Basic Income Tax (L2)

Question 1

Basic Tax Formula

Answer 1

Question 2

Cash Basis Taxpayer

Answer 2

Question 3

Accrual Basis Taxpayer

Answer 3

Question 4

Doctrine of Constructive Receipt

Answer 4

Question 5

Filing Status

Answer 5

• Single
  
  • Married Filing Jointly (MFJ)
  • Married Filing Separately (MFS)
  • Head of Household
  • Qualifying Widow with Qualifying Child

Question 6

Head of Household

Answer 6

• Unmarried (as of last day of the taxable year)
  ○ Filed separate return
  ○ Paid more than half of the cost of keeping up his home
  ○ Abandoned Spouse (Taxpayers Spouse did not live in the
  home during the last 6 months)
  ○ Taxpayers home is the main home of the taxpayer’s child for
  more than half of the year
  ○ Taxpayer is eligible to claim a credit for that child
• “Qualifying Person” generally must have lived with the taxpayer for more than half of the year

Question 7

Qualifying Widow with qualifying child

Answer 7

• ONLY for 2 years following the year of the spouse’s death
• ALL of the following must apply:
  ○ Widow was eligible for a JOINT return with spouse in the year
  the spouse died
  ○ NOT remarried
  ○ Has a QUALIFIED child/stepchild
  ○ Child lived in taxpayers home ALL year
  ○ Taxpayer paid more than half the cost of keeping up the
  home

Question 8

Personal and Dependency Exemption

Answer 8

• Repealed with TCJA 2017

$4,400 (2022)

Question 9

Limited Standard Deduction

Answer 9

• For Claimed Dependents of another taxpayer

○ The GREATER of:
$1,150 (2022) OR $400 plus earned income (CANNOT exceed normal standard deduction)

Question 10

Qualifying Child

Answer 10

Question 11

Qualifying Relative

Answer 11

Question 12

Sources of Income

Answer 12

Question 13

Exclusion Ratio

Answer 13

Question 14

Modified Adjusted Gross Income (MAGI)

Answer 14

Question 15

Social Security Taxation (Hurdles)

Answer 15

Question 16

Below the Market Loans (IMPUTED INTEREST)

Answer 16

Question 17

Exclusions (from Gross Income)

Answer 17

• Gifts and Inheritances (Property, NOT income later generated from the property)
  
  • Life Insurance Proceeds
  • Scholarships (NOT Room and Board)
  • Gain on Sale of Personal Residence
  • Distributions from Roth IRAs and Roth 401k/403b Plans
  • Compensation for Injuries or Sickness (PHYSICAL)
  • Employer-Sponsored Accident and Health Plans
  • Meals and Lodging
  • Other EE Fringe Benefits
  • Foreign Earned Income
  • Interest on Certain State and Local Government Obligations
  • Discharge for Indebtedness

Question 18

Elements of a Gift

Answer 18

Question 19

Viatical Settlement

Answer 19

Question 20

Modified Endowment Contract (MEC)

Answer 20

Question 21

Scholarships

Answer 21

Question 22

Qualified Roth IRA and 401k Distributions

Answer 22

Question 23

Other Fringe Benefits

Answer 23

Question 24

Foreign Earned Income

Answer 24

Question 25

Deductions FOR AGI

Answer 25

Question 26

Deductions FROM AGI

Answer 26

ITEMIZED DEDUCTIONS and Standard Deduction

Question 27

Medical Expenses

Answer 27

* ITEMIZED DEDUCTION * Medical Expenses in EXCESS of 7.5% of AGI)

Question 28

Certain State and Local Taxes

Answer 28

* ITEMIZED DEDUCTION * Taxes CAPPED at $10,000 ○ Property Tax (ONLY US PROPERTY) ○ State income tax paid, OR state and local taxes (actual or standardized table amount)

Question 29

Contributions to Qualified Charitable Organizations

Answer 29

Question 30

Public Charities

Answer 30

Red Cross, Salvation Army, ASCPA, etc. * Churches * Schools * Hospitals *Governmental entities

Question 31

Private Charities

Answer 31

* Veteran organization * Fraternal order * Certain private foundation that support comes from a small group as opposed to public

Question 32

Deduction Clustering

Answer 32

* Grouping or "clustering" intemzied deductions together in one year * 4 categories of itemized deductions that can bunched: ○ Early PMT of state income or property taxes ○ Early PMT of mortgage interest ○ Medical Expenses ○ Charitable Donation

Question 33

Charitable Contributions of IRAs

Answer 33

* ITEMZIED DEDUCTION * Must be made to a Qualified Charity * Owner must be 70.5 * $100,000 annual limit ○ Will be reduced by any IRA contributions made after 70.5 * Tax Result: ○ Contribution is NOT treated as income to IRA owner ○ Contribution is NOT treated as a Charitable Contribution ○ Contribution can count as the owners RMD

Question 34

Casualty Losses

Answer 34

Question 35

Certain Personal Interest Expense (e.g. Mortgage Interest on Personal Residence)

Answer 35

* Investment Interest Expenses is limited to investment interest income. EXCESS investment interest expense may be carried over INDEFINITELY ○ Special Election ==> LTCG to be treated as ordinary income to offset investment interest income * Limited to $750k of mortgage indebtedness (loan) ○ Limited to 2 houses (primary and secondary residences) * NO home equity interest

Question 36

Qualified Business Income (QBI)

Answer 36

Question 37

Tax Credits

Answer 37

Question 38

Kiddie Tax

Answer 38