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Flashcards in Deck 5 Deck (19)

The taxpayer always claims the standard deduction. What does this mean in reference to state taxes?

The state tax was not deducted in the year it was paid. The state tax refund would therefore not be taxable and would not be included in gross income


How are suspected losses allocated?

Losses can be carried forward, not back, until utilized. The losses should be allocated to the two activities with passive losses in the ratio of their losses to total losses


Solvency is based on what?

FMV of all assets less the value of all liabilities (doesn't include non dischargeable liabilities)


How much is taxable for payments made by an employer on behalf of an employee for an employee's educational expenses?

Up to $5250 is non taxable and excluded from gross income; any amount above that is taxable


What is the tax rule for a traditional non-deductible IRA?

Partially taxable; the principal is non-taxable, the accumulated earnings on the principal are taxable


Requirements of an ISO

The option price can not be less than the FMV of the stock on the date of grant, The stock must be held for at least 2 years from the date and at least one year from the exercise date, can not own more than 10%


Requirements of an ESPP

Can not own more than 5%, option price can't be less than the lesser of 85% of the stock price when granted or exercised


Form 1040EZ does not allow:

Itemized deductions; only allows standard deduction


How much is taxable for meals?

50% of meals


Are FICA taxes excluded or included for tax purposes?



Are life insurance benefits taxable or nontaxable?

Not taxable and excluded from gross income


Roth IRA contributions

Post tax, earnings are also tax free, excluded from gross income


Employer matching contribution to 401(k) plan (taxable or no)

Not taxable so excluded from gross income, distribution is taxable though


Gift to minors act

Income is not included in gross income if it is below $1000 for a minor under 18 years old


Rule for nonaccountable plan

any amounts received by an employee from the employer must be reported by the employer as part of wages on the employee's W-2 for the year


What amount is deducted for charitable contributions?

Deduct the FMV if the good has been held for one year


Limit for charitable contributions for appreciated property?

30% of AGI


How much self employment tax is deductible:

One-half of the self employment tax is deductible to arrive at AGI


Which expense, both incurred and paid in the same year, can be claimed as an itemized deduction subject to the two percent-of-adjusted-gross-income floor?

Employee business expenses, including unreimbursed car expense