R1: Individual Tax --Income

Question 1

Qualifying widower

Answer 1

Must maintain household for whole taxable year, which was principle place of abode of dependent child. May use joint return standard deduction for 2 years following the year of spouse’s death.

Question 2

Dependency Exmptions

Answer 2

2016 $4,050

Question 3

Qualifying Child (CARES)

Answer 3

• Close relative
• Age Limit (19/24 college)
• Residency and Filing Requirements (live there more than 1/2 year)
• Eliminate Gross Income Test
• Support test changes

Question 4

Qualifying Relative (SUPORT)

Answer 4

• Support (over 50%) test

- Under a specific amount of (taxable) gross income test (

Question 5

Rental of Vacation Home

Answer 5

Basic Formula:
Gross Rental Income
Plus: Prepaid rental income (Non-refundable Deposits)
Plus: Rent Cancellation Payment
Plus: Improvement in Lieu of Rent (FMV)
Less: Rental Expense
Equals: Net Rental Income(Loss)

Question 6

Rented less than 15 days

Answer 6

Treated as personal residence (income is excluded)

Question 7

Rented 15 or more days

Answer 7

Expenses are prorated, rental use expenses are only deductible to extent of rental income.

Question 8

Individual Tax Calculation

Taxable Income

Answer 8

Gross Income
Less: Adjustments
Equals: AGI

Less: Standard or Itemized Deductions
Less: Exemptions
Equals: Taxable Income

Question 9

Individual Tax Calculation

Taxable due or refund

Answer 9

Federal Income Tax
Less: Tax Credits
Plus: Other Taxes
Less: Payments
Equals: Tax due or refund

Question 10

Adjustments (Taxable Income Calculation)

Answer 10

• Educator Expenses
• IRA
• Student loan interest expense
• Tuition & Fee deduction
• HSA
• Moving Expenses
• One-half Self-employment FICA
• Self-employed health insurance
• Self-employed Retirement
• Interest withdrawal penalty
• Alimony paid

Question 11

Itemized Deductions

Answer 11

• Medical (in excess of 10% of AGI)
• Taxes - State/local
• Interest Expense (home and investment)
• Charity (up to 50% of AGI)
• Casualty/theft (in excess of 10% of AGI)
• Misc (in excess of 2% of AGI)
• Other Misc

Question 12

Gross Income

Answer 12

• Wages
• Interest (interest on state gov’t obligations are NOT taxable)
• Dividends
• State tax refunds
• Alimony Received
• Business Income
• Capital Gain/Loss
• IRA Income
• Pension and Annuity
• Rental Inc/Loss
• K-1 Inc/Loss
• Unemployment Compensation
• Social Security Benefits
• Other Income

Question 13

Uniform Capitalization Rules

Answer 13

• Capitalized as Inventory:
  1. Direct Materials
  2. Direct Labor (compensation, vacation, taxes)
  3. Factory Overhead (utilities, warehousing, repairs, maintenance, indirect labor, rents, storage, dep/amort, insurance, pension, engineering/design, repackage, spoilage)
• Period Expense:
  1. SG&A
  2. Research & Development

Question 14

Social Security Income

Answer 14

• Low Income= No Social Security benefits are taxable (income below: $25k/single or $32k/MFJ)
• Lower Middle Income= Less than 50% of SS benefits are taxable.
• Middle Income= 50% of SS benefits are taxable (income over $25k/single or $32k/MFJ)
• Upper Middle Income= Between 50% and 85% of SS benefits are taxable.
• Upper Income= 85% of SS benefits are taxable (income over $34k/single or $44k/MFJ)

Question 15

Life Insurance

Answer 15

Group term life insurance is a nontaxable fringe benefit for the first $50k. The cost of amount exceeding $50k is considered taxable.

Question 16

Mom and Pop Exception

Answer 16

Passive activity losses of up to $25k are allowable (w/o having to net against passive activity gains).
Any excess is carried forward indefinitely.

Phase out: $25k is reduced by 50% of excess of the AGI over $100k (eliminated when AGI>$150k).