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Flashcards in Individual Taxation Deck (74):
1

Individual Net Capital Loss

Individuals only
$3k max deduction per year

If more than $3k = no carry back, carry forward forever

2

Individual Cap. Gain / Loss

Long term = holding period > 1 year
Tax rates:
20% Rich / 15% Average / 0% Poor

Short Term = holding period < 1 year
Tax rates:
ordinary income tax rate

3

ESO

Non-qualified Options

Taxable when granted if readily ascertainable value

No tax at date of exercise

If no ascertainable value, tax when exercised

4

ESO - Qualified Options

Incentive Stock Options

Employee Taxation:
- not taxable income as compensation
- capital gain/loss when sold

Employer Taxation:
- no tax deduction

5

ESO - Qualified Options

ESPP (Employee Stock Purchase Plans)

Employee Taxation:
- not taxable income as compensation
- capital gain/loss when sold

Employer Taxation:
- no tax deduction

6

ESO - Qualified Options

ESPP (Employee Stock Purchase Plans)

Exception to Cap. Gain / Loss

If FMV < stock on grant date, recognize ordinary income for lesser of:

1 - Diff of FMV when sold and when exercised
2 - Diff of exercise price and FMV on grant date

7

Adjustments

Educator Expenses

Up to $250 of qualified expense paid
K-12 teacher or aide for >= 900 hours

Qualified expenses:
- prof dev
- common and accepted in field
- helpful and appropriate in field
- necessary in field

8

Deductible IRA's

Earnings = tax free
Withdrawals considered taxable income

Not deductible when:
1 - excessive AGI
(single/HoH = $62-72k / MFJ = $99-119k)

2 - active in another plan
(phase out at $186k-$196k if spouse is active in another plan)

9

Nondeductible Moving Expenses

Meals
Pre-move house hunting
Expense of breaking a lease
Temporary living expenses

10

Adjustments

Self Employed
- health insurance
- SS / Medicare tax

Self employed health insurance = 100% deductible

Self employed SS/Medicare tax = 50% deductible

11

Additional Standard Deductions (2)

Blind / Over 65

Qualified:
- 65 or blind = $1,550 single / $1,250 married
- 65 and blind = $3,100 single / $2,500 married

Non-qualified:
- each 65 or blind = $2,500 married
- both 65 and blind = $5,000 married

12

Itemized Deductions

Taxes (RIPS)

Real estate taxes
Income taxes
Personal property taxes
Sales tax

13

Non-deductible Taxes

(FIB)

Federal taxes (including SS)
Inheritance taxes for estates
Business and rental property taxes

14

Charitable Contributions Limitations

Overall Limit = 50% AGI

Cash = may be all 50%
Gen. prop. = lesser of basis or FMV
Long-term appreciated prop. = lesser of:
1 - 30% AGI
2 - remaining amount to reach 50% after other contributions

15

Misc. Itemized Deductions

Not taken as part of allowable adjustment

Combined exceed 2% of AGI

16

Types of Misc Itemized Deductions

Unreimbursed business expenses
Education expenses
Uniforms
Business Gifts
Employment agency fees
Expenses of investors
Subscriptions to professional journals
Tax preparation fee
Debit card fees incurred to pay income tax
Activities no engaged in for profit (hobbies)

17

Other Misc Deductions

(no 2% AGI test)

Gambling losses

Federal state tax paid on income from being the beneficiary of an estate

18

Refundable Tax Credits... WE ACE

Withholding taxes
Earned income credit

American Opportunity Credit
Child tax credit
Excess social security paid

19

Child and Dependent Care Credit

Computations

Maximum = 35%
- taxpayer AGI must be > $15k

Phase = 20-35%
- decreases 1% for each $2k of AGI over $15k, but not below 20%

Minimum = 20%

20

Elderly and/or Permanently Disabled Credit

Available for:
65+ / retired due to permanent disability

Base amounts:
- single = $5k
- MFJ (1 eligible) = $5k
- MFJ (both eligible) = $7.5k
- MFS = $3,750

21

Lifetime Leaning Credit

20% of qualified expenses up to $10,000

22

Adoption Credit

$13,570
- per child (including special needs)

Phase Out = $203,540 - $243,540

23

Foreign Tax Credit Formula

taxable income from all foreign operations
/
taxable income + exemptions
x
US tax

24

Earned Income Credit

*Refundable*

Eligibility:
- live in US half year +
- meet certain low-income threshold
- not have more than specified amount of disqualified income
- between 25 - 65
- file joint return with certain exceptions

25

AMT Calculation

regular taxable income +/- adjustments + preferences
= amt. min. taxable income

- exemption = AMT min. tax base

x AMT rate = tentative AMT tax

- AMT foreign tax credit = tentative min. tax

- regular income tax = AMT

26

Individual Income Tax Formula

gross income - adjustments
= AGI

- standard/itemized deductions - exemptions
= Taxable Income

x fed income tax - tax credits and other taxes- payments
= Tax due / refund

27

AGI

Gross income - adjustments

28

Gross Income includes... (SWAT IS UP)

Schedules B, C, D, E, F
Wages
Alimony received
Taxable state / local refunds

IRA
Social security

Unemployment
Pensions and annuities

29

Adjustments include... (SHIT IM ASS DOPE)

Student loan interest
Health savings account
IRA
Tuition / fees

Interest withdrawal penalty
Moving expenses

Alimony paid
Self employed health insurance
Self employed retirement

Domestic production activities deduction
One half self employment FICA
Paid attorney fees–discrimination/whistle blower
Educator expenses

30

Qualifying Widow(er) w/ Dep. Child

rules...

2 years after spouses death

Principle residence for dependent child

31

Head of Household

4 conditions...

1 - Not married / legally separated / apart from spouse for last 6 months of year

2 - not a qualifying widow(er)

3 - not a nonresident alien

4 - 1/2+ year principle residence for qualifying person

32

Head of Household

qualifying child is...

Child
Step child
Adopted child
Foster child

Brother, sister, or descendent of the above

*must live with taxpayer for 1/2+ year

33

Head of Household

qualifying dependent relative is...

Grandparent
Brother / sister
Aunt / uncle
Nephew / niece
Stepparents
Parents in law
Brothers / sisters in law

*no cousins or foster parents or unrelated*

34

Dependency Exemptions (2)

Qualifying Child = CARES

Qualifying Relative = SUPORT

35

Qualifying Child

CARES test

A - Age limit...

Younger than taxpayer

Under 19

Under 24 if FT student

36

Full Time Student

requirements...

No night school

Part of 5 months within tax year

37

Net Taxable Loss

Carry back / forward

Carry-back = 2 years

Carry-forward = 20 years

38

Non-deductible Expenses

Schedule C

Salaries paid to sole-proprietor

Federal income tax

Personal portion of anything

Bad debt expense

Charitable contributions - Schedule A

39

Alimony / Spousal Support

payment requirements...

- must be legally required pursuant to written divorce or separation
- must be in cash (or equivalent)
- cannot extend beyond death of payee/spouse
- cannot be made to members of same household
- must not be designated as anything other than alimony
- spouses may not file joint tax return

40

1040

Schedule B

Reporting of interest and ordinary dividends

41

Non-taxable Fringe Benefits

- life insurance proceeds
- accident/medical/health insurance (employer paid)
- de minimus fringe benefits
- meals and lodging
- employer payment of employee's educational expenses
- qualified tuition reimbursement
- qualified employee discounts
- qualified pension / profit sharing / stock bonus plans
- flexible spending arrangements (FSA's)

42

Gross Income

Salaries and Wages includes...

- money
- property (FMV)
- cancellation of debt (COD)
- bargain purchases
- guaranteed payments to partners
- taxable fringe benefits
- portion of life insurance premiums

43

Business Costs not Required to be Capitalized

- selling
- advertising
- marketing
- general and administrative
- research
- officer comp (not attributed to production expenses)

44

Passive Activity Loss

Real Estate Professional Exemption

Not considered passive and fully deductible if...

1 - 50%+ of taxpayer personal services are performed in real property businesses

2 - taxpayer performs 750+ hours of services in real property business during the year

45

AMT Adjustments

(PANIC TIME)

Passive activity losses
Accelerate depreciation
Net operating loss of taxpayer
Installment income of a dealer
Contracts - % v. completion

Tax deductions
Interest deductions on some home equity loans
Miscellaneous deductions not allowed
Exemptions (personal) and standard deduction

46

"Child" Tax Credit

Phase Out

Reduce by $50 for each $1,000 over AGI:

Single = $75k
MFJ = $110k
MFS = $55k

47

Itemized Deductions...

Interest Expense (HIPPE)

Home mortgage interest
Investment interest expense
Personal (consumer) interest (non-deductible)
Prepaid interest
Educational loan interest

48

Non-refundable tax credits... CELL GRAF

Child and dependent care credit
Elderly or disabled credit
Lifetime Learning Credit
Long-term unused minimum tax credit

General business credit
Retirement plan contribution credit
Adoption credit
Foreign tax credit

49

Tax-Exempt Interest Income

(reportable but no taxable)

State and local gov bonds / obligations
Bonds of US possession
*Series EE (US Savings Bonds)
Veterans administration insurance

*phase out applies*

50

Casualty and Theft Losses Formula

smaller loss - insurance recovery
= taxpayers loss

- $100
= eligible loss

- 10% AGI
= deductible loss

51

Types of Itemized Deductions... (COMMITT)

Charitable contributions
Other miscellaneous expenses
Miscellaneous 2% expenses
Medical expenses
Interest expense
Taxes Paid
Theft or casualty loss

52

Deductible Medical Expenses Formula

qualified medical expenses
- insurance reimbursement
= qualified medical expenses "paid"

- 10% AGI
= deductible medical expenses

53

Itemized Deduction Phase Out

When AGI crosses the below limits, reduce by smaller of:
- 80% of itemized deductions affected by limit
- 3% of amount over AGI

Single = $261,500
MFJ = $313,800
MFS = $156,900
HoH = $287,650

54

Standard Deduction (2017)

Single = $6,350
HoH = $9,350
MFJ = $12,700
*MFS = $6,350

*only if both don't itemize*

55

Keogh Net Earnings

(from SE)

business income - business expenses
= net business income

- 1/2 self employment tax - keogh deduction
= Keogh net earnings

56

Keogh (Profit-Sharing) Plans

Max annual deductible amount lesser of:
- $54k
- 25% net (keogh/SE) earnings

Max annual contribution lesser of:
- $54k
- 100% net earnings (only if comp < 54k)

57

Adjustments

Moving Expenses

New workplace = 50m farther from old house

FT for 39 weeks in year after arrival

Only direct moving costs
- $0.17c on the mile
- tolls/parking fees

58

Adjustments

Health Savings Account

Up to $3,400 in 2017 ($6,750 for families)
+ $1,000 after 55

High-Deductible Plan Defined
- OOP Limit = $6,550 individual / $13,100 family

59

Adjustments

Tuition and Fees Deduction

2016 Max Deduction for taxpayers with AGI...

<= $65k ($130k MFJ) = $4,000
$65k - $80k ($160k MFJ) = $2,000
over $80k = $0

60

Adjustments

Student Loan Interest Expense

Limited to $2,500

*Phase-Out*
- single = $65 - $80k
- married = $135 - 165k

Completely phased out 2017:
- single AGI >= $80k
- married AGI >= $165k

61

1040

Schedule C (or C-EZ)

Business income / loss

62

1040

Schedule F

Farm income / loss

63

Net Rental Income / Loss

formula...

gross rental income
+ prepaid rental income
+ rent cancellation payment
+ improvement-in-lieu of rent
- rental expenses
= rental income/loss

64

Coverdell Education Savings Account
(Education IRA)

Phase Out

Modified AGI:

Single = $95 - 110k
Married = $190 - 220k

65

Roth IRA Phase Out

Modified AGI:

Single = $118 - 133k
MFJ = $186 - 196k
MFS = $0 - 10k

66

Passive Activity Loss

Mom and Pop Exception

Up to $25k per year of net passive losses:
- must be active
- must own 10%+

Excess carried forward indefinitely

Phase Out:
- minus 50% excess of AGI over $100k
- completely phased out at AGI $150k+

67

Federal Self-Employment (SE) Tax

adjustment...

1/2 of SE tax paid

7.65% up to $127,200
+ 1.45% after that

68

Exemption to Penalty Tax

(HIM DEAD)

*still subject to ordinary income tax*

Home buyer (1st time), $10k max
Insurance (medical)
Medical expenses over 10% AGI

Disability (permanent or indefinite)
Education (college books, tuition, fees)
And...
Death

69

Series EE

Phase Out

When modified AGI exceeds indexed amount...

for 2017:
- Single/HoH = $78,150
- MFJ = $117,250

70

CARES

Close relative
Age limit
Residency and filing requirements
Eliminate gross income test
Support test changes

71

SUPORT

Support (>50%) test
Under a specific amount of taxable GI test
Precludes dependent filing jointly return test
Only citizens of US/Canada/Mexico
Relative test or...
Taxpayer lives with individual for whole year

72

Personal Exemption Phase Out

Reduces 2% for every $2,500 over gross income (2017):

MFJ/Surviving Spouse = $313,800
HoH = $287,650
Single = $261,500
MFS = $156,900

73

Form 1041

Income tax return for estates and trusts

74

Schedule E

income or loss from rental real estate, royalties,
partnerships, S corporations, estates, trusts, and residual interests in REMICs