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Flashcards in Deck 4 Deck (19)

Incentive stock option

No tax on grant date; taxable when exercised


The rule limiting the allowability of passive activity losses and credits applies to:

Personal service corporations


When should a cash basis taxpayer report gross income?

For the year in which income is either actually or constructively received


Are rental activities considered passive or non passive activities?



Mom and Pop Exception

Up to $25,000 of passive losses may be used as an offset against income from nonpassive sources. The $25,000 is reduced by 50% of the amount by which the individual's modified AGI exceeds $100,000; must actively participate


Phase out rule for mom and pop exception

The $25,000 is completely phased out when the amount of AGI exceeds $150,000


A jury duty fee that is required to be remitted to the employer may be:

Deducted from Gross income to arrive at AGI


Interest income is fully taxable except for what kind of interest income:

Interest from state and local government bonds


In order for alimony income to count as income, the amount received for alimony must be greater than the amount received for:

Child support


Maximum deductible for a capital loss:



How is group term life insurance taxed?

First $50,000 is a nontaxable fringe benefit; any amount over that is taxable


Self-employment tax and self-employment health insurance expenses are:

Adjustments from gross income


What does filing 1040EZ mean?

Person did not itemize in the prior year and did not deduct any state income taxes last year


Tax benefit rule for refunds

Refund is not taxable if it was not deducted in the last tax year


Conditions that must be met for tax exemption of accumulated interest on EE bonds bought after 1989:

Purchaser of the bonds must be the sole owner of the bonds, must be over 24, must be used for higher education


Head of household

Not required to live with the person; must pay for more than half of the relatives support for the entire taxable year


What is the maximum deductible for capital loss on investment stock sale?



"Kiddie tax"

amount of income for a child under 18 that is taxable at the parents' maximum tax rate


Calculation for kiddie tax

Child's interest income - standard deduction (950) - standard deduction again = amount taxed to parents