Individual Taxation Flashcards Preview

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Flashcards in Individual Taxation Deck (46):
1

Taxable today

No benefit tomorrow

2

Deductible today

Taxable tomorrow

3

Traditional ira


Contributions are deductible

Unless ind actively participates in another plan- like at work

Agi exceeds threshold

4

Roth IRA

Not deductible but grows tax free

Withdrawals before 59.5 results in penalties 10%

Apart from state and fed tax

Unless medical, educational, first time home ...

5

Educations saving

Put up to 2k?
Whatever it earns is tax free for education . Have to use it before age 30 or can be passed to another member.

6

529 plan

For children, the accumulated won’t be taxed as long as used for qualified expenses

Grows tax free

You can front load the plan. For 5 years and wouldn’t be considered a gift. Can’t give them gift for 5 years

7

Simple plan

Match plan for employees

8

Early withdrawal penalty

Assume for other investment .

9

Jury duty fee if remitted to employer

Deduct when arriving at AGI

ON EXAM

10

Average out income

Farmers

Fertilizer seeds plants on schedule F you could see.

11

Adjustments

For AGI

IEMBRACED EDUCATION HEALTH AND FARMERS

12

From AGI

Itemized deductions

COMMIT

Charity - buying cookies?!-qualified org

Other misc

Misc 2%

Medical- 10%

Interest

Taxes

Theft / casualty loss 10% 100$

13

Alimony

CANNOT

14

Charitable contributions

Carried over 5 years

50% of AGI deductible

Corps are limited to 10% of adjusted taxable income ATI -5 year carry forward

Prop contributions: subject to 2 rules
Ordinary income rule: sterm deduction lower of tax basis or fmv on date of contribution .
Long term cap gain: held higher than 1 year, resulted in long term gain, claim higher of v - limited to 30% of agi

15

Gambling losses

If itemize

No more than winnings

16

Other misc

Estate taxes on income in respect of decedent (Ird)
Gambling losses
Prof gamblers deduct non wagering business expenses on sch c

NO THRESHOLD

17

Misc 2%

A little of 100%

Excess of 2% of agi is deductible

BIT

EMPLOYEE BUSINESS EXPENSES
INVESTMENT COSTS : not fees, no advisory fees... if related to taxable income yes deductible
TAX AND attorney fees

18

Uniform

If could be worn elsewhere, not deductible like a tuxedo for a waiter

19

Medical

10% of excess of AGI

Cosmetic for medical reason deductible

Therapist deductible

Health insurance premium deductible

Drugs must be prescription

Minus insurance reimbursement - asked

Pool and elevator could be if for medical

Not life insurance

Not medical out of ssi

Expenses for others: cdirs (dependent) ..citizen, related live with you provide over 50% of support

If income or joint return test you can still deduct

Diseased spouse or dependent deduc in year , doesn’t matter if before or after death

20

Interest

Investment int- margin interest can’t be more than income on B

Test: mortgage loan interest—
Acquisition: loan to acquire and purchase house , interest of loan up to 1M
Home Equity: interest of loan up to 100thousand , borrowed and used on something else with it . The extra amount above 100k , interest on that amount wouldn’t be deductible

21

Taxes

State taxes, state and local, registration: not the fee

Fee fines federal FICA , forget it.

State sales tax was extended

22

Theft and casualty

Not gradual like termites and erosion. Has to be pretty sudden like natural

Unreimbursed that exceed 10% of AGI, -100$ per event

Measured by drop in fmv but limited to tax basis of asset . Costs incurred to repair, increase tax basis of property but doesn’t affect drop of fmv-loss



23

Itemized deduction phaseout

Total of itemized is reduced by smaller of:

3% of the amount that agi goes over limit

80% of itemized that are affected by limit - not GIMC
Gambling losses
Investment interest
Medical expenses
Casualty losses

24

Itemized deductions with no percentage limit

Other misc

Interest

Taxes

25

Qualifying dependent requirements

C I R S J

Citizen or resident of mex or Canada .

Income, can’t make more than personal exemption

Relationship: all immediate and uncles and aunts but not cousins- cousins can be dependents if they lived with you the entire year

Support has to be over 50%. If more than one but no one provides more than 50% then multiple support agreement , can be given to someone who provides at least 10%

Joint tax return not filed. Unless only to get a refund

26

Child dependent requirements

J A R S

no joint tax return

Age or full time student. Any age if disabled . Otherwise, under 19 or full time student under 24

Residency /Related to you - live with you at least half the year

Support : must not have provided more than half of their own support. Scholarships don’t count. You don’t have to support 50%

Phase out exists

27

Ctc

Child tax credit- under age 17

Refundable

28

Child independent car

Children under 13

29

Adoption

Credit- carry forward 5 years

Phase outs

30

Education

Aotc: hope, first 4 years , 2500$

40% refundable

Lifetime credit : other years 24%

Savers credit : under threshold, you can put in ira and get credit

31

Foreign tax credit

Not claimed as itemized deduction

32

Elderly credits

Non taxable ssi
65+
Disabled
Less than 7500$ of income

33

Eic

Refundable

25? Age

34

SE tax

15.3 tax

If you make over 400$

High income above 250mfj+

35

Underpayment penalty

Estimated payments 4, 6, 9, 1 15th of each

If you pay 90% of this year or 100% of last year, you’re no penalty

.05 penalty per month ***

36

Understatement of penalty- inaccurate

20% penalty

37

AMT

Looks at itemized deductions and disallows or changes limits. If not paying enough then diff is amt

Considers committ

Penalty tax

Taxable income
+- adjustments =adj before exemptions
-exemption = amt income

Charity , other misc, theft and casualty you keep. Int on acquisition . Asked before

Others are disallowed so tax is higher, if total greater than current tax then that is taxed

Lost misc 2%, interest on equity , taxes

Non refundable credits can offset: like cdc hope

38

Adj and preferences for AMT

SIMPLE PIE
Losing adj:
Standard deduction
Interest in home equity
Medical expenses
Personal and dependency exemption
Taxes will all be added back
Employee busi expenses 2% BIT

Preferences:
Private activity bond: added back, was previously included

ISO

EXCESS DEPRECIATION: when double declining is used, they use 150 instead of 200.
Reduces expense so income goes up

Makes income to go up but can lead to decrease also

39

Amt formula?

amti before exemption minus 150 Amount minus 25% of

Find rates too 26%?...

40

Charity contributions carried

Give me 5... years

41

NOL

Upside down looks like 2 and 20 . Go back 2 and forward 20

42

Net Capital loss

Offsets

CAP GAINS
cap 3 letters for go back 3 yrs

Gains has 5, for forward 5 years

Individuals 3k , no go back , forward indefinitely.

43

Investment interest

No go back

If interest expense greater than int income then net and carry excess forward indefinitely

44

Net passive loss

Not back

Forward indefinitely

25k a year loss

45

Net gambling loss

No back or forward

Just lose it

46

Rental royalty ****

Roof and cops