FEDERAL INCOME TAX (28 QUESTIONS) Flashcards

Question

When can the non-custodial parent claim a child as a qualifying child?

Answer 1

The child of a divorced parent will be treated as a qualifying child for the non-custodial parent if all 4 statements are true: (1) the parents are: (a) divorced or legally separated by a decree, (b) separated under a written agreement, or (c) lived apart during last 6 months; (2) child received over ½ of his/her support from the parents; (3) child is in custody of one or both parents for more than ½ of the year; and (4) custodial parent signs a written declaration that he/she wont claim child as dependent that year.

Answer 2

Even if all 4 are true allowing a noncustodial parent to claim a child as a qualifying child, this doesn’t allow the noncustodial parent to claim head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, the earned income credit, or the health coverage tax credit.

Answer 3

If child lived with each parent for same number of nights, the parent with the higher AGI is considered the custodial parent.

Answer 4

For the Support test, the child can’t have provided more than half of his or her own support for the year.

Answer 5

For the Joint Return test, the child can’t file a joint return for that year unless child is filing joint return with his/her spouse to claim a refund of income tax withheld or estimated tax paid

Answer 6

Sometimes a child meets all 5 tests but may be a qualifying child for more than 1 person.

Answer 7

No - only 1 person

Answer 8

1 person can actually treat qualifying child to take all of the following tax benefits: (a) child tax credit or other dependent credits; (b) HOH; (c) credit for child and dependent care expenses; (d) exclusions from income for dependent care benefits; and (e) earned income credit.

Answer 9

You and the person cannot agree to divide these benefits between the two of you.

Answer 10

To determine which person can treat child as qualifying child to take credits, the following tiebreaker rules apply: (1) if only one person is a parent, then parent gets it; (2) if parents file joint return together, child is qualifying child for both parents; (3) if parents don’t file joint return and each claims, IRS will give to parent whom child lived with longer or if same amount of time then with parent with higher AGI; (4) if no parent can claim child, child is treated as qualifying child of person with higher AGI.; (5) if a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child (i.e. if mom and grandma can claim child as qualifying child, but mom’s AGI is higher than grandma’s AGI, then grandma cannot claim even if mom wants to let grandma claim)

Answer 11

Four tests must be met: (1) not a qualifying child; (2) member of household or relationship test; (3) gross income test; (4) support test.

Answer 12

No - can be any age unlike qualifying child

Answer 13

Either (a) lives with you all year; or (b) be related to you (i.e. child, grandchild, sibling (half/step), stepparent, niece, nephew, uncle, aunt, in-laws (son/daughter/mom/father).

Answer 14

No - any of these relationships established are not ended by divorce or death.

Answer 15

A person’s gross income for the year must be less than 42,000

Answer 16

You generally must provide more than half of a person's total support during the calendar year

Answer 17

(1) Single; (2) Married Filing Jointly; (3) Married Filing Separately; (4) Head of Household; and (5) Qualifying Widow(er).

Answer 18

You are considered unmarried for the whole year if on the last day of the tax year you are unmarried or legally separated under a decree (state law governs whether you are legally separated).

Answer 19

You are considered married for the whole year if on the last day of the tax year you are: (a) married and living together; (b) living together in common law marriage recognized in state where you now live or where common law marriage began Divorce and Remarriage – if you obtain a divorce for sole purpose of filing tax returns as unmarried individuals and intend and do marry following year, you and your spouse must file as married individuals in both years

Answer 20

If you obtain a court decree of annulment which holds no valid marriage existed, you are considered unmarred even if you filed joint returns for earlier years.

Answer 21

You should file an Amended US Income Tax Return claiming single or HOH for all tax years affected by annulment and not closed by SOL for filing a tax return.

Answer 22

You may be able to file as HOH if you are: (1) unmarried or considered unmarried, (2) you paid more than ½ of the cost of keeping up a home for the year, and (3) a qualifying person lived with you in the home for more than ½ of the year (except for temporary absences such as school), but if qualifying person is your parent, parent doesn’t have to live with you.

Answer 23

You may be considered unmarried if: (a) you file a separate return, (b) you paid for more than ½ of costs of keeping up your home, (c) your spouse didn’t live during the last 6 months of the tax year (note a spouse is considered to live in your home if he or she is temporarily absent due to special circumstances), (d) your home was the main home of a qualifying person (i.e. your child, stepchild or foster child, and in some situations, parent, grandparent, brother or sister if dependent, but there is a special rule for parent and may be eligible even if parent didn’t live with you so long as you can claim parent as a dependent) for more than ½ of the year, and (e) you must be able to claim the qualifying person as a dependent (if a child you may still meet this test if you cannot claim only because the noncustodial parent can claim). Usually if you qualify as HOH, your tax rates are lower than single or MFS.

Answer 24

Both may be held responsible jointly and individually for the taxes, interest and penalties due on the joint return.

Answer 25

If divorced, this responsibility still applies even if your decree state that your former spouse will be responsible for any amounts owed on prior joint returns

Answer 26

(1) innocent spouse; separation of liability (available only to joint filers who are divorced, widowed, legally separated or haven’t lived together for the 12 months ending on the date the election for this relief is filed); and (2) equitable relief.

Answer 27

Generally, yes, but there exceptions.

Answer 28

Exceptions: (a) if spouse died before signing, executor or administrator may sign; (b) injury or disease prevents signing; (c) guardian of spouse; (d) spouse in combat zone; (e) power of attorney.

Answer 29

A tax refund may be applied to pay the past due amounts of your spouse’s debts and you must file and claim “injured spouse.”

Answer 30

You must file and claim injured spouse

Answer 31

To claim injured spouse you cannot be legally obligated for the debt and have made and reported tax payments (either holdings or estimated payments) or claimed a refundable tax credit.

Answer 32

You will generally pay more combined tax on separate returns than you would on a joint return due to special rules. These rules include not being able to take many credits (i.e. earned income credit, education credits, etc). If filing separately, you can deduct on the separate return the property tax, mortgage insurance if the property is held as tenants by the entirety and you alone paid it. As for casualty loss, neither spouse may report the total casualty loss for a home owned as tenants by the entirety. If medical expenses are paid with funds from a joint account, half of the total medical expenses may be paid unless you can show you alone paid the expenses

Answer 33

These rules include not being able to take many credits (i.e. earned income credit, education credits, etc).

Answer 34

You can deduct on the separate return the property tax, mortgage insurance if the property is held as tenants by the entirety and you alone paid it.

Answer 35

NO- neither spouse may report the total casualty loss for a home owned as tenants by the entirety.

Answer 36

If medical expenses are paid with funds from a joint account, half of the total medical expenses may be paid unless you can show you alone paid the expenses

Answer 37

NO - UNLESS the personal representative for a decedent does this 1 year from date of the return.

Answer 38

You may be able to file as MFJ for the year spouse died, and then following 2 years after your spouse died you can file as Qualifying Widow(er).

Answer 39

You may be eligible if you meet all of the following tests: (a) you didn’t remarry, (b) you have a child or stepchild you can claim as dependent, (c) the child lived in your home all year, (d) you paid more than ½ of the costs keeping up a home for the year.

Answer 40

Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you.

Answer 41

NO - it does not aply

Answer 42

You cannot claim head of household filing status because you and your husband did not live apart for the last 6 months of the year. As a result, your filing status is married filing separately, so you cannot claim the earned income credit or the credit for child and dependent care expenses.

Answer 43

In this case, only your husband will be allowed to treat your son as a qualifying child. This is because, during 2019, the boy lived with him longer than with you.

Answer 44

If you claimed the child tax credit for your son, the IRS will disallow your claim to the child tax credit.

Answer 45

If you do not have another qualifying child or dependent, the IRS also will disallow your claim to the exclusion for dependent care benefits.

Answer 46

No - because you and your husband didn't live apart for the last 6 months of the year, your husband can’t claim head of household filing status.

Answer 47

As a result, he has to file married filing separately, which means he can’t claim the earned income credit or the credit for child and dependent care expenses.

Answer 48

Your basis is the amount on your investment in property for tax purposes. You use the basis to figure the gain or loss on the sale, exchange or other disposition of property. It is also used to figure out deductions for depreciation, amortization, depletion, and casualty losses.

Answer 49

The cost of the property - it can also include sales tax, freight, installation and testing, excise taxes, legal and accounting fees, recording fees, real estate taxes

Answer 50

A. Cost Basis B. Adjusted Basis C. Basis Other Than Costs

Answer 51

It's basically what you paid for the property (including the mortgage, sales tax, revenue stamps, legal fees, etc.)

Answer 52

Your adjusted basis is generally your cost in acquiring your home plus the cost of any capital improvements you made, less casualty loss amounts and other decreases. Increases to basis will include things such as capital improvements while decreases can include any depreciation or tax credits you've already claimed. (The basis will be increased i.e. higher than the cost you paid for it by adding the improvements Likewise, the basis will decreased from the cost you paid for it by the basis of any property by all items that represent a return of capital for the period you held the property (i.e. if casualty or theft losses you decreases basis by any insurance proceeds, depreciation of your qualifying business property, easements)

Answer 53

1. Property received for services 2. Taxable exchanges 3. Nontaxable exchanges 4. Like-Kind Exchanges 5. Property Transferred from a Spouse 6. Property Received as a Gift 7. Inherited Property 8. Property Changed From Personal to Business or Rental Use 9. Stock and Bonds

Answer 54

You include the FMV of the property in income and the amount you include in income becomes your basis.

Answer 55

One where gain is taxable and loss is deductible, and is also known as recognized gain or loss. The basis of the property you receive is usually its FMV at the time of the exchange.

Answer 56

It is purchase of an item for less than its FMV

Answer 57

A taxable exchange is one in which the gain is taxable or the loss is deductible

Answer 58

A recognized gain or loss

Answer 59

The basis of the property you receive is usually its FMV at the time of the exchange.

Answer 60

A nontaxable exchange is an exchange in which you're not taxed on any gain and you can't deduct any loss.

Answer 61

Its basis is generally the same as the basis of the property you transferred

Answer 62

An exchange where you are not taxed on any gain and cannot deduct any loss. The basis is generally the same as the basis for the property transferred.

Answer 63

The exchange of property for the same kind of property, such as 1031 exchanges for real property held or used for business or investment. The basis for the property you receive is generally the basis for the property you gave up. If you paid money, then the adjusted basis of the property you gave up is increased by the money you paid.

Answer 64

The basis of the property transferred to you is the same as your spouse’s adjusted basis.

Answer 65

Need to know its adjusted basis to the donor before it was given, its FMV at the time it was given, and any gift tax paid on it.

Answer 66

You can deduct depreciation for business use at the time of the change.

Answer 67

This is generally the purchase price plus any costs of purchase, such as commissions and fees. If you get stocks other than by purchase, your basis is usually determined by the previous owner’s adjusted basis. You reduce your basis when you receive non-taxable distributions as they are a return of capital. If you receive additional stock from nontaxable stock splits, reduce your basis for the stock (i.e. 2:1 stock split, you buy 100 shares for $10 p/s, your basis is now $5 p/s for 200 shares)

Answer 68

A sale is a transfer of property for money or promise to pay money (mortgage, note, etc.)

Answer 69

A transfer of property for other property or services and may be taxed in the same way as a sale.

Answer 70

It may be taxed in the same way as a sale.

Answer 71

It is subject to capital gain or loss provision unless the redemption is a dividend or other distribution of stock.

Answer 72

It depends on each case how redemption is treated. The redemption is treated as a sale or trade of stock if: (a) the redemption isn’t essentially equivalent to a divided, (b) there is a substantially disproportionate redemption of stock, (c) there is a complete redemption of all the stock of the corporation owned by the shareholder, or (d) the redemption is a distribution in partial liquidation of a corporation.

Answer 73

Usually retirement of bonds or notes at maturity is treated as a sale or trade.

Answer 74

If by a dominate shareholder who retains ownership of more than half of the corporations voting shares , it is treated as contribution to capital rather than as an immediate loss deducible from taxable income

Answer 75

Stocks or bond that become completely worthless during the tax year are treated as though they were sold on the last date of the tax year. This affects whether your capital loss is short or long term.

Answer 76

You figure the gain or loss by subtracting the adjusted basis of the property from the amount you realize on the sale or trade. The amount realized from the sale or trade is everything you receive for the property minus your expenses related to the sale (i.e. fees, commissions). The amount realized includes money you received plus the FMV of any property or services you receive. Also, if you have a debt against the property, the amount realized includes the debt paid off (i.e. you owe $8,000, your basis is $6,000 and buyer pays off loan and pays you $20,000 your amount realized is $28,000 and the gain is $22,000).

Answer 77

1. Corporate reorganizations 2. Stock for stock of the same corporation 3. Convertible stocks and bonds 4. Insurance policies and annuities

Answer 78

If you exchange common stock for preferred stock, or stock in one corporation for stock in another, and this is as a result of merger, recapitalization, corporation acquisition, etc., you don’t recognize gain or loss

Answer 79

You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having recognized a gain or loss

Answer 80

You generally won’t have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate.

Answer 81

You won’t have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: (a) a life insurance contract for another life insurance contract, or for an endowment, or annuity or qualified long term care insurance contract; (b) an endowment contract for another endowment contract, or annuity or qualified long term care; (c) or an annuity contract for another annuity or qualified long term insurance contract; or (d) a qualified long term insurance contract for another qualified long term insurance contract.

Answer 82

Generally no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse.

Answer 83

This does not apply if the recipient spouse or former spouse is a nonresident alien, or property is transferred in trust and liability exceeds basis.

Answer 84

The recipient’s basis in the property will be the same as the adjusted basis of the giver immediately before the transfer.

Answer 85

This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its FMV at the time of transfer or any consideration paid by the recipient.

Answer 86

This rule applies for purposes of determining loss as well as gain. Any gain recognized on a transfer in trust increases the basis.

Answer 87

A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage.

Answer 88

1. Occurs within 1 year after the date your marriage ends, or 2. Is related to the end of your marriage.

Answer 89

A divorce, for this purpose, includes the end of your marriage by annulment or due to violations of state laws.

Answer 90

A property transfer is related to the end of your marriage if both of the following conditions apply: (a) the transfer is made under your original or modified divorce or separation instrument; and (b) the transfer occurs within 6 years after the date your marriage ends.

Answer 91

This presumption won't apply if you can show that the transfer was made to carry out the division of property owned by you and your spouse at the time your marriage ended.

Answer 92

For example, the presumption won't apply if you can show that the transfer was made more than 6 years after the end of your marriage because of business or legal factors which prevented earlier transfer of the property and the transfer was made promptly after those factors were taken care of.

Answer 93

Long Term Capital Gain or Loss – hold the investment property for more than 1 year Short Term Capital Gain or Loss – hold the investment property for 1 year or less.

Answer 94

You begin counting on the date after the day you acquired the property, but the day you disposed of the property is part of your holding period

Answer 95

Your holding period isn’t more than 1 year and you have a short-term capital gain or loss; but if you sold it on February 6, 2019 then you have a long term gain or loss because holding period is more than 1 year)

Answer 96

You can take a bad debt deduction only in the year the debt becomes worthless.

Answer 97

To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash.

Answer 98

For example, you can’t claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. If you are a cash method taxpayer (as most individuals are), you generally can’t take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items.

Answer 99

1. Cost as basis 2. Adjusted Basis

Answer 100

This is the amount you paid for it in case, debt obligations, other property or services. This is the purchase price, some settlement fees and closing costs.

Answer 101

This is the cost or other basis increased or decreased by certain amounts. This includes improvements, but not repairs. As for decreases, this would be deductible casualty loses, insurance payments received or expected for casualty losses, payments received for granting an easement, depreciation allowed if you used your home for business or rental purposes.

Answer 102

You can exclude up to $250,000 ($500,000 if married and filing MFJ) of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true: 1. You meet the ownership test (i.e. you owned the home for at least 2 years for 5 years preceding sale of home). 2. You meet the use test (i.e. you lived in the home as your main home for at least 2 years for 5 years preceding sale of home). 3. During the 2-year period ending on the date of the sale, you didn’t exclude gain from the sale of another home Gains or Losses

Answer 103

1. You meet the ownership test (i.e. you owned the home for at least 2 years for 5 years preceding sale of home). 2. You meet the use test (i.e. you lived in the home as your main home for at least 2 years for 5 years preceding sale of home). 3. During the 2-year period ending on the date of the sale, you didn’t exclude gain from the sale of another home Gains or Losses

Answer 104

You lived in the home as your main home for at least 2 years for 5 years preceding sale of home).

Answer 105

You owned the home for at least 2 years for 5 years preceding sale of home

Answer 106

There are exceptions to the use test due to disability (you become physically or mentally unable to care for yourself AND you owned and lived in your home as your main home for a least 1 year during the 5 year period before the sale of your home; you still must meet the ownership for 2 years test for 5 years preceding sale of home

Answer 107

you become physically or mentally unable to care for yourself AND you owned and lived in your home as your main home for a least 1 year during the 5 year period before the sale of your home; you still must meet the ownership for 2 years test for 5 years preceding sale of home

Answer 108

The Ownership and Use 2 year period don’t have to be continuous and they both don’t have to occur at the same time, but they must be meet during the 5 year period preceding the sale

Answer 109

You are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. You can exclude up to $500,000 if the sale or exchange took place no more than 2 years after the date of death, you haven’t remarried, and: 1. You meet the ownership test (i.e. you owned the home for at least 2 years for 5 years preceding sale of home). 2. You meet the use test (i.e. you lived in the home as your main home for at least 2 years for 5 years preceding sale of home). 3. During the 2-year period ending on the date of the sale, you didn’t exclude gain from the sale of another home Gains or Losses also apply to your spouse.

Answer 110

Helena can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 8, 2014, to July 7, 2019, the date she sold the condominium. She owned her condominium from December 2, 2016, to July 7, 2019 (more than 2 years). She lived in the property from July 8, 2014 (the beginning of the 5-year period), to April 14, 2017 (more than 2 years). The time Helena lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use.

Answer 111

Emilio can exclude up to $250,000 of gain on a separate or joint return for 2019. The $500,000 maximum exclusion for certain joint returns doesn’t apply because Jamie doesn’t meet the use test.

Answer 112

Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Kari owned and used the property before death.

Answer 113

If you don’t meet the ownership and use test or have used the exclusion within 2 years of selling your current home, you may qualify for a reduced maximum exclusion if you sell your main home because: (a) a change of employment; (b) health; or (c) unforeseen circumstances (i.e. events you couldn’t have reasonably foreseen occurring before buying and occupying main home).

Answer 114

You may be able to exclude gain but you must meet the ownership and use test

Answer 115

If the amount realized is less than the adjusted basis, the difference is a loss. A loss on the sale of your main home can’t be deducted

Answer 116

You don’t have to report the gain on the sale of your house unless you have a gain and don’t qualify to exclude all of it, you have a gain and chose not to exclude it, you received a form 1099-S

Answer 117

If your capital losses are more than your capital gains, you can claim a capital loss deduction. You can use your total net loss to reduce your income dollar to dollar up to the $3,000 limit.

Answer 118

You can use your total net loss to reduce your income dollar to dollar up to the $3,000 limit.

Answer 119

You can carry over the unused part to the next year. A long-term capital loss you carry over will reduce that year’s long term capital gains before it reduces that year’s short term capital gains. However use your short term capital losses first even if you incurred them after long term capital loss.

Answer 120

NO - Capital Loss of a decedent cannot be carried over

Answer 121

The capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss

Answer 122

The amount by which your net long term capital gain for the year is more than your net short term capital loss.

Answer 123

You are subject to the lower rate. For example, if capital gain rate on collectible is 28% and you are in a lower tax bracket, the lower rate applies.

Answer 124

After December 31, 2018, alimony is no longer deductible by payor and no longer taxable to recipient.

Answer 125

The following rules apply to alimony: (a) payments to a 3rd party may be considered alimony (i.e. medical expenses, housing, tuition); (b) payments for life insurance premiums if on your life and your spouse owns policy and you pay premiums is considered alimony; (c) payments for expenses for a home owned by you and your spouse may be alimony (i.e. ½ of mortgage and interest, taxes and insurance if held as tenants in common but if held as tenants by the entirety, none of your payments for taxes and insurance are alimony)

Answer 126

It must expressly state alimony is non-taxable and non-deductible otherwise the old rule apply or that the new post 12/31/18 rules apply.

Answer 127

Then all payment payments made in 2019 are taxable/deductible because the alimony payments were made under the written separate agreement that was executed before 12/31/18.

Answer 128

You can’t deduct the costs of personal advice, counseling, or legal action in a divorce. These costs aren’t deductible, even if they are paid, in part, to arrive at a financial settlement or to protect income-producing property

Answer 129

You can’t deduct legal fees you pay for a property settlement. However, you can add it to the basis of the property you receive. For example, you can add the cost of preparing and filing a deed to put title to your house in your name alone to the basis of the house.

Answer 130

You must file the form 2 years after the date on which the IRS first attempted to collect the tax from you

Answer 131

The IRS must contact your spouse or former spouse. No exceptions even if there is domestic violence

Answer 132

The IRS has 10 years from the date of the tax liability was assessed to collect the tax

Answer 133

Even if you are relieved of the tax liability under the innocent spouse relief provisions, you may remain liable for the unpaid tax, interest, and penalties to the extent provided by those laws. Therefore IRS may collect deficiency from the innocent spouse to the extent permitted under federal or state transferee liability or property laws

Answer 134

1. You filed a joint return. 2. There is an understated tax on the return that is due to erroneous items (i.e. you never paid or incurred the expense deducted, the expense doesn’t qualify as a deduction) of your spouse (or former spouse). 3. You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed). 4. Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax.

Answer 135

Under this type of relief, the understated tax (plus interest and penalties) on your joint return is allocated between you and your spouse (or former spouse). The understated tax allocated to you is generally the amount you are responsible for

Answer 136

You must have filed a joint return and meet either one of the following requirements: (1) You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. (Under this rule, you are no longer married if you are widowed); or (2) you e not a member of the same household as the spouse with whom you filed the joint return at any time during the 12 month period ending on the date you file the form 8857 relief.

Answer 137

NO - if you have actual knowledge of the underreported tax, then you cannot get this relief for portion you had actual knowledge of.

Answer 138

There is an exception if you can establish you were a victim of domestic violence.

Answer 139

You can get equitable relief form an understated tax or an unpaid tax. An unpaid tax is amount you properly reported on return but failed to pay.

Answer 140

Court will consider if you are married or no longer married to your spouse. If not married, this weighs in your favor of relief and if married its neutral

Answer 141

1. You are not eligible for Innocent Spouse or Separation of Liability Relief 2. You filed a joint return 3. You timely filed your claim for relief 4. You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. 5. Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 6. You did not knowingly participate in the filing of a fraudulent joint return. 7. The income tax liability from which you seek relief is attributable (either in full or in part) to an item of your spouse (or former spouse) or an unpaid tax resulting from your spouse’s (or former spouse’s) income. If the liability is partially attributable to you, then relief can only be considered for the part of the liability attributable to your spouse (or former spouse). The IRS will consider granting relief regardless of whether the understated tax, deficiency, or unpaid tax is attributable (in full or in part) to you if any of the following exceptions apply: (a) the item is attributable or partially attributable to you solely due to the operation of community property law. If you meet this exception, that item will be considered attributable to your spouse (or former spouse) for purposes of equitable relief. (b) If the item is titled in your name, the item is presumed to be attributable to you. However, you can rebut this presumption based on the facts and circumstances. (c) You did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by your spouse (or former spouse) for his or her benefit. If you meet this exception, the IRS will consider granting equitable relief although the unpaid tax may be attributable in part or in full to your item, and only to the extent the funds intended for payment were taken by your spouse (or former spouse).

Answer 142

1. Marital Status: Court will consider if you are married or no longer married to your spouse. If not married, this weighs in your favor of relief and if married its neutral. 2. Economic Hardship 3. Knowledge or Reason to Know understated tax or unpaid tax. Court will also consider abuse by your spouse when considering this factor. 4. Legal obligation to pay the debt 5. Significant Benefit you will receive 6. Compliance with Income Tax Laws 7. Mental or Physical Health

Answer 143

* You will be permitted a refund under innocent spouse and equitable relief but NOT separation of liability * You will only get a refund if you provide proof of payment made with your own money * No credit for refunds of payments made with joint return, joint payments.

Answer 144

It is used to determine whether you must file a return, your standard deduction and the correct tax. It can also be used to determine if you can claim certain other deductions and credits.

Answer 145

On the last day of your tax year.

Answer 146

Single or if you meet certain requirements HOH or qualifying widower

Answer 147

Your filing status is either married filing a joint return or married filing a separate return

Answer 148

If you and your spouse divorced by the last day of the tax year for the sole purpose of filing a tax return as unmarried but at the time of the divorce you intend to remarry in the next tax year, you and your spouse must file as married individuals

Answer 149

You MUST amend your turns because an annulment means the marriage never existed for all tax years affected EXCEPT the years precluded by the statute of limitations

Answer 150

It generally doesn't end until 3 years (including extensions) after the date you file your original return or within 2 years after the date you pay the tax

Answer 151

Single OR HOH if you meet certain requirements

Answer 152

If you are married as of the last day of the tax year i.e. Dec 31st i.e. have not obtained a divorce decree yet

Answer 153

No - which means you are still married for purposes of your filing status.

Answer 154

If those things aren't considered marriage in the state they are in then they are not deemed married for filing status purposes for their federal tax purposes.

Answer 155

You must have qualifying health care coverage

Answer 156

1. Most coverage through government-sponsored pro-grams (including Medicaid coverage, Medicare parts A or C, the Children’s Health Insurance Program (CHIP), certain benefits for veterans and their families, TRICARE, and health coverage for Peace Corps vol-unteers); 2. Most types of employer-sponsored coverage; 3. Grandfathered health plans; and 4. Other health coverage the Department of Health and Human Services designates as minimum essential coverage.

Answer 157

1. Special Marketplace Enrollment Period. If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period. 2. Changes in Circumstances. If you purchase health insurance coverage through the Health Insurance Marketplace, you may get advance payments of the premium tax credit in 2019. If you do, you should re-port changes in circumstances to your Marketplace throughout the year. Changes to report include a change in marital status, a name change, and a change in your income or family size. By reporting changes, you will help make sure that you get the proper type and amount of financial assistance. This also will help you avoid getting too much or too little credit in advance. 3. Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your sepa-rate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. The Instructions for Form 8962, Premium Tax Credit, has more information about the Shared Policy Allocation.

Answer 158

No, only one of you has to be a US Citizen or a resident alien at the end of the tax year i.e. December 31st

Answer 159

Yes, but only if you agree to treat the nonresident alien as a resident of the US - which means both of your incomes are subject to US income tax

Answer 160

Generally, you both have to sign it or it won't be considered a joint return

Answer 161

Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse.

Answer 162

1. Innocent spouse relief. 2. Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who haven’t lived together for the 12 months ending on the date election of this relief is filed. 3. Equitable relief.

Answer 163

Yes - an over payment on a joint return can be used to pay the past due amount of your spouse's debts - this includes federal tax, state tax, child or spousal support payments or federal nontax debt such as student loan

Answer 164

Yes - if you qualify as an injured spouse

Answer 165

You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts.

Answer 166

1. Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and 2. Not be legally obligated to pay the past-due amount.

Answer 167

Must only show that you are not legally obligated to pay the past-due amount

Answer 168

Form 8379 with your tax return

Answer 169

If you haven’t filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return & you should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. If you filed your joint return and your joint refund was offset, file Form 8379 by itself. When filed after offset, it can take up to 8 weeks to receive your refund. Don’t attach the previously filed tax return, but do include copies of all Forms W-2, Wage and Tax Statement, and W-2G, Certain Gambling Winnings, for both spouses and any Forms 1099 that show income tax withheld.

Answer 170

NO - an injured spouse uses Form 8379 and requests an allocation of the overpayment attributed to each spouse An innocent spouse used Form 8857 to request relief from a joint liability for tax, penalties, interest and penalties on a joint return for items of the other spouse that were incorrectly reported or omitted from the joint return

Answer 171

If you paid with funds deposited in a joint checking account in which you and your spouse have an equal interest then you may deduct HALF of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses

Answer 172

If you file a separate state income tax return then you can deduct the state income tax you alone paid during the year. If you file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax then you can deduct the state income tax you alone paid during the year. If you file a joint state income tax return and you are liable for only your own share of state income tax then you can deduct the smaller of: -the state income tax you alone paid during the year, or -the total state income tax you and your spouse paid during the year multiplied by the following fraction. The numerator is your gross income and the denominator is your combined gross income.

Answer 173

If you paid the tax and mortgage interest on property held as tenants by the entirety then you can deduct the property tax and the mortgage interest you paid.

Answer 174

If you have a casualty loss resulting from a federally declared disaster on a home you own as tenants by the entirety, you can deduce half of the loss, subject to the deduction limits. **Neither spouse may report the total casualty loss.

Answer 175

Your income may be separate income or community income for income tax purposes

Answer 176

1. Your tax rate generally is higher than it would be on a joint return. 2. Your exemption amount for figuring the alternative minimum tax is half of that allowed on a joint return. 3. You can’t take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 on a joint return). If you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. 4.You can’t take the earned income credit. 5. You can’t take the exclusion or credit for adoption ex-penses in most cases. 6. You can’t exclude the interest from qualified savings bonds that you used for higher education expenses. 7. If you lived with your spouse at any time during the tax year: a. You can’t claim the credit for the elderly or the dis-abled, and b. You will have to include in income a higher percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received. 8. The following credits and deductions are reduced at income levels that are half those for a joint return. a. The child tax credit. b. The retirement savings contributions credit. 9. Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). 10. If your spouse itemizes deductions, you can’t claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return. 11. You can’t take the credit for higher education expenses (American opportunity and lifetime learning credits), the deduction for student loan interest, or the tuition and fees deduction.

Answer 177

Yes, generally you have 3 years to amend

Answer 178

Form 1040-X

Answer 179

No BUT a personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent 1 year from the due date

Answer 180

1. You can claim the standard deduction even if your spouse files a separate return and itemizes deductions. 2. Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately. 3. Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately. 4. You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you can’t claim if your filing status is married filing separately. 5. Income limits that reduce your child tax credit and your retirement savings contributions credit, for example, are higher than the income limits if you claim a filing status of married filing separately.

Answer 181

1. You are unmarried or “considered unmarried” on the last day of the year. 2. You paid more than half the cost of keeping up a home for the year. 3. A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she doesn’t have to live with you.

Answer 182

1. You file a separate return. A separate return includes a return claiming married filing separately, single, or head of household filing status. 2. You paid more than half the cost of keeping up your home for the tax year. 3. Your spouse didn’t live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily ab-sent due to special circumstances. 4. Your home was the main home of your child, step-child, or foster child for more than half the year. (See Qualifying person, later, for rules applying to a child's birth, death, or temporary absence during the year.) 5. You must be able to claim the child as a dependent. However, you meet this test if you can’t claim the child as a dependent only because the noncustodial parent can claim the child.

Answer 183

You will be considered an unmarried person for HOH purposes. However, your spouse is NOT a qualifying person for HOH purposes.

Answer 184

1. The person is your qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests) AND single THEN that person is a qualifying person, whether or not the child meets the Citizen or Resident Test 2. The person is your qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests) AND he or she is married and you can claim him or her as a dependent THEN that person is a qualifying person. 3. The person is a qualifying relative who is your father or mother AND you can claim him or her as a dependent THEN they are a qualifying person 4. The person is a qualifying relative other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) AND he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who don't have to live with you AND you can claim him or her as a dependent THEN they are a qualifying person

Answer 185

He or she is married and you can’t claim him or her as a dependent

Answer 186

If you cannot claim them as a dependent

Answer 187

1. He or she didn’t live with you more than half the year 2. He or she isn’t related to you in one of the ways listed under Relatives who don’t have to live with you and is your qualifying relative only because he or she lived with you all year as a member of your household; OR 3. you cannot claim him or her as a dependent

Answer 188

Only if you pay more than half the cost of its upkeep for the year. This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. This doesn’t include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household

Answer 189

They must live with you more than half the year UNLESS it's your parents so long as you can claim them as dependent and paying more than half the cost of keeping up their main home for the year

Answer 190

Illness, education, business, vacation, military service, or detention in a juvenile facility. It must be reasonable to assume that the absent person will return to the home after the temporary absence. You must continue to keep up the home during the absence

Answer 191

1. The child is presumed by law enforcement authorities to have been kidnapped by someone who isn’t a member of your family or the child's family. 2. In the year of the kidnapping, the child lived with you for more than half the part of the year before the kid-napping. 3. In the year of the child’s return, the child lived with you for more than half the part of the year following the date of the child’s return. 4. You would have qualified for head of household filing status if the child hadn’t been kidnapped. This treatment applies for all years until the earliest of: 1. The year the child is returned, 2. The year there is a determination that the child is dead, or 3. The year the child would have reached age 18.

Answer 192

If all of the 4 statements are TRUE: 1. The parents: a Are divorced or legally separated under a decree of divorce or separate maintenance, b. Are separated under a written separation agreement, or c. Lived apart at all times during the last 6 months of the year, whether or not they are or were married. 2. The child received over half of his or her support for the year from the parents. 3. The child is in the custody of one or both parents for more than half of the year. 4. Either of the following applies. a. The custodial parent signs a written declaration, discussed later, that he or she won't claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984 or separation agreement that went into effect after 1984 and before 2009, or Post-2008 divorce decree or separation agreement, later). b. A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2019 states that the noncustodial parent can claim the child as a dependent, the decree or agreement wasn’t changed after 1984 to say the noncustodial parent can’t claim the child as a de-pendent, and the noncustodial parent provides at least $600 for the child's support during the year.

Answer 193

If they could be claimed as as a dependent by another tax payer

Answer 194

If the married person is only filing the joint return to claim a refund of withheld income tax or estimated tax paid

Answer 195

You can’t claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico

Answer 196

They are your qualifying child or qualifying relative

Answer 197

1. 2. 3. 4. 5. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled. The child must have lived with you for more than half of the year.2 The child must not have provided more than half of his or her own support for the year. The child must not be filing a joint return for the year (unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid). A child isn't a qualifying child unless he or she meets items (1) through (5).

Answer 198

1.The person can’t be your qualifying child or the qualifying child of anyone else. 2. The person either (a) must be related to you in one of the ways listed under Relatives who don't have to live with you in Pub. 501 or (b) must live with you all year as a member of your household 2 (and your relationship must not violate local law). 3. The person's gross income for the year must be less than $4,200. 4. You must provide more than half of the person's total support for the year. A person isn't a qualifying relative unless he or she meets items (1) through (4).

Answer 199

The parent with the greater number of nights during the year

Answer 200

If the child sleeps at that parent's home whether or not the parent is present OR In the company of the parent, when the child doesn’t sleep at a parent's home (for example, the parent and child are on vacation together).

Answer 201

The parent with the higher adjusted gross income

Answer 202

As part of the year in which it begin e.g. December 31, 2019 is part of 2019

Answer 203

The child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. But if it can’t be deter-mined with which parent the child normally would have lived or if the child wouldn’t have lived with either parent that night, the child is treated as not living with either pa-rent that night.

Answer 204

If, due to a parent's nighttime work schedule, a child lives for a greater number of days but not nights with the parent who works at night, that pa-rent is treated as the custodial parent. On a school day, the child is treated as living at the primary residence registered with the school.

Answer 205

Parent with 210 overnights

Answer 206

During the time she is at camp, she is treated as living with each parent for 3 weeks because this is how long she would have lived with each parent if she hadn’t attended summer camp.

Answer 207

Parent with higher AGI is treated as custodial parent

Answer 208

Your son is treated as living with you during this 10-day period be-cause he was living in your home.

Answer 209

He isn’t considered in the custody of his parents for more than half of the year. The special rule for children of divorced or separated parents (or parents who live apart) doesn’t apply

Answer 210

Because she is treated as not living with either parent be-ginning on August 1, she is treated as living with you the greater number of nights in 2019. You are the custodial parent

Answer 211

The custodial parent must use either Form 8332 or a similar statement (containing the same information required by the form) to make a written declaration to release a claim to an exemption for a child to the noncustodial parent. Although the exemption amount is zero for tax year 2019, this release allows the noncustodial parent to claim the child tax credit, additional child tax credit, and credit for other dependents, if applicable, for the child

Answer 212

The release can be for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration

Answer 213

The noncustodial parent may be able to attach certain pages from the agreement instead of Form 8332. The agreement must state all three of the following. 1. The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. 2. The custodial parent won't claim the child as a dependent for the year. 3. The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return. *The cover page (write the other parent's SSN on this page). *The pages that include all of the information identified in items (1) through (3) above. *The signature page with the other parent's signature and the date of the agreement.

Answer 214

YES - custodial parent can revoke a release of claim to an exemption that he or she previously released to the noncustodial parent. For the revocation to be effective for 2019, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2018 or earlier. The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation.

Answer 215

It is treated as provided to you

Answer 216

It is considered support of the child.

Answer 217

This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support.

Answer 218

They aren’t treated as a payment for the support of a dependent.

Answer 219

1. The child tax credit, the credit for other dependents, and the additional child tax credit. 2. Head of household filing status. 3. The credit for child and dependent care expenses. 4. The exclusion from income for dependent care benefits. 5. The earned income credit.

Answer 220

1. If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. 2. If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. 3. If the parents don’t file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. 4. If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. 5. If a parent can claim the child as a qualifying child but no parent claims the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child.

Answer 221

Both parents bc kid lived with each for more than half the year and met the relationship, age, support and joint return test for both parents.

Answer 222

This means, if your husband doesn’t claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. However, you can’t claim head of household filing status because you and your husband didn’t live apart the last 6 months of the year. And, as a result of your filing status being married filing separately, you can’t claim the earned income credit or the credit for child and dependent care expenses

Answer 223

In this case, only your husband will be allowed to treat your son as a qualifying child. This is because, during 2019, the boy lived with him longer than with you. If you claimed the child tax credit for your son, the IRS will disallow your claim to the child tax credit. If you don’t have another qualifying child or dependent, the IRS also will disallow your claim to the exclusion for dependent care benefits. In addition, because you and your husband didn’t live apart the last 6 months of the year, your husband can’t claim head of household filing status. And, as a result of his filing status being married filing separately, he can’t claim the earned income credit or the credit for child and dependent care expenses.

Answer 224

Only the noncustodial parent can claim the child tax credit or the credit for other dependents for the child. However, the custodial parent, if eligible, or other eligible person can claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. If the child is the qualifying child of more than one person for those tax benefits, the tie-breaker rules determine which person can treat the child as a qualifying child.

Answer 225

Under the rules for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim the child tax credit for the child if he meets all the requirements to do so. Because of this, you can't claim the child tax credit for your son. However, your son's father can’t claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned in-come credit.

Answer 226

This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you don’t claim him as a qualifying child for the earned income credit. (You can’t claim head of household filing status because your mother paid the entire cost of keeping up the home.)

Answer 227

Your mother can’t claim your son as a qualifying child for any purpose because her AGI isn't higher than yours.

Answer 228

You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child.

Answer 229

Your basis is the amount of your investment in property for tax purposes. Use the basis to figure the gain or loss on the sale, exchange, or other disposition of property. Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses.

Answer 230

Must allocate the basis based on the USE

Answer 231

Only the basis allocated to the business or the production of income part of the property can be depreciated.

Answer 232

Yes - it is increased or decreased by certain events. For example, if you make improvements to the property, increase your basis. If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis.

Answer 233

The cost is the amount you pay in cash, debt obligations, other property, or services. Your cost also includes amounts you pay for the following items. * Sales tax. * Freight. * Installation and testing. * Excise taxes. * Legal and accounting fees (when they must be capitalized). * Revenue stamps. * Recording fees. * Real estate taxes (if you assume liability for the seller).

Answer 234

Real property, also called real estate, is land and generally anything built on, growing on, or attached to land.

Answer 235

Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Figure the basis of each asset by multiplying the lump sum by a fraction. The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase

Answer 236

If you buy property and assume (or buy the property subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage.

Answer 237

Your basis includes the settlement fees and closing costs you paid for buying the property. (A fee for buying property is a cost that must be paid even if you buy the prop-erty for cash.) Don't include fees and costs for getting a loan on the property in your basis.

Answer 238

*Abstract fees (abstract of title fees). *Charges for installing utility services. *Legal fees (including fees for the title search and preparation of the sales con-tract and deed). *Recording fees. *Survey fees. *Transfer taxes. *Owner's title insurance. *Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions.

Answer 239

Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance.

Answer 240

*Casualty insurance premiums. *Rent for occupancy of the property before closing. *Charges for utilities or other services rela-ted to occupancy of the property before closing. *Charges connected with getting a loan, such as points (discount points, loan origi-nation fees), mortgage insurance premi-ums, loan assumption fees, cost of a credit report, and fees for an appraisal required by a lender. *Fees for refinancing a mortgage

Answer 241

f you pay real estate taxes the seller owed on real property you bought, and the seller didn't reimburse you, treat those taxes as part of your basis. You can't deduct the taxes as an expense.

Answer 242

NO - if you pay points to get a loan, do not add the points to the basis of the related property. Generally, you deduct the points over the term of the loan.

Answer 243

Before figuring gain or loss on a sale, ex-change, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments (increases and decreases) to the cost basis or basis other than cost (discussed later) of the property. The result is the adjusted basis.

Answer 244

* Capital improvements: additions to your home, replace a rood, paving your driveway, install central AC, rewiring your home * Assessments for local improvements: water connections, extending utility service lines, sidewalks, roads * Casualty losses: - restoring damaged property * Legal fees: Cost of defending and perfecting a title * Certain canceled debt excluded from Fees for getting a reduction of an assessment * Zoning costs

Answer 245

* Exclusion from income of subsidies for energy conservation measures * Casualty or theft loss deductions and insurance reimbursements * Postponed gain from the sale of a home * Alternative fuel vehicle refueling property credit * Residential energy credit * Depreciation and section 179 deduction * Nontaxable corporate distributions * Certain canceled debt excluded from income * Easements * Adoption tax benefits

Answer 246

Add the assessment to your property's basis. In this example, the assessment is a depreciable asset.

Answer 247

Adjusted basis after restoration is $19,000 Basis in the land is its original cost of $5,000

Answer 248

Yes - reduce the basis of the property for which you received the subsidy by the excluded amount.

Answer 249

There are many times when you can't use cost as basis. In these cases, the FMV or the adjusted basis of the property can be used.

Answer 250

Include the FMV of the property in income

Answer 251

The amount you include in income becomes your basis. If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary.

Answer 252

your basis in the property is its FMV when it becomes substantially vested.

Answer 253

A bargain purchase is a purchase of an item for less than its FMV.

Answer 254

Your basis in the property is its FMV (your purchase price plus the amount you include in income).

Answer 255

A taxable exchange is one in which the gain is taxable or the loss is deductible.

Answer 256

If you receive replacement property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property using the basis of the converted property

Answer 257

$26,000 - it's $29k minus gain not recognized $3k

Answer 258

The exchange of property for the same kind of property may qualify as a nontaxable exchange under section 1031.

Answer 259

It only applies to exchanges of real property held for use in a trade or business or for investment, other than real property held primarily for sale.

Answer 260

The exchange of real property for the same kind of real property is the most common type of nontaxable exchange

Answer 261

You must hold for business or investment purposes both the real property you transfer and the real property you receive. There must also be an exchange of like-kind property.

Answer 262

The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. If you trade property in a like-kind exchange and also pay money, the basis of the property received is the adjusted basis of the property you gave up increased by the money you paid.

Answer 263

Your basis in the newly acquired real property is $70,000 (the $30,000 adjusted basis of the old parcel plus the $40,000 paid).

Answer 264

partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property.

Answer 265

The basis of the property you receive is the same as the adjusted basis of the property you gave up the following adjustments: 1. Decrease the basis by the following amounts. a. Any money you receive. b. Any loss you recognize on the ex-change. 2. Increase the basis by the following amounts. a. Any additional costs you incur. b. Any gain you recognize on the ex-change.

Answer 266

Treat the debt assumption as money you received in the exchange

Answer 267

Allocate the basis first to the unlike property, other than money, up to its FMV on the date of the ex-change. The rest is the basis of the like-kind property

Answer 268

The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. The same rule applies to a transfer by your former spouse that is incident to divorce. However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred.

Answer 269

The transferor must include in income the interest accrued to the date of transfer. Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income.

Answer 270

At the time of the transfer, the transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer.

Answer 271

To figure the basis of property you receive as a gift, you must know: -its adjusted basis to the donor just before it was given to you, -its FMV at the time it was given to you, and -any gift tax paid on it.

Answer 272

If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property.

Answer 273

You will have a $2,000 gain because you must use the donor's adjusted basis at the time of the gift ($10,000) as your basis to figure gain

Answer 274

You will have a $1,000 loss because you must use the FMV at the time of the gift ($8,000) as your basis to figure loss

Answer 275

you have neither gain nor loss

Answer 276

If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property

Answer 277

Your basis is the donor's adjusted basis at the time you received the gift. Increase your basis by all or part of any gift tax paid, depending on the date of the gift.

Answer 278

Your basis is $26,106 FMV - $50,000 minus adjusted Basis ($20,000) = $30,000 net increase in value Gift tax paid - $7,100 X .86 ($30k x. $35k) = $6,106 + adjusted basis of property to your mother of $20k = $26,106

Answer 279

It is generally one of the following. *The FMV of the property at the date of the decedent's death. *The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. *The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes. *The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement.

Answer 280

Your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes

Answer 281

They own half of the community property

Answer 282

The total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. However, for this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return.

Answer 283

The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). The basis of the other half to your spouse's heirs is also $50,000.

Answer 284

At the time of the change. To do so, you must figure its basis for depreciation at the time of the change. For e.g changing property from personal use to rental use would be renting out your former personal residence.

Answer 285

The basis for depreciation is the lesser of the following amounts. * The FMV of the property on the date of the change. *Your adjusted basis on the date of the change.

Answer 286

Your adjusted basis in the house when you changed its use to rental property was $178,000 ($160,000 + $20,000 − $2,000). On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. The basis for figuring depreciation on the house is its FMV on the date of the change ($165,000) because it’s less than your adjusted basis ($178,000).

Answer 287

It will depend on whether you're figuring a gain or loss

Answer 288

The basis for figuring a gain is your adjusted basis in the property when you sell the property.

Answer 289

Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500).

Answer 290

Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Then make adjustments (in-creases and decreases) for the period after the change in the property's use

Answer 291

In this case, you would start with the FMV on the date of the change to rental use ($180,000) because it is less than the adjusted basis of $203,000 ($178,000 + $25,000 (land)) on that date. Reduce that amount ($180,000) by the depreciation deductions ($37,500). The basis for loss is $142,500 ($180,000 − $37,500).

Answer 292

The basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees.

Answer 293

If you get stocks or bonds other than by purchase, your basis is usually deter-mined by the FMV or the previous owner's adjusted basis

Answer 294

For example, if you receive additional stock from nontaxable stock dividends or stock splits, reduce your basis for each share of stock by dividing the adjusted basis of the old stock by the number of shares of old and new stock. This rule applies only when the additional stock received is identical to the stock held. Also reduce your basis when you receive nontaxable distributions. The nontaxable distributions are a return of capital.

FEDERAL INCOME TAX (28 QUESTIONS) Flashcards

(329 cards)