REG mod 35h

Question 1

Under what circumstances may a scholarship be excluded from taxable income?

Answer 1

A scholarship is excluded from income if it is used to pay for tuition, books, fees, or equipment.

Question 2

When is the beneficiary of a trust required to pay tax on the distributable net income of the trust?

Answer 2

The beneficiary of the trust only pays taxes when the earnings are distributed.

Question 3

Name the two types of deductions.

Answer 3

Above the line deductions (deductions for adjusted gross income)
Below the line deductions (deductions from adjusted gross income)

Question 4

In what year is a casualty loss deductible?

Answer 4

In the year the casualty occurred. Note: Theft is deductible in the year the theft was discovered.

Question 5

What are the general requirements that must be met in order for business expenses to be deductible?

Answer 5

The expense must be ordinary and necessary.

Question 6

Property received as a gift is considered to be taxable income to the recipient of the gift. True / False

Answer 6

False, this is not considered to be taxable income. The tax, if applicable, is paid by the person giving the gift.

Question 7

When is form 1041 due?

Answer 7

It must be filed with the IRS by the 15th day of the fourth monthly following the end of the estate / trust’s fiscal year. For example, a trust with a fiscal year end of December 31, must file by April 15. (Note: This is the same as form 1040.)

Question 8

Property received as compensation is included in gross income. True / False

Answer 8

True. It is included in compensation at fair market value on the date of receipt.

Question 9

List the percent ownership and the corresponding dividends received deduction percentage.

Answer 9

Ownership %
Less than 20%
20% - 80%
More than 80%

Question 10

Name some of the miscellaneous Schedule A deductions that must exceed 2% of AGI in order to deduct.

Answer 10

Business travel expenses, Union dues, Tax preparation fees, Legal fees related to the collection of alimony, appraisals related to casualty losses and charitable contributions

Question 11

What expenses may not be deducted as moving expenses?

Answer 11

Meals, costs of house hunting trips, and the cost to break a lease

Question 12

What is the formula for AMT?

Answer 12

Regular Taxable Income
\+Preference Items
\+/- Adjustments
\+/- ACE Adjustment
= AMTI
-Exemption
X 20%
=Tentative AMT (AMT Base)
-Foreign TAX Credit
=Tentative Minimum TAX
=-Regular TAX
=Alternative Minimum TAX

Question 13

What does the question mark in the below formula represent?
Adjusted Gross Income
(Itemized Deductions)
(?)
Taxable Income

Answer 13

Personal exemption

Question 14

Name three refundable tax credits.

Answer 14

Earned Income Credit, Child Tax Credit, American Opportunity Credit

Question 15

What percentage of unemployment compensation is taxable?

Answer 15

100% of the unemployment compensation is taxable.