Filing Requirements Flashcards
(347 cards)
1
Q
Who must file 2014 - Single
A
Under 65 = Gross Income > $10,150
65+ = Gross Income > $11,700
2
Q
Who must file 2014 - Head of Household
A
Under 65 = Gross Income > $13,050
65+ = Gross Income > $14,600
3
Q
Who must file 2014 - Married Filing Separately
A
Any age = Gross Income > $3,950
4
Q
Who must file 2014 - Qualifying widower(er) with dependent child
A
Under 65 = Gross Income >$16,350
65+ = Gross Income > $17,500
5
Q
Who Must File 2014 – Married Filing Jointly
A
Both Under 65 = Gross Income > $20,300
One Spouse 65+ = Gross Income > $21,500
Both 65+ = Gross Income > $22,700
6
Q
How Is Marital Status Determined?
A
As Of December 31, Of The Tax Year
7
Q
When Is An Individual Considered To Be 65?
A
The Day Before Their 65Th Birthday
8
Q
Personal Exemption Amount 2014
A
$3,950 per taxpayer
9
Q
Additional Standard Deduction for age and blindness for 2014
A
$1,200 Per Person (Married And Qualified Widower)
$1,550 Per Person (Single And Head Of Household)
10
Q
Can a dependent claim themselves?
A
No, a dependent can not claim a Personal Exemption and may have a reduced Standard Deduction.
11
Q
Dependent Filing Requirement – Single, Under 65, Not Blind
A
Unearned Income > $1,000
Earned Income > $6,200
Gross Income > $1,000 Or Earned income (Up To $5,850) Plus $300
12
Q
What is Gross Income
A
Standard deduction ($3950 in 2014) \+ personal exemption
13
Q
Dependent Filing Requirement – Single, 65+, Or Blind
A
“Uei > $2,400 ($3,850 If 65+ And Blind)
Ei > $7,250 ($8,700 If 65+ And Blind)
Gi > $2,400 ($3,850 If 65+ And Blind) Or Ei (Up To $5,500) Plus $1,750 ($3,200 If 65+ And Blind)”
14
Q
Dependent Filing Requirement – Married, Under 65, Not Blind
A
“Uei > $950
Ei > $5,800
Gi At Least $5 And Spouse Itemizes
Gi > $950 Or Ei (Up To $5,500) Plus $300”
15
Q
Dependent Filing Requirement – Married, 65+, Or Blind
A
“Uei > $2,100 ($3,250 If 65+ And Blind)
Ei > $6,950 ($8,100 If 65+ And Blind)
Gi Was At Least $5 And Spouse Itemizes
Gi > $2,100 ($3,250 If 65+ And Blind) Or Ei (Up To $5,500) Plus $1,450 ($2,600 If 65+ And Blind)”
16
Q
Four Factors Determining Filing Requirement
A
Gross Income, Filing Status, Age, Dependency Status
17
Q
Define Gross Income
A
All Income Received In The Form Of Money, Goods, Property, And Services, That Is Not Exempt From Tax, Including Sources Outside Of The Us
18
Q
Is Social Security Included In Gross Income?
A
Not Unless Individual Is Mfs And Lived With His/Her Spouse During The Year, Or 1/2 Of The Benefits Plus Other Income Exceeds $25,000 ($32,000 If Mfj)
19
Q
Does Gross Income Include Gain From A Sale Of A Principal Residence Or Foreign Earned Income When Determining Filing Requirements?
A
Yes And Yes. Even If Gain From Sale Of The Home Is Excluded From Gross Income.
20
Q
How Is Community Income In A Community Property State Handled?
A
1/2 Of Any Community Income Is Considered Each Spouse’S Income.
21
Q
California, Nevada, Washington – Registered Domestic Partners?
A
Must Report 1/2 Of The Combined Community Income Of The Individual And His/Her Partner
22
Q
What Constitutes Gross Income For A Self–Employed Individual?
A
“Service Business – Gross Income = Gross Receipts
Manufacturing, Merchandising, Or Mining – Gross Income = Sales – Cogs”
23
Q
Individual Filing Requirements
A
Gross Income Exceeds The Sum Of The Personal Exemption Allowed For Filing Status Plus The Standard Deduction, Increased For Age And/Or Blindness
24
Q
What Is Dependent Gross Income?
A
Gross Income = Total Earned Plus Unearned Income
25
Earned Income
Salaries, Wages, Tips, Professional Fees, Taxable Scholarships, Fellowship Grants
26
Unearned Income
Investment–Type Income Such As Interest, Dividends, And Capital Gains. Also Includes Unemployment, Taxable Ss Benefits, Pensions, Annuities, And Distributions From A Trust
27
When Can A Parent Elect To Report The Child'S Interest And Dividends?
"Child Is Under 19 Or A Full Time Student Under 24 At The End Of The Year
Child Is Required To File A Return For 2011, Except For This Election
Child Only Had Income From Interest And Dividends Including Capital Gain Distributions And Alaska Permanent Fund Dividends
The Child Does Not File A Joint Return For 2011
Child'S Gi
28
How Does A Parent Make The Election To Report Child'S Interest And Dividends?
Completing And Attaching Form 8814 (Parent'S Election To Report Child'S Interest And Dividends) And Attaching It To Their 1040 Or Form 1040Nr
29
When Reporting Kiddie Tax, How Much Is Reported On Parent'S Return?
Only The Amount Of Interest, Dividends, And Capital Gain Distributions Over $1,900. The First $950 Is Not Taxed, While The Next $950 Is Taxed At 10%. Use Part Ii Of The Form 8814 To Figure The Tax On The $1,900 As If It Was Received By The Parent. The Amount Is Carried To Line 44 Of The 1040 Or Line 42 Of The 1040Nr, And Box A For Form 8814 Is Checked.
30
Is A Child Born On January 1, 1988 Considered 23 Or 24 For 2011 Tax Purposes?
24
31
Investment Income Greater Than $1,900 – Kiddie Tax
"Subject To Tax At The Parent'S Tax Rate If All Of The Following Conditions Are Met:
Child Was Under Age 18 At The End Of 2011 Or Was 18 But Did Not Have Ei That Provided More Than Half His Support (Same Rule For Full Time Student Under Age 24)
Child'S Investment Income Was More Than $1,900
Child Did Not File A Joint Return
Child Is Required To File A 2011 Return
At Least One Parent Was Alive At The End Of 2011"
32
Kiddie Tax – What If Parent Won'T Or Can'T Choose To Include Child'S Income On Their Tax Return?
Form 8615 (Tax For Certain Children Who Have Investment Income Of More Than $1,900) Is Used To Figure The Child'S Tax And Is Attached To The Child'S 1040
33
Calculating Tax On Child'S Net Investment Income
"Determine Net Investment Income In Part I Of Form 8615. Determine Tentative Tax At The Parent'S Tax Rate In Part Ii. That Is The Difference Between The Tax On The Parent'S Taxable Income With The Child'S Net Investment Income And Without. If More Than One Child With Investment Income, The Tentative Tax Is Based On The Income Of All The Children Then Divided Proportionately.
Figure Child'S Tax In Part Iii. This Is The Larger Of The Child'S Share Of The Tentative Tax Based On The Parent'S Tax Rate Plus The Tax On The Child'S Income In Excess Of Net Investment Income Figured At The Child'S Rate Or The Tax On The Child'S Income Figured At The Child'S Tax Rate"
34
How Do You Determine The Imposed Tax Rate On Child'S Net Investment Income Based On Parent'S Filing Status?
"Mfs – Return For The Parent With Greater Ti Is Used
Parents Are Married But Do Not Live Together, And The Custodial Parent Is Considered Unmarried, The Return For The Custodial Parent Is Used.
Parents Are Divorced Or Legally Separated, And Custodial Parent Has Not Remarried, Custodial Parent'S Return Is Used. If Custodial Parent Has Remarried, Stepparent Is Considered Other Parent For Following The Preceding Rules.
Never Married But Lived Together All Year, Parent With Higher Ti Is Used. If They Did Not Live Together All Year, Custodial Parent'S Return Is Used.
Mfj – Joint Return Is Used"
35
Decedent Tax Return Requirements
Same Four Factors Are Used For Deceased Persons As Individual Persons
36
Who Files For A Decedent?
"Personal Representative Or Spouse – Write Deceased With Name And Date Of Death On Top Of Return
Personal Representative Would Fill In Area For Spouse'S Name – Executor, Administrator, Or Anyone In Charge Of Deceased Property"
37
What Document Should Be Filed With A Decedent Tax Return For A Refund To Be Received?
A Copy Of The Certificate That Shows Appointment By A Court.
38
What Is Not Acceptable Evidence Of Appointment As A Personal Representative For A Deceased Person?
Poa Or A Copy Of The Will
39
How Should A Spouse Sign A Decedent Tax Return?
Write Filing As A Surviving Spouse In Signature Area
40
What Form Needs To Be Filed With A Decedent Tax Return To Receive A Refund (Except For Spouses)?
Form 1310 (Statement Of Person Claiming Refund Due A Deceased Taxpayer)
41
Alien Tax Return ? Which Form To File?
Nonresident Aliens File Form 1040?Nr And Report Certain Income
Resident Aliens File Form 1040 As A Us Citizen Would
Dual Status Aliens File Both
42
What Is A Resident Alien?
Individual That Meets Green Card Test Or Substantial Presence Test.
43
Green Card Test
Individual Is A Resident Of The Us If He Is A Lawful Permanent Resident At Any Time During 2011
44
Substantial Presence Test
Taxpayer Is A Resident If Both Conditions Are Met:
Physically Present In The Us For At Least 31 Days In 2011
Physically Present In Us For At Least 183 Days During 2009?2011. Include All Days Of Physical Presence In 2011, 1/3 Of The Days In 2010, And 1/6 Of The Days In 2009
45
Days Of Presence Exclusions
Days The Person Commutes To Work In The Us From A Residence In Canada Or Mexico If They Do It On A Regular Basis
Days In Us For Less Than 24 Hours When In Transit Between Two Places Outside The Us
Days Present As A Foreign Vessel Crew Member
Days In Us If Medical Condition Arising In Us Keeps Them From Leaving
Days The Individual Is Exempt
46
Exempt Individual For Days Of Presence Test
Foreign Government Related Person Present With An A Or G Visa
Teacher/Trainee Under A J Or Q Visa Who Substantially Complies With Requirements Of Visa
A Student In Compliance With Requirements Of Their F, J, M, Or Q Visa
Professional Athlete In The Us To Compete In A Charitable Sports Event
47
Form 8840 (Closer Connection Exception Statement For Aliens)
Used To Claim Closer Connection To A Foreign Country To Avoid Us Resident Status
48
Nonresident Alien Taxes
Subject To Us Income Tax Only On Us Source Income And Certain Foreign Source Income
49
Nonresident Alien Filing Requirements
Nr Engaged In Trade Or Business In Us During 2011, Even If They Had No Income From That Business, No Us Income, Or Exempt Income
Nr Not Engaged In A Trade Or Business In The Us With Us Income On Which The Tax Liability Was Not Satisfied By The Withholding Of Tax At The Source
Taxpayer Represents A Deceased Person That Would Have Had To File A 1040Nr
Taxpayer Represents An Estate Or Trust That Has To File Form 1040Nr
50
Nonresident Alien Filing Requirements ? When Are They Not Required To File?
Nr Only Us Trade Or Business Was Personal Services And Wages
51
Dual?Status Aliens
Us Resident For Current But Not Preceding Year ? Us Resident Only For The Part Of The Year That Begins On Residency Starting Date. Before That Date, Person Was A Nonresident Alien.
Meets Substantial Presence Test, Starting Date Is First Day Present. Green Card Test, First Day Of Lawful Perm Residency. Meets Both, First Date Is Earlier Of Two.
52
Person Not Meeting Green Card Or Presence Test In 2010 Or 2011 But Meets Presence Test In 2012
Can Elect To Be Treated As A Resident For Part Of 2011 If They Did Not Choose To Do So For 2010 And Were Present In Us For At Least 31 Days In A Row In 2011 And Present For 75% Of The Days Between The First Day Of The 31 Day Period And The End Of 2011
53
When Can A Dual Status Alien Choose To Be Treated As A Us Resident For Entire Year?
Nr Alien At Beginning Of Year
Ra Or Citizen At End Of Year
Married To Ra Or Us Citizen At End Of Year
Spouse Joins In Making The Choice
54
Us Source Interest Income
Interest On Bonds, Notes Or Other Interest?Bearing Obligations Of Us Residents Or Domestic Corps
Interest Paid By A Domestic Or Foreign Partnership Or Foreign Corp Engaged In Us Trade Or Business At Any Time In 2011
Original Issue Discount
Interest From A State, Dc, Or Us Government
55
Us Source Dividends
Received From Domestic Corps Except:
If Domestic Corp Elects To Take American Samoa Economic Development Credit
Part Of Dividend Received From Foreign Corp Is Us Source Income If 25% Or More Of Its Total Gi For The Three Years Leading Up To End Of The Tax Year Were Connected With Trade Or Business In Us, Then Us Sourced Portion Is Found Using This Calculation:
Foreign Corp Gi Connected With Us For 3 Year Period/Foreign Corp Gi From All Sources For That Period
56
Us Source Personal Service Income
All Wages And Compensation For Services Performed In Us
| Allocate If Services Performed In More Than One Country
57
Us Source Fringe Benefit Income
Sourced On A Geographical Basis And Includes Housing, Education, Transportation, Tax Reimbursement, Hazard Pay, Moving Expense Reimbursement
58
Us Source Transportation Income
All Income From Transportation That Begins And Ends In Us
50% If Begins Or Ends In Us
Compensation To A Crew Member Of A Foreign Vessel Is Not Us Income
59
Us Source Scholarships, Grants, Prizes, And Awards
Residence Of The Payer Unless Designated As International Organizations Immunities Act ? Then It Is Foreign
60
Us Source Pensions And Annuities
Pension From A Domestic Trust For Services Performed In And Out Of The Us Is Divided Between Both Attributable To Earnings Of The Trust And Employer Contributions Made For Services Performed In Us
61
Us Source Rents And Royalties
Property In Us Including Use Of Intangible Us Property (Patents, Copyrights, Franchises, Etc)
62
Us Source Real Property
Property Located In Us
| Sold To Foreign Or Bought From Foreign Is Partial Us Income
63
Us Source Personal Property
Us If Individual Has Us Tax Home
64
Nr Exclusion From Income
Us Source Interest Income Not Connected With Business Or Trade If It Is From Deposits With Persons In The Banking Business, Deposits With Mutual Banks, Coop Banks, Credit Unions, Etc., And Amounts Held By Insurance Company Under Agreement To Pay Interest On Them
Interest On Obligations Of A State Or Dc Or Us Possession
Portfolio Interest On Obligations Issued After July 18, 1984
Dividend Income Is Exempt From 30% Tax:
Us Source Divs From Fc
Interest?Related Divs From Mutual Fund
Stcg Divs From Mutual Fund Or Investment Co.
Income For Personal Services If All Conditions Are Met:
Performs Svcs As Ee Of Nr Individual, Fc, Not Engaged With Us, Or Works In An Office Maintained Outside The Us
Performs Services Less Than 90 Days
Pay Is Less Than $3000
65
Other Filing Requirement Situations
Church Employee With Wages > $108.28
Hsa, Msa, Or Medicare Advantage Msa Distributions Received
Self?Employment Earnings > $400
Owes Any Special Taxes:
Form 5329 (Addt. Taxes On Qualified Plans And Other Tax?Favored Accounts), Unless There Is No Other Filing Requirement, Then File Only Form 5329 For The Following:
Additional Tax On Distributions From A Qualified Plan, Ira, Roth Ira, Coverdell Esa, Or Qtp
Addtl. Tax On Excess Contributions To Ira, Roth Ira, Hsa, Archer Msa, And Coverdell Esa
Additional Tax On Excess Accumulations Of Qualified Retirement Plans , Including Iras
Amt
Household Employment Taxes ? If No Other Filing Requirement, File Only Schedule H
First?Time Homebuyer Credit Repayment
Ss And Med On Unreported Tips Or Wages Received From An Employer That Did Not Withhold These Taxes. Attach Form 4137 (Ss/Med On Unreported Tip Income) Or Form 8919 (Uncollected Ss/Med Taxes On Wages) To 1040
Numerous Write In Taxes Including Uncollected Ss/Med Or Rrta Tax On Tips Reported To The Employer Or On Grou
66
How To Obtain A Tin
File Form W?7, Application For A Us Tin
67
How To Obtain An Atin For A Pending Adoption
Form W?7A, Application For Tin For Pending Us Adoptions
68
What Is A Limitation Of A Tin Or An Atin?
They Cannot Be Used To Claim The Earned Income Credit ? Ssns Are Required
69
Determining Married Status
Married For The Whole Year If One Of The Following Apply:
Married And Living Together As Husband And Wife
Living Together In A Common Law Marriage That Is Recognized In The State Where They Now Live Or Where The Common Law Marriage Began
Married And Living Apart, But Not Legally Separated Under A Decree Of Divorce Or Separate Maintenance
Separated Under An Interlocutory (Not Final) Decree Of Divorce
70
When A Marriage Annulment Occurs
Any Years In Which Taxpayers Elected Mfj Should Be Amended As Legally, Marriage Never Existed
71
Married Filing Jointly ? Valid Signatures
Deceased Spouse Must Be Signed By Spouse Or Executor Or Administrator
Injury Or Disease Prevents One Spouse From Signing, The Taxpayer Can Sign For Them With Proper Notation And A Statement Attached To The Return
Spouse Is Serving In A Combat Zone, Filing Spouse Can Sign And Attach A Statement
Any Other Reason And The Spouse Signing Must Include A Poa
72
Form 8857, Request For Innocent Spouse Relief
Used To Relieve Spouse Of Joint Liability For Items Of The Other Spouse'S That Were Reported Incorrectly
73
Married Filing Separately ? Can An Individual Claim An Exemption For Their Spouse?
Only If The Spouse Had No Gross Income, Is Not Filing A Return, And Was Not A Dependent Of Someone Else
74
What Credits Are Individuals Mfs Ineligible To Take?
Child And Dependent Care Expenses And Amount Excludable Under An Employer Dependent Care Plan Is $2,500
Earned Income Credit
Exclusion Or Credit For Adoption Expenses
Education Credits
Deduction For Student Loan Interest
Tuition And Fees Deduction
Exclude Interest Income From Us Savings Bonds Used For Higher Education
75
If Mfs And Individual Lived With The Spouse At Any Time During 2011 ? What Special Rules Apply?
Credit For Elderly Or Disabled Cannot Be Claimed
Up To 85% Of Ss Benefits Are Included In Income
Special $25,000 Loss Allowance For Rental Activity Is Lost Entirely
76
These Credits Or Deductions Are Reduced At Income Levels That Are Half Of Those Allowed For A Mfj Return ? Mfs
Child Tax Credit
Retirement Savings Contribution Credit
Exemption Amount For Determining Alternative Minimum Tax
77
The Following Credits Or Deductions Are Half Those Allowed For Mfj ? Mfs
Capital Loss Is Limited To $1,500
Special Allowance For Rental Activity Losses Is Limited To $12,500 If Lived Apart From Spouse For Entire Year
First Time Homebuyer Credit Is Limited To $4,000 (Or $3,250 For Long?Time Residents)
78
Can Mfj Amend To Mfs And Vice Versa?
Mfs Can Amend To File Mfj Any Time Within 3 Years From The Due Date Of Separate Returns, Not Including Extensions.
Mfj Cannot Amend To Mfs After The Due Date Of The Return
79
Head Of Household Requirements
Unmarried Or Considered Unmarried" On 12/31/11
80
Unmarried Status
Legally Separated Under A Decree Of Divorce Or Of Separate Maintenance
81
Considered Unmarried""
Files A Separate Return
Pays More Than Half The Cost Of Keeping Up The Home For The Year
Spouse Did Not Live In The Home During The Last 6 Months Of The Year
Home Was The Main Home Of The Child, Stepchild, Or Foster Child For More Than Half The Year
Must Be Able To Claim An Exemption For The Child. Even If Taxpayer Releases The Exemption To The Noncustodial Parent.
Spouse Is A Nr Alien At Any Time During The Year And They Do Not Elect To Be Treated As A Resident For The Entire Year.
82
Can A Nonresident Alien File As Head Of Household
No
83
Qualifying Child
Son, Daughter, Grandchild
84
Qualifying Relative
Father, Mother
85
Qualifying Relative Other Than Father Or Mother
Grandparent, Brother, Sister
86
Hoh ? Qualifying Child
Qc And Single
| Qc And Married And Taxpayer Can Claim Exemption For Him/Her
87
Hoh ? Qualifying Relative
Qr And Taxpayer Can Claim Exemption For Him/Her
88
Hoh ? Qualifying Relative Other Than Father Or Mother
He Or She Is Related, Lived With The Taxpayer For More Than Half The Year, And Taxpayer Can Claim An Exemption For Him/Her
89
Costs Of Keeping Up A Home
```
Rent
Mortgage Interest
Property Taxes
Insurance On The Home
Repairs
Utilities
Food Eaten In The Home
Other Expenses Related Specifically To The Home
```
90
Costs Of Keeping Up A Home That Are Not Included In Hoh Calculation
```
Clothing
Education
Medical Care
Vacations
Life Insurance
Transportation
Rental Value Of Home Owned
Value Of Taxpayer Services
```
91
Kidnapped Child
Hoh Or Qualifying Widower With Dependent Child Is Available Even If Child Is Kidnapped, Provided:
Law Enforcement Presume That Kidnapper Is Not A Family Member
In The Year Of Kidnapping, Child Lived With Individual For More Than Half Of The Part Of The Year Before Kidnapping
The Individual Would Have Qualified For This Status If Child Had Not Been Kidnapped
92
Last Year Of Kidnapped Child Treatment
The Year That A Determination Is Made That Child Is Dead
| The Year The Child Would Be 18
93
Standard Deduction For 2011
```
Single ? $5,800
Hoh ? $8,500
Mfj ? $11,600
Qw ? $11,600
Mfs ? $5,800
```
94
Additional Standard Deduction For 65+ Or Blind
Single, Hoh ? $1,450
| Mfj, Qw, Mfs ? $1,150
95
Partially Blind Status
Must Get A Certified Statement From The Eye Doctor Or Registered Optometrist Stating That The Taxpayer Cannot See Better Than 20/200 In The Better Eye With Glasses Or Contact Lenses, Or The Taxpayer'S Field Of Vision Is Not More Than 20 Degrees
96
Dependent Standard Deduction
Generally Limited To $950 Or Ei Plus $300 (Not More Than $5,800)
97
No Standard Deduction
Mfs And Spouse Itemizes (Unless Hoh)
Filing A Tax Return For A Short Year Because Of Change In Annual Accounting Period
Nonresident Alien
Dual?Status Aliens
98
Personal Exemption
2011 Amount Is $3,700
99
Who Cannot Claim A Personal Exemption?
If Another Person Can Claim T/P As A Dependent, T/P May Not Take Exemption, Even If Other Person Does Not Claim Them As A Dependent
100
Is A Nra Entitled To A Personal Exemption?
Yes. Residents Of Mexico, Canada, S. Korea, Us Nationals And Student/Business Apprentices From India Can Also Claim A Personal Exemption For A Spouse If That Spouse Had No Income For Us And Is Not Claimed As A Dependent By Someone Else.
101
Can Dual?Status Aliens Take A Personal Exemption?
Exemptions For Spouses And Dependents Cannot Be More Than The Taxable Income For Period Of Residence
102
Test For Dependency Exemption
Cannot Be A Dependent Of Someone Else
Joint Return Test. Cannot Claim A Married Person Unless Married Person And Spouse File Mfj Only To Claim A Refund And No Tax Liability Exists.
Citizen Or Resident Test
103
Qualifying Child Tests
```
Relationship
Age
Residency
Support
Special Test For Qc Of More Than One Person
```
104
Qc Relationship
```
Son
Daughter
Stepchild
Eligible Foster Child
Descendent Of Any Of The Above
Brother
Sister
Half?Brother/Sister
Stepbrother/Sister
Descendent Of Any Of The Above
```
105
Qc Age Test
Under 19 And Younger Than T/P
Full Time Student Under 24 And Younger Than T/P
Permanently And Totally Disabled Regardless Of Age
106
Qc Residency Test
Must Live With T/P > 1/2 Year
Home Does Not Have To Be Traditional
Non?Permanent Temporary Absence Is Same As Occupancy In The Home
107
Qc Special Rules Test
Apply To Divorced/Separated/Never Married Parents
Custodial Parent ? Whoever Child Spends Most Nights At
Neither If Emancipated
Counts As A Night If In Parent'S Home Or With Parent
If On A Sleepover, Counts Toward Parent That Would Have Had Them
If Parent Has A Night Job Which Prevents Child From Sleeping Nights But Lives More Days With That Parent, That Parent Is Custodial Parent
If Equal Nights, Parent With Higher Agi Gets Child
108
Noncustodial Parent
Qc If All Are True:
Parents Are Legally Apart And Lived Apart For Last 6 Mths Of Year
Child Received > 1/2 Support From Parents
Child Is In Custody Of One Or Two Parents For > 1/2 Yr
Effective Date Of Decree Determines What Document Is Needed For Noncustodial Parent
109
Noncustodial Parent ? Documents Needed
Post 2008 Decree: Form 8332, Release/Revocation Of Release Of Claim To Exemption For Child By Custodial Parent
Post 1984 And Pre 2009 Decree: Pages From Decree May Be Attached To 1040 In Lieu Of Form 8332
Pre 1985: Can State That Noncustodial Parent Can Claim Child
110
Support Test For Qc
Child Provided
111
Qualifying Person Of More Than One T/P Test
```
T/P That Claims Qc Gets All:
Exemption
Child Tax Credit
Hoh
Credit For Child/Dependent Care Expenses
Exclusion From Income For Dependent Care Benefits
Earned Income Tax Credit
If Parents Can Claim Qc But Don'T, Someone Else Can If They Have A Higher Agi Than Both Parents
```
112
Qc Of Noncustodial Parent Limitations
```
Noncustodial Parent Cannot Claim:
Hoh
Credit For Child/Dep Care Exp
Exclusion For Dep Care Ben.
Eitc
```
113
Tie Breaker Rules For Qc
Parent Trumps Anyone Else
Parent That Lived With Child Most
Parent With Highest Agi If They Spent Equal Time
If Neither Are Parents, Highest Agi Wins
114
Qualifying Relative Tests
Not A Qualifying Child
Member Of Household Or Relationship Test
Gross Income Test
Support Test
115
Not A Qc Test For Qr
Not Qr If Qc Of Anyone
| Qc Can Be Qr If The Parent Is Not Required To File A Return And Either Doesn'T File Or Files Only For A Refund
116
Member Of Household/Relationship Test For Qr
Lives With T/P All Year Or Related To T/P In These Ways:
Child, Stepchild, Eligible Foster Child, Or Descendant
Sibling, Stepsibling, Half?Sibling
Parent, Grandparent, Or Direct Ancestor (Not Foster)
Stepparent
Niece/Nephew
Aunt/Uncle
Child?In?Law, Parent?In?Law, Sibling?In?Law
117
Can A Cousin Be A Qr?
Yes Only If They Live In Home Entire Year
118
Do Dependency Relationships Established By Marriage End At Death Or Divorce?
No
119
Gross Income Test ? Qr
Must Be Less Than $3,700
120
Support Test ? Qr
T/P Must Provide > 1/2 Support
Support Includes Tax Exempt Income, Savings And Loans Used For Support
Own Funds Not Used For Support Are Not Support
Foster Care Payments Are Support Provided By Agency
If Two T/P Could Take Exemption Except For Support Test, But Together Provide > 1/2 Support, Multiple Support Agreement Is Used To Allow One Person To Claim Exemption
121
Due Dates For 1040
April 15 For Calendar Year T/P
| 15Th Of Fourth Month After Year End For Fiscal Year T/P
122
Automatic Six Month Extension
Using E?File Program Or Paper Form 4868 By Due Date Of Return
123
Extension For Individuals Living Abroad
Auto 2 Mth Ext. If:
Us Citizen/Resident
On Due Date Of Return, T/P Is Living Out Of Us And Puerto Rico Or In Military/Naval Service Outside Of Us And P.Rico
124
Individuals Serving In A Combat Zone
Deadline For Filing Auto Extended
Applies To Members Of Armed Forces, Merchant Marines For Dept. Of Defense, Red Cross, Accredited Correspondents And Civilians Under Direction Of Armed Forces
125
What Is A Combat Zone?
President Designated Where Us Is Engaged In Combat
126
2011 Combat Zones
Afghanistan, Effective 9/19/01
Pakistan, Tajikistan, Jordan, Uzbekistan, And Kyrgyzstan As Of 12/14/01
Kosovo Area As Of 3/24/99 ? Includes Federal Republic Of Yugoslavia (Serbia/Montenegro), Albania, The Adriatic Sea, And The Ionian Sea North Of The 39Th Parallel
Persian Gulf Area, As Of ?1/17/91 ? Includes Persian Gulf, Red Sea, Gulf Of Oman, Gulf Of Aden, Total Land Areas Of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, And The United Arab Emirates, And Part Of The Arabian Sea
127
Combat Zone Extension Time
180 Days After The Later Of The Last Day In A Combat Zone Or The Last Day Of Any Continuous Qualified Hospitalization For Injury From Service In The Combat Zone
128
Due Date For Form 1040Nr And 1040Nr?Ez
Nr Earned Wages Subject To Us Tax: Same As 1040
| Without Wages Subject To Us Tax: Calendar Year June 15 Or 15Th Day Of 6Th Month After Year End For Fiscal Year
129
Decedent Tax Return Due Date
Same As If Decedent Was Alive
130
Late File And Late Pay Penalties
Late Filing Is 5% For Each Month/Part Of Month But No More Than 25% ? Based On Unpaid Tax At Due Date
Late Payment Penalty Is .5% Of Unpaid Taxes Per Month/Part Of Month After Due Date
If Both Penalties Are Combined, 5% Failure To File Is Reduced By Failure To Pay Rate
131
Employee Compensation
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Wages
Salaries
Commissions
Fees
Tips
Fringe Benefits
Stock Options
```
132
Tips ? Recording
Can Be Recorded On Form 4070A, Employees Daily Record Of Tips
133
Tip Reporting To Employer
Cash, Check, Credit Card Tips By 10Th Of Each Month
| Required For Every Month That Tips > $20
134
What If Employee'S Check Cannot Cover Fica?
Reported On W?2, Box 12, Codes A And B
| Reported On 1040, Line 60, Identified As Ut
135
What Tips Are Included On 1040, Line 7?
Cash And Noncash Tips Not Reported To The Employer. Tips Reported To Employer Will Be On W?2.
136
Allocated Tips
The Amount An Employee Is Deemed To Have Received But Not Reported While Employed At A Large Food/Beverage Establishment, Shown On W?2
Taxable Unless Employee Has Proof That They Did Not Receive Them
137
Form 4137, Ss/Med Tax On Unreported Tip Income
Includes All Tips Reported To The Employer, All Unreported Tips, And All Allocated Tips. Ss/Med Is Calculated On Amounts For Which There Was No Withholding.
138
Expense Reimbursement
Can Be Excluded From Wages If Provided Under An Accountable Plan Of The Employer.
139
Fringe Benefits
Taxable At Fmv Unless Excluded By Law Or Paid For By T/P
140
Cafeteria Plan Definition
A Flex Spending Arrangement, Written Plan That Allows Ee To Choose Cash Or Taxable Fringe Benefits Instead Of Certain Excludable Benefits.
141
Qualified Benefits Of A Cafeteria Plan
```
Accident And Health Benefits
Adoption Assistance
Dependent Care Assistance
Group?Term Life Insurance
Hsa ? Distributions From Hsa Can Be Used To Pay Eligible Long?Term Care Insurance Premiums Or Care Services
```
142
Non?Qualified Benefits Of A Cafeteria Plan
```
Archer Msa
Athletic Facilities
De Minimus Benefits
Educational Assistance
Employee Discounts
Lodging On Er'S Premises
Meals
Moving Exp. Reimb.
No?Addt.L?Cost Services
Transportation Benefits
Tuition Reduction
Working Conditinon Fringe Benefits
```
143
Employees For Cafeteria Plans
Common Law Ee (Not A 2% S?Corp Shareholder)
Full?Time Life Insurance Agency Who Is A Current Statutory Ee
Leased Ee Working On Ft Basis For At Least 1 Year Under Er Control
144
Are $ From Er For Long?Term Care Included In Income?
No, But If Made Thru A Flexible Spending Or Cafe Plan Are.
145
Er Contributions To Archer Msa
Not Income. Reported In Box 12 Of W?2, Code R.
| Reported On Form 8853, Archer Msas And Long?Term Care Insurance Contracts
146
Health Fsa
Qualifies As An Accident/Health Plan, The Salary Reduction And Reimbursements Of Medical Expenses Are Not Income.
Health Fsa Can Make Qualified Hsa Distribution. Direct Transfer To T/P Hsa Trustee By Er.
147
Health Reimbursement Arrangement (Hra)
Er Provided ? Not Income
| Hra Can Make Qualified Hsa Distributions.
148
Contributions To An Hsa By T/P
T/P, Er, Family Member Can Make Contributions Which Are Deductible. If Made By Er, Reported In Box 12, Code W. Reported On Form 8889, Hsas.
One?Time Distribution From An Ira To An Hsa Can Be Excluded From Income.
149
Achievement Awards
Excluded From Ee Wages If Cost Is Not More Than Er Can Deduct
150
Excludable Amount Of Achievement Awards
$1,600 Under Qualified Plan
| $400 Under Nonqualified Plan
151
Qualified Plan ? Achievement Awards
Part Of An Established Written Plan Not Favoring Highly Paid Ees
Highly Paid Ee Is 5% Owner In 2010 Or 2011, Earned > $110,000 And If Er Made The Top?Paid Group Election, Was Among The 20% Top Paid Ees
152
What Is An Achievement Award?
Given For Length Of Service (Over 5 Years), Safety Achievement (Not To Mgr, Admin, Clerical, Professional) Unless > 10% Of Ees Have Received Award During Tax Year
Awarded At Presentation
153
Adoption Assistance
$13,360 Paid By Er Is Not Income
Reported In Box 12, Code T
Taxable For Ss/Med
Reported On Form 8839, Qualified Adoption Expenses
154
Athletic Facilities
Not In Income If Er Owned And Used By Ees And Their Families
155
De Minimis Benefits
Not In Income ? Includes Personal Use Of Office Equipment, Small Holiday Gift (Not Cash), Occasional Parties
156
Dependent Care Benefits
Er Provided Not Income
Reported On Form 2441, Child And Dependent Care Expenses. Amount Is Lesser Of: Total Benefit Received, Total Expenses Incurred, Ee Ei, Spouse'S Ei, Or $5,000 ($2,500 If Mfs)
157
Educational Assistance
Up To $5,250 Of Er Provided Is Not Income
158
Ee Discount
Not Disounts On Real Property Or Investment Property. Limited To Retail Price X Limits: Er Gross Profit % X Retail Or 20% Of Retail
159
Ee Stock Option
Incentive Stock Option
Ee Stock Purchase Plan Options
Nonstatutory Stock Options
160
Iso And Espp ? Inclusions
On The Exercise Of An Iso, T/P Must Include As An Adj. In Figuring Amt Income The Amount By Which Fmv Exceeds Option Price
161
Disposition Of Option Stock
Taxable Income/Deductible Loss ? Generally Cg Or Cl
| Unless Holding Period Is Not Met Or Option Granted Under A Discount
162
Holding Period Requirement Stock Options
T/P Does Not Sell Stock Within One Year After Transferred To Them, Or Two Years After Option Granted
163
Basis Of Iso Stock
Amount Paid
164
Iso Stock When Holding Period Is Not Met
Gain Is Ordinary Income Up To Amount By Which Fmv When Exercised Exceeds Option Price. Excess Is Capital Gain Or Loss.
165
Stock Acquired Through An Espp
Basis Is Option Price At Time Of Exercise. Holding Period Begins Day After Exercise. If Granted At A Discount, Amt. Over Fmv Is Compensation, Excess Is Capital Gain.
166
Nonqualified Stock Option
If Nqso Has Fmv, Option Is Included In Income
| If Nqso Has No Fmv, Not In Income Until Exercised/Transferred.
167
Restricted Property
Property With Restrictions Not In Income Until Vested (Transferable Or Not Subject To Substantial Risk)
T/P Can Include In Income The Value At Transfer And Not Have To Include Value Increase Later
168
Group Term Life Insurance
Up To $50,000 Is Not Income. Excess, Reduced By Ee Cost, Is Income. Excess Reported In Box 12, Code C. Entire Cost Is Income If Provided By A Trust/Pension Plan. If It Does Not Provide General Death Benefits, Not Group Term Life Insurance.
169
Meals And Lodging
Not Income If They Are On Er Premises And Furnished For Er Convenience Or As A Condition Of Employment (Lodging)
170
Moving Expense Reimbursement
Not Income If Would Have Been Deductible. Reported In Box 12, Code P If Paid To Ee.
171
No Additional Cost Services
Not Income If Also Offered To Customers Ordinarily
172
Retirement Planning Services
Paid By Er Are Income. If Er Has Qualified Plan, Services Provided By Er Are Not Income.
173
Transportation Benefits
```
Tran. In A Commuter Vehicle Between Ee Home And Work
Transit Pass
Qualified Parking
Qualified Bike Commuting
Cash Under Qualified Arrg.
Vanpool/Transit Pass
```
174
Tuition Reduction
Excluded From Income ? For Education
175
Working Condition Benefit
Deductible If Paid By Ee, Not Included If Paid By Er
| Business Use Of Vehicle, Job Related Education
176
Elective Deferrals
Other Than Roth Cont., Taxable For Ss/Med
401K
Thrift Savings Plan ?Fed Ee
Salary Reduction Simplified Ee Pension Plans
Savings Incentive Match Plans For Ees (Simple)
Tax?Sheltered Annuties (403B)
Section 501C18D Plans
Section 457 Plans
177
Maximum Elective Deferral
$16,500 ($22,000 If 55+)
Simple Plan ? $11,500 (14,000 If 55+)
501C18D ? Lesser Of 7,000 Or 25% Of T/P Compensation
Ers With 401K, 403B, 457 Plans Can Start Qual. Roth Programs So Ees Can Designate After?Tax Roth Contr.
178
Excess Deferrals
Included In Income For Year Of Deferral, If Plan Permits, Excess Deferrals Are Distributed.
If Not Distributed, Cannot Be Included In Basis Of Contract, So Taxed Twice.
179
What If Excess Deferral Is Taken Out After The Year Of Deferral And A Corrective Distribution Is Made?
If Made By April 15, Not Included In Income In Year It Was Received. If After April 15, Included In Income In The Year It Was Deferred And Again In The Year It Was Distributed.
180
Disability Pension
If Retired On Disability, Amount Received From Plan By Er Is Income
181
How Long Is Compensation To Retired On Disablity Person Classified As Wages?
Until Minimum Retirement Age, When They Are Classifed As Taxable Pension Or Annuity
182
What Disability Pensions Are Not Taxable?
Certain Govt. And Military Pensions. If Any Of These Apply:
T/P Entitled Before 9/25/75
Member Of Listed Govt. Service On 9/24/75
Received For Combat Related Injury
Could Receive From Dept. Of Veterans Affairs If Applied
Injuries From Terrorist Attack
183
Long Term Care Insurance Contracts
Excluded From Income
$300/Day
Reported On Form 8853, Archer Msas And Long?Term Care Insurance Contracts
184
Worker'S Comp
Fully Exempt If Paid Under Wc Act Or Statute
| If Reduces Ss, That Part Is Considered Ss And Subject To Ss Rule For Determining Benefit
185
Miscellaneous Compensation
```
Advance Commissions
Back Pay Awards
Govt. Cost Of Living
Nonqualified Deferred Compensation Plans ? Box 12, Code Y
If Plan Doesn'T Meet Requirements, Included In Income And Shown In Box 12, Code Z
Fmv Of Secured Note
Severance Pay
Sick Pay/St Disability
Ee Med/Fica Pay By Er
Stock Appreciation Rights When Exercised
Differential Wages (On Active Duty)
```
186
What If T/P Doesn'T Provide Ssn To An Entity Required To Report To The Govt?
Subject To 28% Backup Withholding
187
Series H And Series Hh Us Savings Bond
Issued At Face Value, Interest Paid Twice A Year, Offered Until 1979. Until August 2004, Series E Or Ee Bonds Could Be Exchanged For Series Hh Bonds. Series H Matured In 30 Years And Series Hh Mature In 20 Years.
188
Series Ee Bonds
Issued At A Discount. Diff Between Cost And Face At Maturity Is Interest When Redeemed. Mature In 30 Years.
189
Series E Bonds
Issued At A Disount Until 1979
190
Series I Bonds
Inflation Indexed Bonds Issued At Face Value With 30 Year Maturity Period. Face Value Plus Interest Payable At Maturity.
191
How Can A Cash Method T/P Report Increase In Redemption Value Of Series E, Ee, And I Bonds?
They Can Report Each Year Or Postpone Until Bond Is Cashed Or Matures, Whichever Is Earlier. Method Chosen Must Be Used For All Classes Of Bonds Held Or To Be Acquired.
192
Can A T/P Switch Reporting Methods Of Bond Interest?
From Postponed To Reporting Each Year ? Yes, But All Postponed Interest Must Be Reported In Year Of Switch
From Yearly To Postponed ? Must File Form 3115, Application For Change In Accounting Method, Or Attached Statement ? Automatically Granted
193
What If Bonds Are Co?Owned?
Interest Is Taxable To T/P Whose Funds Purchased The Bond.
194
Education Savings Bond Program
Interest On Series Ee Bonds Issued After 12/31/89 Or A Series I Bond Is Excluded If Proceeds Are Used To Pay Qualified Higher Education Expenses During The Same Year. Purchaser Must Be At Least 24 And Bond Issued In T/P Name. Exclusion Not Available For Mfs.
195
What Are Eligible Higher Education Expenses For Education Savings Bond Program?
Tuition And Fees Required For T/P, Spouse, Or Dependent. Also Any Contribution Made To A Qualified Tuition Program
196
What Tax?Free Benefits Reduce Eligible Expenses For Education Savings Bond Program?
Tax?Free Scholarships/Fellowships
Tax?Free Portion Of A Distribution From A Coverdell Esa Or Qtp
Other Tax?Free Payments (Except Gifts/Inheritances) Such As Veteran Educ. Asst. Benefits, Qualified Tuition Reductions Or Er Provided Edu. Asst.
Any Expense Used In Figuring The Amer. Opportunity And Lifetime Learning Credits
197
Current Year Interest On Education Savings Bond Program
Excluded If Total Expenses Exceed Proceeds. If Proceeds Are More, The Excludable Amount Is Based On A Fraction. Qualified Higher Edu. Exp/Total Redemption Proceeds Received. Use Form 8815, Exclusion Of Interest From Series Ee And I Us Savings Bonds Issued After 1989.
198
Interest Exclusion Phase Out For Education Savings Bond Program
If Single Or Hoh, Modified Agi Within $71,100 ? $86,100
| If Mfj Or Qw, Modified Agi Within $106,650 ? $136,650
199
Taxability Of Us T?Bills, Notes And Bonds
Subject To Fed Income Tax But Not State/Local
If T/P Sells Bond Between Interest Payment Dates, Sales Price Includes Accrued Interest. For Buyer, Interest Is A Return Of Capital Investment Rather Than Interest, And Reduce The Basis In The Bond.
200
Original Issue Discount (Oid)
Form Of Interest Included In Income When It Accrues, Regardless If Payment Is Received
201
When Can A T/P Disregard Oid And Treat It As Zero?
When Discount Is
202
What Debt Instruments Do Not Oid Rules Not Apply To?
Tax?Exempt Obligations
Us Savings Bonds
Short?Term Debt Instr.
Obligations Issued By An Individual Before 3/2/84
Loans Between Individuals Iff: The Lender Is Not In The Business Of Lending, Loan Is $10,000 Or Less, Avoiding Fed Tax Is Not One Of The Main Reasons For The Loan
203
Certificate Of Deposit
Cd With Maturity Of More Than One Year Is Treated As Any Other Oid.
Also Time Deposits, Bonus Plans, Savings Certs, Deferred Income Certs, Bonus Savings Certs, And Growth Savings Certs
204
If Time Deposit Is Withdrawn Early, How Does A T/P Report Penalty?
On Form 1040. Line 30
205
Municipal Bonds
Not Taxable If Issued By A State, Dc, A Us Possession, Or Any Of Their Political Subdivisions. Bonds Issued Post 1982 By Indian Tribal Govt. Are Same As Issued By State.
206
Ordinary Dividends
Paid Out Of The Earnings And Profits Of A Corp
207
Qualified Dividends
Ordinary Dividends Subject To Same 0% Or 15% Max Tax Rate That Applies To Net Capital Gain. 15% If Regular Tax Rate Would Be 25% Or More. If Regular Rate Would Be Less Than 25%, Then 0%.
208
What Makes A Qualified Dividend?
Paid By Us Corp Or Qualified Foreign Corp
T/P Meets Holding Period:
Held Stock For More Than 60 Days During 121 Day Period That Begins 60 Days Before Ex?Dividend Date
In Case Of Pref. Stock, Stock Must Be Held For More Than 90 Days During 181 Day Period That Begins 90 Days Before The Ex?Div Date.
The Ex?Div Date Is The First Date Following The Declaration Of A Div. On Which Buyer Of Stock Is Not Entitled To Receive Next Div. Payment
209
Nonqualified Dividends
Capital Gain Dist.
Div. From Tax?Exempt Corp Or Farmer'S Co?Op
Div. Paid By Corp On Er Securities Held By An Esop Maintained By That Corp.
Div. On Any Share Of Stock To The Extent The T/P Is Obligated To Make Related Pmts For Positions In Substantially Identical Stock Or Securities
Payments In Lieu Of Div.
Payments Shown In Form 1099?Div, Box 1B, From A Foreign Corp. To The Extent That They Are Not Qualified Divs.
210
Can Qual. Div. Income Increase A Deductible Capital Loss?
No
211
Do Qualified Div. Appear On Form 8949, Sales Or Other Dispositions Of Capital Assets?
No ? They Appear Only On Sched D Tax Worksheet
212
Is Qual. Div. Income Include Any Amount Of Investment Income On Form 4952, Investment Int. Exp. Deduction?
No
213
Dividend Reinvestment
Dividends Used To Purchase More Stock Under A Div. Rein. Plan
Div. Included In Inc. If Price Paid To Purchase Addt. Stock Is Equal To Fmv
If Purchased At Less Than Fmv, Fmv On Div. Payment Date Is Reported As Income
If Plan Allows T/P To Invest More Cash To Purchase Addt. Shares At Less Than Fmv, T/P Must Report As Div. Income The Diff Between Cash Invested And Fmv Of Stock Rec.D
214
Money Market Mutual Funds
Div. Include Amts. Paid On Mmmf And Payments On Stock Of Savings And Loan Assoc.
215
Capital Gain Distributions
Div. Paid By Mutual Funds And Real Estate Inve. Trusts
216
Distributions Of Stock And Stock Rights
Generally Not Taxable ? Rights To Acquire The Corp Stock
217
When Are Dist Of Stock/Stock Rights Taxable?
Any S/H Has The Choice Of $ Or Prop. In Lieu Of Stock
Dist. Gives $ Or Other Prop. To Some S/H And In Inc. In The % Int. In The Corp Asset Or Earn. And Prof. To Other S/H
Dist. Is In Convertible Pre.Stock
Diff. Classes Of Stock Are Offered To Common?Stock Sh
Dist. Is On Pref. Stock
218
Basis Of Stock Div Or Stock Rights
If Taxable, Fmv At Time Of Dis.
| If Not Tax, Old Stock Is Divided Between Old And New
219
How Are Fractional Shares Treated By T/P?
If Corp Has Plan In Which Frac. Shares Are Not Issued But Sold, Cash Is Treated As Amt. Realized On Sale Of Frac. Shares And Reported On Form 8949 And Schedule D
220
Form 1099?Int
Exempt?Interest Div. Shown On Box 8
Div. On Ins. Policies ? Return On Premiums Paid And Not Taxable Until Fully Recovered ? Interest Is Taxable And Reported On Form 1099?Int And Form 1040, Line 8A
221
Div On Vet Ins. Policy
Not Taxable And Int. Earned Is Not Taxable
222
Patronage Dividends
Box 1 Of Form 1099?Patr, Taxable Dist. Rec. From Cooperatives, And Are Taxable Unless Paid On Purchase Of Prop.
223
How To Report Dividends
Ordinary Div ? Part Ii Of Schb
| If
224
Rental Income
Any Amts. Paid By Tenant To Landlord Except Deposits That Will Be Returned. If Payment Is To Restore Part Of Prop., Income Is Excess Over Cost.
225
Standard Mileage Rate For Business Use
50 Cents Per Mile From 1/1?6/30
| 55.5 Cents Per Mile From 7/1?12/31
226
Not Rented For Profit
Income From Not For Profit Rental Is Other Income On Form 1040, Line 21
227
Personal Use Of Vacation Homes And Other Dwelling Units
If Unit Is Rental And Personal, Expenses Are Divided Proportionately
228
What Is A Dwelling Unit?
House, Apt. Condo, Boat, Mobile Home, Vacation Home
229
What Is Not A Dwelling Unit?
Hotel, Motel, Inn, Similar Establishment If Avail. To Customers And Not Used As A Home By Owner
230
What Constitutes Being Used As A Home By An Owner?
Personal Use Of 14 Days Or 10% Of Days Rented Out
231
Depreciation Of Rental Property
Modified Accelerated Cost Recovery System (Macrs) If Used As A Home And Changed To A Rental In 2011
232
Can A T/P Claim S 179 Deduction For Rental Property?
No
233
Limits On Rental Losses
At?Risk Rules
| Passive Activity Rules
234
At?Risk Rules
Limit Loss To The Amount At Risk: Cash Contributed And Adjusted Basis Of Other Prop. Contr., Amts Borrowed For Use In Activity
Form 6198, At?Risk Limitations, Is Used To Compute Current Year
Apply To Rental, Business, And Farming Activities
235
Passive Activity Rules
Once At?Risk Limits Are Met. Passive Income Is Only Income That Can Be Offset By Passive Losses.
Real Estate Professional Is Not Limited: More Than 1/2 Of Services Performed By T/P Were Real Estate Related, And T/P Performed More Than 750 Hrs. In Real Estate Activity
236
Special Allowance For Passive Loss
$25,000 Is Allowed Against Nonpassive Income If Loss Was Incurred In A Rental Real Estate Activity In Which T/P Participated. Allowable Amt Is 12,500 If Mfs And Lived Apart. If Mfs And Lived Together, No Offset.
Active Part. Is If T/P Owns 10% And Makes Mgr Decisions
Reduced By 50% Of The Amount That Modified Agi Exceeds 100,000 And Is Phased Out At 150,000. Modified Agi Does Not Include Taxable Ss, Ira Or 501C18 Deductions, Us Bond Excl. For High Ed, Any Passive Act Loss Or Ded For Se Taxes
237
Where Are Rental Activies Reported?
Schedule E If Owner Is Only Providing Min. Svcs.
| If Owner Provides Sig. Svcs, Income And Exp Are On Sch. C
238
Personal Property Rental
For Income:Sch. C
Not Income: Line 21, And Exp On Line 36 And Write Ppr On The Dotted Line
If Not For Profit, Ded. Are Misc. Itemized Ded. Limited To Income, So No Loss Is Allowed
239
Gambling Income
Winnings From Lottery, Raffles, Races, Casinos, Fmv Of Prizes
Recreational ? Line 21 Of 1040 And Exp. On Sch A
Professional ? Sched C
Losses Cannot Exceed Winning
Should Keep A Diary: Date, Type Of Wager, Name/Add Of Gambling Esta., Amts., Names Of Other People Present
240
Debt Forgiveness Income
Non?Business Report On Line 21
Business Report On Sch C
If Fin. Inst. Offers Disc. On Early Pmt, Disc. Is Canceled Debt Income
If T/P Is Stockholder And Corp Forgives Debt, Div. Inc
If Included In Income And T/P Pays Later, T/P Can File A Claim For Refund
241
Exceptions To Debt Forgiveness
Student Loans Requiring Service To Be Forgiven,
Payments Made By Nat. Health Svc Corps Loan Repayment Prog Or State Edu. Loan Prog. Under Public Hsa
If Pmt Of Debt Would Result In Deduction
T/P Owes On Prop. And Seller Reduces Amt. Owed, Red. Is Purch. Price Adj.
Excluded Debt
Form 982, Reduction Of Tax Attributes Due To Discharge Of Indebtedness (And Section 1082 Basis Adj)
Debt Is Cancelled In Bankruptcy Under Title 11
Debt Is Canceled When T/P Is Insolvent
Debt Is Qual. Farm Debt And Is Canceled By Qual. Person
Debt Is Qual. Real Prop. Business Debt
Debt Is Qual Princ.Residence Indebtedness
$2 Million Limit On Principal Residence
242
Foreign Earned Income In A Currency Not Readily Convertible Into Usd
Blocked Or Deferrable Income Reported As: The Usd That A T/P Has In The Us, Or Postpone Reporting Until Unblocked ? File Only An Info Return
243
How To Stop Withholding On Foreign Earned Income
T/P Should Give Er Form 673, Statement For Claiming Exemption From Wh On Fei Eligible For The Exclusion(S) Provided By Section 911
244
Exclusion On Foreign Earned Income
Us Cit/Us Res May Exclude $92,900 And May Be Able To Exclude Certain Foreign Housing Amts.
Must Satisfy All 3:
Tax Home Was A Foreign Ctry
Had Foreign Ei
Was: Us Cit. Who Is Resident Of Foreign Ctry For An Uninteruppted Period That Includes Tax Yr, Usra In Country With A Treaty In Effect, Us Cit Or Usra Physically Present For At Least 330 Days During 12 Months
245
What Countries Are Not Considered Foreign Countries?
Puerto Rico, Guam, Comm. Of Northern Mariana Islands, Us Virgin Islands, Or Us Possessions Like Johnston Island
246
How Does T/P Meet Bona Fide Residence Test?
Bona Fide Resident For Uninteruppted Period That Includes An Entire Year. Need To Establish A Residence That Is Intended To Be Permanent.
247
What Countries Are Us Residents Not Legally Allowed To Reside In?
Cuba. Guantanamo Bay Does Not Count.
248
How To Take Foreign Earned Income Exclusion?
Form 2555, Foreign Earned Income, Or Form 2555?Ez, Foreign Earned Income Exclusion
249
Foreign Country Housing Exclusion
Paid For With Er Provided Amts, Housing Deduction Only Amts Paid For With Se Income
Housing Amt Is Total Expenses For Year Minus Base Housing Amt. Base Housing Amt Is 16% Of Exclusion Amt X #Days In Qualifying Period.
$40.72 Per Day 2011
Qualified Housing Exp = $76.36 Per Day
250
How Are Taxable Scholarships Reported?
Line 7 Of 1040, With Notation Sch
251
Ss Benefits
Monthly Retirement, Survivor And Disability Benefits. Does Not Include Ssi Payments, Which Are Not Taxable.
252
Ss Equivalent Benefit (Sseb)
Equivalent Tier 1 Railroad Retirement Benefits Are The Part Of Tier 1 Benefits That A Rr Ee Or Beneficiary Would Have Been Entitled To Receive Under The Ss System
253
How Are Ss And Sseb Benefits Reported?
Form Ssa?1099, Box 5
254
Are Ss And Sseb Taxable?
Up To 85% Can Be. Calc. By Comparing Other Income, Including Tax?Exempt Interest, Plus 1/2 Of Benefits, To The Base Amount. This Is Then Compared To An Adjusted Base Amount To Determine How Much Is Subject.
255
Base Amount And Adj. Base Amt For Computing Taxable Ss/Sseb
S, Hoh, Qw, Mfs Not Living Together ? 25,000/34,000
Mfs Living Together ? 0
Mfj ? 32,000/44,000
256
How Is Taxability Determined For Ss/Sseb?
In IncomeBaseAdj Base, Up To 85% Are Tax
257
1040 Worksheet To Determine Taxable Ss/Sseb
Increase Total Inc. By T/E Int. And 1/2 Ss/Sseb
Add Excl. To Income And Subtract Adj. To Income
Subtract The Bae Amount
If Zero Or Less, No Tax
Determine Smaller Of Step 3 Or 9,000 (12,000 If Mfj, 0 If Mfs Living Apart) And Divide By 2
Excess Of Step 3 Over 9000 Is X 85%
Add Line 5 To Smaller Of 1/2 Of The Ss/Sseb Or Line 4
Multiply X 85% Of Ss/Sseb
Taxable Benefits Are Smaller Of Step 6 Or Step7
258
Lump?Sum Benefits
Reported On Ssa?1099. All Is Treated As 2011 Benefits Unless Special Election To Determine How Much Allocable To Prior Year Would Have Been Taxable That Year And Then Including That In 2011.
If Disability From Er Included In Income In Earlier Year, Then Repaid, Repayment Is Item. Ded. Unless >3,000, Take Credit.
If Negative Figure Due To Repayment, T/P Can Take An Item. Ded. For Part Of The Figure That Represents Benefits Included In Income In An Earlier Year.
259
Bartering
Fmv Of Property Or Service Is Income.
260
Independent Contractor Income
Reports On Sch C Or F
261
Hobby Income
Lacks Profit Motive, Loss Cannot Be Used To Offset Other Income.
262
Deciding If A Profit Motive Exists
If Activity Shows A Profit In At Least 3 Of Last 5 Years. If Horses, 2 Of Last 7 Years. If Neither, Nine Other Factors:
Businesslike Manner
Time And Effort
Depends On Income
Losses Are Beyond T/P Control
T/P Changes Method Of Operation In Attempt To Improve Profits
T/P Or Advisor Has Knowledge Needed To Make It A Business
T/P Made A Profit In Similar Activity In Past
Makes A Profit In Some Years, And How Much
T/P Can Expect To Make A Future Profit From The Appreciation Of The Assets Used In Activity
263
Alimony
Income, Not Wages
Not Voluntary Payments
Spouse Not Living Together
No Liability If Spouse Dies
264
Nontaxable Combat Pay
Reported In Box 12, Code Q
265
Unemployment
Taxable Not Wages
266
Welfare/Public Assistance
Not Income
267
Recoveries
Included In Income If Tax Benefit Was Derived From Ded.
268
Traditional Ira Contributions
T/P 70.5? Can Cont. Up To Lesser Of $5000 Or Taxable Comp., Reduced By Cont. To Roth Iras
50+ Have Addt'L Catch?Up Cont. $1,000
269
Contributions To Spousal Ira
Mfj
Under Age 70.5
At Least One Spouse Has Taxable Comp.
270
Total Combined Contribution To Ira And Spousal Ira
$10,000 ($11,000 If One Spouse Is 50+, $12,000 If Both Are 50+)
Total Comp. Of Both Spouses, Reduced By Spouse Ira Cont. For The Year To A Traditional Ira And Any Cont. To Spouse'S Roth Ira
271
What If Contributions To Ira Are Less Than Or More Than The Limit?
Less Than Cannot Be Made Up In A Later Year. More Than Can Be Applied To Later Year But Penalties Apply Until Excess Is Eliminated.
272
When Can Ira Contributions Be Made?
Any Time During The Year Or By The Due Date Of The Return, Not Including Extensions. If Made After End Of Year And Before Due Date Of Return, T/P Must Designate Year.
273
Taxable Compensation For Ira Contribution Purposes
Wages, Salaries, Tips, Fees, Bonuses, Other Amts. For Svcs.
Scholarship/Fellowship Box 1 Of W?2
Commissions Rec.D As % Of Profit Or Sales Price
If Se, Net Earnings Reduced By T/P Ded. For Contr. On Own Behalf To Ret. Plans And Ded. Amt. Of Se Tax
If Partner Provides Svcs That Are An Income?Producing Factor
Alimony/Sep. Mtc Pmts
Differential Wages
Combat Pay
274
Not Compensation For Ira Cont. Purposes
Property Earnings
Pension/Annuity
Def. Comp.
Income From Ptshp When T/P Does Not Provide Svs That Materially Produce Inc.
Foreign Ei And/Or Housing Cost
Any Other Amts Excl. From Income, Except Combat Pay
275
Ira Contribution Deduction
Not Required.
If T/P And Spouse Do Not Participate In Er Ret. Plan, They Can Deduct Full Ira Contribution
If T/P And Spouse Participate In Er Ret. Plan, Ded. May Be Limited
Retirement Plan On W?2 Will Be Checked
276
Deduction Phase Out Rules For Ira Contribution
Neither Spouse Covered By Ret. Plan, The Lesser Of Total Contribution (Up To 5,000 Or 6,000 If 50+) Or 100% Comp. Can Be Ded. By Each
S Covered By Er Plan, Phased Out When Magi Is >56,000
277
Magi For Ira Contribution Phase Out Determination
Agi W/O Ira Ded., Student Loan Interest, Tuition/Fees, Domestic Prod. Act., Excl. Of Series Ee Bond Int., Excl. Of Er Paid Adoption Exp.
278
Nondeductible Amounts Of Ira Contribution
Form 8606, Nondeductible Iras, Or Withdrawn By The Due Date Of The Return.
279
Roth Ira
Permits Non?Ded. Cont. And Normally Results In Non?Tax. Dist. Permitted At Any Age As Long As Comp. And Magi Req. Are Met
280
Roth Ira Magi Limit
169,000?179,000 Mfj Or Qw
107,000?122,000 S, Hoh, Mfs Living Apart
0?10,000 Mfs Living Together
281
Computing Magi For Roth Ira
Same As Ira With Some Modifications:
Subtract Inc Resulting From Conv. Of Ira To Roth Ira
Subtract Min. Req. Dist. From Qual. Ret. Plan, Including Ira (For Conv. Only)
282
Roth Conversion
Traditional To Roth:
Rollover, In Which T/P Rec. Dist. From Ira And Rolls It To Roth Ira Within 60 Days
Trustee?Trustee Transfer, Where T/P Directs Trustee Of Ira To Transfer To Trustee Of Roth Ira
Same?Trustee Transfer, Where T/P Directs Trustee To Transfer Ira To Roth Ira Maintained By Same Trustee
283
Simple Or Sep Ira To Roth Ira
Same Rules As Traditional Ira
Amt. From Simple Ira During 2 Year Period Beg. On Day T/P First Part. In Any Simple Ira Plan Maintained By Er Is Not Eligible.
284
Rollover To Roth Ira
Qualified Pension, Profit Sharing, Or Stock Bonus Plan (Including 401K)
Indiv. Retirement Ann. Plan
Deferred Comp Plan Or State/Local Govt. (457 Plan)
285
Amounts Not Eligible For Rollover From Qual. Plan
Req. Min. Dist.
Hardship Dist.
Any Of A Series Of Subst. Equal Per. Dist. Paid At Least Once A Year, Based On Life Expectancy Or For 10+ Years
Corrective Dist. Of Exc. Cont. Or Exc. Deferrals, And Any Income Allocable To Excess
Loan Treated As Dist. Because It Does Not Satisfy Certain Req. Either When Made Or Later
Div. On Er Securities
Cost Of Life Ins. Coverage
286
2010 Roth Conversions
T/P Had Choice To Defer Income From Coverting Ira To Roth Ira In 2010 Until 2011. Half In 2011, Half In 2012.
287
Excess Ira Contributions
Excise Tax Of 6%
Does Not Apply If Withdrawn By Due Date Of Return Including Extensions
If Left In The Acct., Treated As Contributed Next Yr, And If Excess Again, Subject To 6% Tax Again, And So On.
Earnings Of Excess Contr. Are Includible In Income In Year Paid.
If T/P Under 59.5, Dist. Of Earnings Is Subject To The Addt.'L 10% Tax In The Year Of Cont. Unless Exception Applies.
288
Distributions From Er Retirement Plan, Ira, Or Commercial Annuity
Form 1099?R, Taxable Unless There Is A Basis.
Traditional Iras Only Have Basis When Non?Ded. Cont. Are Made Or After?Tax Amts. Are Rolled Over From An Er Plan. Since Roth Ira Cont. Are Not Ded., They Created Basis. T/P Also Have Basis When They Convert An Amt. To A Roth Ira. Er Ret. Plans Only Have Basis When After?Tax Money Was Contributed Or Er Cont. Were Included In The Ee Income. Commercial Annuiteies Are Purchased With After?Tax Money Thereby Creating Basis.
289
Taxability Of Traditional Ira Distributions
T/P Who Only Make Ded. Cont. Have No Basis So Entire Ira Is Taxable. If There Is Basis, Calculation Is Needed To Determine Taxability.
1. Determine Basis Of All Iras At Year End
2. Add Cont. Made For Cty. (Include Cont. Made Before 4/17/12 But Not Rollover)
3. Determine Value Of All Iras At End Of Current Year, Including Rollovers.
4. Add Dist. Rec'D During Cy (Not Rollovers)
5. Divide Sum Found In 2 By Sum Found In 4. Multiply Dist. By This Decimal. This Is Nontax Amt. Of Dist. Total Dist. ? Nontax. = Tax Amount Of Dist.
290
Required Minimum Distributions (Rmd)
Traditional Ira Must Be Distributed When T/P Turns 70.5 And Every Year After.
Rmd Must Be Made By 12/31.
During Year T/P Turns 70.5, Dist. Can Be Made By April 1 Of Following Year. Rmd Is Not Eligible For Rollover.
291
Roth Ira Distributions
Qualified Dist. Are Tax Free. Nonqualified Dist. First Reduce Basis And To The Extent That They Exceed Basis Are Taxable. Basis Comes From Reg. Cont. And Conv.
292
Qualified Dist. Of Roth Ira
Made After 5 Years
After T/P Turns 59.5, Because Of Disability, Made To A Beneficiary After Death, Or One That Meets The Requirements For A First Time Homebuyer
293
Nonqualified Dist. Of Roth Ira
Made From The Following Amts. In The Following Order:
Regular Cont.
Conv. Contr., Fifo, Taxable First
Earnings On Cont.
294
Loss On Roth Ira Investment
T/P Can Recognize Loss As A Misc. Itemized Ded. Subject To 2% Of Agi Limit, Only When All Amts. In All Roth Ira Accts. Have Been Dist. And The Total Dist. Are Less Than Unrecovered Basis
295
Qualified Charitable Distributions
A Qcd Is A Nontaxable Dis. Made Directly By The Trustee Of The Ira (Other Than An Operating Sep Or Simple Ira) To An Org. Eligible To Receive Tax?Ded. Cont. Must Be 70.5 When Dis. Is Made. Total Qcd Cannot Exceed $100,000. Amount Of Qcd Is Limited To Amt. Of The Dist. Otherwise Incl. In Inc. No Charitable Deduction Allowed, But Dist. Is Not Included In Income.
296
Death Of Ira Owner
Ira Income Belongs To Decedent And Is Not Eligible For A Basis Adjustment As Other Types Of Inherited Property. If A Spouse Inherits An Ira, The Spouse Can Treat The Ira As His Or Her Own Or As A Beneficiary Ira. Someone Other Than Spouse, He Or She Cannot Treat It As Her Own. Beneficiary Can Make Trustee?Trustee Transfer As Long As The Ira Into Which Amts Are Moved Is Set Up And Maintained In The Name Of The Deceased Ira Owner For The Benefit Of The T/P As Beneficiary.
297
Beneficiaries Of A Traditional Ira
Must Include Income In Any Distributions. If Decedent Had Basis, Beneficiary Receives Basis. Can Claim Deduction For Estate Tax If Estate Tax Was Paid On Any Part Of A Dist. That Is Income In Respect Of Decedent.
298
Beneficiaries Of Roth Ira
Nonqualified Dist Iff: Owner Dies Before End Of These 5 Year Periods: 1St Taxable Year For Which Cont. Was Made, Starting With Year Of Conversion Of Ira Or Rollover From Qual. Ret. Plan
Once 5 Year Period Is Completed, Ben. Will Receive Qual. Dist. Regardless Of Age
299
Cost Or Investment In Retirement Plan Contract
Amounts Paid In Total Contributions And Amounts An Er Contributed That Were Included In Income. Does Not Include Tax?Deferred Amounts.
300
Periodic Payments Of Retirement Plan
Paid At Regular Intervals For More Than One Year. Fully Taxable If T/P Has No Cost Basis. If T/P Has Cost Basis To Recover, Portion Of Each Payment Is Excluded From Income.
If To Be Paid Over A Lifetime, The Tax?Free Part Of Annuity Is Calculated Using Simplified Method Or General Rule.
301
Simplified Method ? Periodic Payment
Tax Free Part Of Each Payment Is Determined By Dividing The Cost In The Contract By The Total Number Of Anticipated Payments.
302
General Rule? Periodic Payments
Payments From A Nq Plan Or Qp If T/P Is 75+ With Pmts Of At Least 5 Yrs
Ratio Of Cost To Expected Return
303
Nonperiodic Payments
From An Annuity Contract On Or After Starting Date, Fully Taxable
Before Starting Date , Part Of Cost Alloc. To Cost
Before Start Date From A Plan Other Than Qual. Ret. Plan, It Is Alloc. First To Earnings And Then To The Cost Of Contract
304
Lump Sum Distribution
Reporting Taxable Part Options:
Before 1974 As Cg And Part After 1973 As Ordinary Income
Report Pre?74 As Cg And Use 10 Year Tax Option To Figure Tax On Post?73
Use 10 Yr Tax Option To Figure Tax On Total
Roll Over All Or Part Of Dist. Report Any Amt. Not Rolled Over As Ordinary Income.
Report Entire Taxable Portion As Ordinary Income.
305
10 Year Tax Option
Paid In Year Of Dist., On Form 4972 Tax On Lump?Sum Dist. Can Elected Once And Only If T/P Was Born Before 1/2/36
Form 4972 Is Also Used If A Portion Of The Dist. Is Eligible For 20% Cg Election. If Portion Is Eligible For 20% Cg, T/P Can Elect To Treat It As Ordinary And Include It In Computing The 10 Year Tax Option.
306
Direct Rollover
Trustee?Trustee Transfer
Not Taxable
Not Affected By One Year Waiting Period Between Ira Rollovers
307
Rollover
Starts With Dist. To T/P
T/P Has 60 Days To Rollover
One Year Between Ira Rollovers
May Be Able To Roll Over Tax Free, A Dist. From Ira To A Qual. Plan. These Plans Include Federal Thrift Savings Fund, Def. Comp Plans Of Govt., Tax Shel Ann. Plan
308
Divorce Transfer
The Interest In The Ira Starting From Date Of Transfer Is Treated As Recipient'S Spouses Ira. Transfer Is Tax Free
309
Penalty For Early Distributions
Before 59.5 Subject To 10% Penalty
Early Dist. From Simple Retirement Account Made Within 2 Years Of Beg. Part. In The Simple Are Subject To 25% Early Dist. Tax. Does Not Apply To Part Of A Dist. That Represents A Return Of Basis.
310
Exceptions To 10% Penalty For Early Withdrawal
```
Certain Medical Exp. Up To 7.5% Of Agi
Disability
Death
Substantially Equal Periodic Payments
Irs Levy
Reservist Or Nat. Guard During A Period Of Active Duty For At Least 180 Days
```
311
Exceptions To 10% Penalty For Early Withdrawal Of Employer Plans Only
After T/P Separation From Service In Or After The Year He Turns 55 (50 For Qualified Public Safety Officer)
Dis. To An Alt. Payee Under Qdro. A Qdro Is Not Needed To Split Ira Between Divorcing Couples
312
Exceptions To 10% Penalty For Early Withdrawal Of Iras Only
First Time Homebuyer $10K
Higher Ed. Exp.
Health Ins. Prem. For Unemployed Indiv. ? If T/P Received Unemployment For 12 Weeks And No Later Than 60 Days After Re?Employment
313
Penalty For Early Withdrawal Of Non?Qualified Commercial Annuity
Before 59.5, 10%
Exceptions Are Death, Disability, Or Substantially Equal Periodic Payments
Additional Tax Is Calc. And Reported On Form 5329, Addt'L Taxes On Qualified Plans Incl. Iras And Other Tax?Favored Accts
314
Prohibited Transaction For Ira Purposes
Improper Use Of Ira By T/P Or Disqualified Person
Borrowing Money From Ira
Selling Property To Ira
Receiving Unreasonable Comp. For Mgr Of Ira
Using Ira As Security For Loan
Buying Property For Personal Use With Ira
315
Adverse Consequences Of Prohibited Use Of Ira
Acct. Not An Ira As Of First Day Of Year Of Transaction
Acct. Is Treated As Dist. Its Assets At Fmv
If Other Than T/P 15% Of Tax On Proh. Trans And 100% Addt'L Tax If Not Corrected
316
Two Types Of Transactions Not Prohibited For Ira
Pmts Of Cash, Property By Sponsor To T/P Or Family If Pmts Are For Establishing Ira Or Making Add'L Cont., Ira Is Estab. Solely To Benefit The T/P, Spouse Or Ben., Total Fmv Of The Pmt Is Not More Than $10 For Ira Dep. Less Than $5000, Or $20 For $5000+
Receipt Of Svcs At Reduced Or No Cost From The Bank Where Trad. Ira Is Estab. Or Maintained
317
Intangibles
Section 197 Intangibles Are Certain Int. Assets Acquired After 8/10/93 And Held In Connection With Business For 15 Years
Sale Is A S1231 Gain Or Loss
318
Sale Of Goodwill
Self?Created Is Capital Gain/Loss No Cost Basis
If Acquired, Before 8/11/93, Capital Gain/Loss
If Acquired, After 8/10/93, Sale Is Treated As S1231 Property And Amt. Of Amort. Claimed Under S197 Subject To S1245 Recapture
If Acquired After 7/25/91 But Before 8/11/93, These Rules Apply If An Election Was Made To Apply S197 To Such Intang.
319
Timber
Held As Inv. Prop. Is Cap Asset
Held Primarily For Sale To Customers Is Ordinary Inc
Timber Owned For More Than A Year, T/P Can Treat Timber Cutting As Sale Or Exchange Or Enter Into A Cutting Contract. Treated As S1231 Transaction.
Farmers Selling Timber Report On Schedule F
Christmas Trees Older Than 6 Are Timber.Tree Stumps Are Cap Asset If They Are On Land Held By Investor Not In Timber Or Stump Business. Gain From Sale Of Stumps Held By Timber Operators Is Ord. Income.
320
Investment Income
T/P Elects To Treat Ncg As Inv. Inc.., On Form 4952 Inv. Int. Exp. Ded. Income Taxed As Ordinary
321
Related Party Transactions
Ordinary Income If S1239 Related Party
322
Holding Period
Worthless Stock ? Last Day Of Year
| Nontax Stock Div Same Day As Holding Period Of Old Stock
323
Commodity Futures
S1256 Is A Standard, Exchange?Traded Contract For Sale Of Purchase Of Fixed Amt. Of A Commodity At A Future Date For A Fixed Price.
S1256 Contract That Is Open At Year End Is Treated As Sold At Fmv On Last Day Of Yr
60/40 Rule?60% Ltcg Or Ltcl And 40% Is Short Term
324
Options
Capital Gain/Loss
Option Not Exercised ? Treated As A Sale On Expiration Date
Writer Of Option Has Gain Or Loss Dependent On Whether Exercised. If No, Stcg, And If Excercised, Gain Or Loss Is Same As Call Or Put
325
Calls And Puts
Options On Sec. Issued By Writers To Holders For Cash.
Ended By Exercise, Lapse, Or Closing Trans.
Call Option Is Right To Buy Stated Shares At Specified Price Before Exp. Date
Put Option Is Right To Sell Stated Shares At Spec. Price Before Exp. Date.
Holder Cannot Deduct Cost, It Is Capital Exp.
Short Term Or Long Term Determines Type Of Gain Or Loss
326
Traders In Securities
In Business Of Buying And Selling For Own Acct.
Must Seek Profit From Daily Market Movement
Must Be Substantial
Must Carry On Activity With Continuity And Regularity
327
Short Sale
T/P Sells Borrowed Property To Another Party. At A Later Date, T/P Buys Substantially Identical Property And Delivers It To Lender To Close Sale.
Gain/Loss Recognized When Sale Is Closed.
328
Info Returns
Form 1099?B Proceeds From Broker And Barter Exchange Trans. Is Rec'D When Stocks, Bonds, Certain Comm. Are Sold Thru Broker.
1099?S Proceeds From Real Estate Trans.,
329
Allowable Capital Loss Deduction
Lesser Of $3000 Or Capital Loss Shown On Sch D Line 16. Rest Is Carryover.
330
Carryover Losses
Stl Are Used Before Ltl
Amt That Exceeds Lesser Of: Allowable Cap Loss, T/P Tax.Income Plus Allowable Cap Loss Ded. And Ded. Personal Ex. If Ded>Gi, Use Neg. Tax Inc. For Comp.
On Decedent Return, No Carrover Allowed But Limit Still Applies
331
Capital Gain Tax Rates
0, 15, 25, Or 28%
Collectibles/Q.Sm.Bus.Stock Equal To The S1202 Exc = 28%
Unrecaptured S1250 = 25%
Other Gain And Reg. Tax Rate Is 25% Or Higher = 15%
Other Gain, And Regular Tax Rate Would Be Less Than 25% = 0
332
Cost Basis
Amount Invested In Property For Tax Purposes. Cost Of Property If Purchased.
Basis Diff Than Cost If Property Acquired By Gift, Inheritance, Or Some Other Way Besides Purchase
333
Cost Basis Of An Asset Includes:
```
Sales Tax
Freight
Install/Test Chgs
Excise Tax
Legal Fees
Recording Fees/Revenue Stamps
Commissions
```
334
Real Property Cost Basis
```
Allocated Between Land And Property Based On Fmv
Abstract Fees
Charges For Install Of Utility
Legal Fees
Recording Fees
Surveys
Transfer Tax
Owner'S Title Insurance
Any Amt. Seller Owes That Buyer Assumes
```
335
Settlement Costs ? What Is Not Included
Amts. Placed In Escrow For Future Pmt Of Expenses, Fees And Costs Of Getting A Loan, Casualty Ins. Prem, Rent For Occu. Of Prop. Before Closing Or Charges For Utilities And Other Svcs Related To Occup. Of Prop. Points Paid To Get A Mortgage
336
Constructed Property Cost Basis
```
Cost Of Land
Labor And Materials
Architect Fees
Building Permit Charges
Payments To Contractors
Pmts For Rental Equip
Inspection Fees
Demolition Costs
```
337
Intangible Asset Cost Basis
Cost To Buy Or Create Not Including Time Invested By Creator, Author, Inventor
338
Purchase Of Trade Or Business Cost Basis
Written Agreement Or Residual Method:
Class I Cash
Class Ii Actively Traded Personal Property
Class Iii Assets Inc. A/R
Class Iv Stock In Trade, Or Inventory
Class V All Other Assets
Class Vi All S197 Intang. Except Goodwill And Going Concern Value
Class Vii Goodwill And Going Concern Value
339
Adjusted Basis Of Property
```
Increased By:
Cap. Impro.
Asses. For Local Impro.
Rehab Exp Reduced By Rehab Credit
Exp. To Restore Property That Suffered Casu. Loss
Certain Legal Fees, Such As Cost Of Title
Zoning Costs
Decreased By:
Energy Cons. Subs.
Casualty And Theft Loss
Credits Allowed On Prop
Deferred Gain
Section 179 Gain Exp.
Certain Can. Debt Excl. From Income
Rebates Rec'D From Mftr. Or Seller
Depr.. Amort, Depletion
Various Nontax Dist., Such As Nontax Corp Dist., Or Amts Rec'D For Granting Easement
```
340
Basis Other Than Cost
Fmv Of Prop. Received For Svcs Incl. In Income And Then Becomes Basis
341
Restricted Property
Basis Is Fmv When Prop. Becomes Subst. Vested
342
Bargain Purchases
Fmv Because Discount Is Included In Income
343
Involuntary Conversions
If Similar To Old Property, Basis Equal To Old Prop On Date Of Conversion Minus Loss Recognized On Exchange Plus Any Gain Recognized On Exchange
344
Like?Kind Exchange
Property Rec'D In A Taxable Exchange Has A Basis Equal To Fmv Of Property At Time Of Exchange
345
Property Settlements
Non?Taxable
346
Gift Basis
Depends On Donor'S Adjusted Basis, Fmv At Time Of Gift, And Any Gift Tax Paid
If FmvAb, Recipients Basis Is Ab + Gift Tax Due To Net Increase In Value
Pre?1977 Basis + All Gift Tax Paid But Not More Than Fmv At Gift Date
Post?1976 Basis Is + By Part Of Gift Tax Paid Due To Net Increase And Is Figured By Mult. Gift Tax By Fraction = Net Inc. In Value/Amt. Of Gift
347
Inheritance
Basis Is Fmv On Death Date, Fmv On Alt. Valuation Date If Elected, Value Under Special?Use Valuation For Real Prop Used In Farming, Qualified Woodlands, Or Closely Held Businesses
Decedent'S Ab To Extent Of Value Excluded From Dec. Tax. Estate As A Q Cons. Easement
Modified Carryover Basis As Reported By Estate On Form 8939, Allocation Of Increase In Basis For Prop Acquired From A Decedent For 2010 Deaths
