Chapter 6 (Above the Line)

Question 1

Deductions:
1.Trade or Business
2. HSA & MSA
3. Trad IRA
4. Moving expenses (Before 2017, after 2025) (Qual’d by distance test)
5. Penalties paid on early withdrawals
6. Educator expenses (Up to $300)
7. Student Loan Interest (Up to $2,500)
8. Alimony can be deducted before 2017 from payor
9. CHILD SUPPORT IS NOT DEDUCTIBLE
10. PROPERTY EXCHANGES ARE NONTAXABLE

Answer 1

Deductions for AGI or above the line

Question 2

Corporations (C-Corp)
Partnerships
Sole-Proprietorship

Answer 2

Types of Businesses

Question 3

C-Corps can deduct dividend income expenses

Answer 3

C-Corps

Question 4

Owners can convert company from C to S-Corp, creating a pass-through entity. Like C corporations, S corporations deduct all the ordinary, necessary, and reasonable expenses incurred in generating corporate income on the S corporation tax return. Only the net profit or loss flows through to the owners to report on their individual income tax return.

Answer 4

S-Corp

Question 5

Distributions issued from S-corporations are not subject to tax, since the owners paid tax on the corporate operating income when it was earned (whether or not the operating income was distributed)

Answer 5

S-Corps

Question 6

Non-cash compensation to an employee by employer. An employer can deduct the costs of providing qualified fringe benefits to employees without causing the value received by the employee to be included in the employee’s income.

Answer 6

Fringe Benefits