums

2 policy for dental

3 prescription drugs

98
Q

Accident and disability premiums are…

A

Not deductible

99
Q

Cosmetic surgery is usually not deductible, what are 2 conditions to make it deductible?

A

1 correct a defect from an accident

2 paid out of pocket

100
Q

If you don’t have income subject to state withholding then…

A

You must pay estimated payments

101
Q

You can deduct estimated state cash payments made in what time period?

A

Made within the tax year

102
Q

Foreign real estate taxes are deductible as long as…

A

U.S. had a treaty with that country

103
Q

A Coverdell Education Savings Account is…2

A

1 An education IRA

2 for elementary, secondary and post secondary education

104
Q

Contributions can be made to a Coverdale Education Savings Account of up to…2

A

1 $2,000 per beneficiary

2 until beneficiary reaches age 18

105
Q

Coverdell Education Savings Account:

Contributions and withdrawals

A

Contributions not deductible

Withdrawals to pay cost of education are tax free

106
Q

Coverdell Education Savings Account:

Any earnings of an education IRA that are not used to pay a beneficiary’s education expenses must…2

A

1 be included in distributee’s gross income and

2 are subject to 10% penalty tax

107
Q

Coverdell Education Savings Account:

Eligibility is…

A

Phased out to high AGI

108
Q

Simplified employee pension plan (SEP) 2

A

1 deductible to arrive at AGI

2 employees don’t need to file for this plan

109
Q

Savings incentive match plan for employees (SIMPLE) 2

A

1 contributed by self-employed

2 deductible to arrive at AGI

110
Q

Deduction for interest on eduction loans, how long can you deduct?

A

Can deduct interest as long as loan exists

111
Q

For qualified education loans an individual can deduct interest up to…

A

$2,500

112
Q

Deduction for interest on qualified education loans is not available if…

A

Individual is claimed as dependent on another taxpayer’s return

113
Q

Qualified education loan is any debt incurred to pay for the qualified higher education expenses of…2

A

1 the taxpayer, spouse or dependents

2 must relate to period student was enrolled at least half time basis

114
Q

Qualified education expenses include…4

A

1 tuition
2 fees
3 room
4 board

115
Q

Deduction for interest on education loans is…

A

Phased out

116
Q

For 2007 through 2013, individuals are allowed to…

A

Deduct higher education expenses in arriving at AGI

117
Q

Qualified tuition and related expenses applies to tuition and fees, not…

A

Not text book expenses

118
Q

Qualified tuition and related expenses means tuition and fees required for…

A

Enrollment of taxpayer, taxpayer’s spouse, dependent at post secondary institution

119
Q

If a taxpayer takes an American Opportunity credit or lifetime learning credit with respect to a student, the qualified higher education expenses of that student for the year are…

A

Not deductible

120
Q

Penalties for premature withdrawals from time deposits

A

Penalty paid to bank is tax deductible

121
Q

Alimony or separate maintenance payments are…

A

Deducted above the line

122
Q

Jury duty pay…

A

Remitted to employer is deductible to arrive at AGI

123
Q

Costs involving discrimination suits:

What is deductible on behalf of an individual in connection with any action involving claim of unlawful discrimination (age, sex, race)?

A

Attorneys fees and court costs are deductible to arrive at AGI

124
Q

Costs involving discrimination suits:

The amount of deduction is limited to…

A

Amount of settlement/judgement included in gross income for year

125
Q

Expenses of elementary school teachers

A

U reimbursed paid out of pocket for supplies up to $250

126
Q

Medical and dental expenses paid by tax payer for himself, spouse or dependent are deductible in year of payment if…

A

Not reimbursed by insurance or employer

127
Q

Removal of structural barriers

A

Deductible expenses for physically handicapped individuals

128
Q

Deductible medical expenses:

Fees for…3

A

Doctors, dentists, psychiatrists, etc.

129
Q

Deductible medical expenses:

Meals and lodging 2

A

1 meals and lodging provided by hospital during medical treatment

2 provided during treatment for drug/alcohol addiction

130
Q

Deductible medical expenses:

Medical + hospital…

A

Insurance premiums

131
Q

Deductible medical expenses:

Prescribed…

A

Medicines and insulin

132
Q

Deductible medical expenses:

Transportation for…

A

Needed medical care

133
Q

Deductible medical expenses:

Special items and equipment including…2

A

Crutches, motorized wheelchair, etc.

134
Q

Items not deductible for medical expenses…4

A

1 bottled water
2 maternity cloths
3 diaper service
4 funeral + burial service

135
Q

Income taxes that are deductible

A

1 state

2 local

3 foreign

136
Q

Income tax that is not deductible…

A

Federal

137
Q

In states with no state tax, you can deduct…2

A

1 Sales tax from receipts or IRS tables

2 can deduct sales tax from purchase of boat or motor vehicle in
Addition to tables

138
Q

Real property taxes are deductible for…3

A

1 State

2 local

3 foreign

139
Q

For real property taxes to be deductible you must…2

A

1 own property

2 pay real estate taxes

140
Q

Personal property, which are deductible?2

A

1 state and local deductible

2 foreign is not deductible

141
Q

If personal property taxes are based on…

A

Weight, they are deductible

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