REAL PROPERTY LIFE Mid month convention 1. Residential building 2. Commercial building

1. Residential building – 27.5 year S/L 2. Commercial building – 39 years S/L

- insurance reimbursement - 10% of AGI

Individual taxation Flashcards by Shin Yamanita

statute of limitation: #1 :General 
#2: 25% understatement 
#3:bad debts,worthless securities

#1: 3 years from later of the date filed or due date of return(4/15)  
#2:6 years
#3: 7 years

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cost of life insurance in excess of $50,000 paid by employer is

taxable

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Life insurance proceeds (upon death)
Accident, medical& health insurance
Death Benefits

are Non Taxable

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A. Return of Capital - Company distributes funds but has no E&P, reduce basis in common stock held.
B. Stock split - Allocate original basis over total shares now held.
C. Stock Dividend - (Unless Cash Option)
D. Life Insurance Dividend – Premium return

are Non Taxable

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Alimony is

Non taxable!

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Personal/dependent exemption is

NO MORE

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BAD DEBTS & WORTHLESS SECURITIES:
A. Business
B. Nonbusiness

A. Business – Deductible against business income

B. Nonbusiness – when completely worthless it is deductible only as a short term capital loss.

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Rental income = Passive income

A. Principal Residence Rental Income (14 days or less)
B. Improvements NOT in- lieu-of-rent

These are tax free
A. Principal Residence Rental Income (14 days or less)
B. Improvements NOT in- lieu-of-rent

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All rental activity treated as “passive“ and net losses =

All rental activity treated as “passive“ and net losses = non deductible

Exception: (If AGI is below $100,000) (Phaseout $100,000 to $150,000)
a. Active Participant - $25,000.00 maximum

NONDEDUCTIBLE LOSSES – carry forward forever or used in year asset is sold

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I. UNEMPLOYMENT 
II. COVENANT NOT TO COMPETE 
III. WINNIGS: 
A. Prize 
B. Gambling
IV. JURY DUTY
V. DAMAGES: - For lost profits, punitive damages 
VI. STATE TAX REFUND

I. UNEMPLOYMENT – Fully taxable II. COVENANT NOT TO COMPETE – All taxable as ordinary income
III. WINNIGS: A. Prize – All taxable (even Nobel) B. Gambling – All taxable income, may take a miscellaneous itemized deduction for gambling losses up to the amount of winnings.
IV. JURY DUTY: Fees paid are income, however, if these fees are turned over to employer, taxpayer is allowed to directly deduct (adjustment ) the amount on their tax return. V. DAMAGES: - For lost profits, punitive damages
VI. STATE TAX REFUND:

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SCHOLARSHIPS

SCHOLARSHIPS:
A. Tax Free – Tuition for a candidate going for their degree.
B. Taxable – Tuition for noncandidate.
C. Taxable – Stipend or grant for student work.
D. Taxable – Room and board to all

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I. DAMAGE AWARDS 
A. Workmens Compensation 
B. Accident &amp; Health 
Proceeds 
C. Lawsuit Awards for Damages (Except: Punitive) 
D. Disability Benefits 
II. GIFTS 
III. INHERITANCE &amp; BEQUESTS
IV. DEBTS FORGIVEN

I. DAMAGE AWARDS: Tax Free – All are attempts to undo the damage and make you whole again. (Personal injury awards) A. Workmens Compensation
B. Accident & Health Proceeds C. Lawsuit Awards for Damages (Except: Punitive)
D. Disability Benefits
II. GIFTS: Tax Free III. INHERITANCE & BEQUESTS: Tax Free
IV. DEBTS FORGIVEN: Tax Free in Bankruptcy

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MACRS
200% DDB
Half Year Convention
Mid Quarter Convention

5 years: car, copier, PC

& years: furniture desks

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REAL PROPERTY LIFE

Mid month convention

Residential building
Commercial building

Residential building – 27.5 year S/L

2. Commercial building – 39 years S/L

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INTANGIBLES

Goodwill
Licenses & permits granted by government
Covenants not to compete Trademarks

15 years

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NOL

No carry back any more,

carry forward forever

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1/2 self employment tax

self employed health insurance

deductible

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IRA

A.$5,500 per person with salary, compensation, or alimony
B. $5,500 for a non-working spouse

over 50 YO, can deduct +$1,000

NOt allowed if AGI is >$120,000

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Jury duty

included in income but deductible later

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Moving exp

NO MORE

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EDUCATIONAL LOAN INTEREST

MEDICAL SAVINGS ACCOUNTS

deductible against Gross income = arriving at the AGI

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STANDARD DEDUCTION

Joint : 24,000
Single:12,000
head of household:18,000

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Itemized

medical

insurance reimbursement

- 10% of AGI

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REAL ESTATE TAXES
INCOME
PROPERTY

itemized deduction

income tax is up to total $10,000

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Interest on $750,000 of debt for two houses

No MORE home equity indebt

Charity cash: Property(FMV):

cash:60% of AGI | Property(FMV):30% of AGI

charity carry over

5 years

Casualty loss

NO MORE for individual | corp is still allowed

social security(nenkin)

max.855 of SS to be included in gross income

NOL calculation

personal exemption standard deduction net capital loss won't be included!

interest on Home equity for adding room is

Non deductible!

kids income under 18

up to $1,050: non taxable 1,051 to 2,100:child tax rate 2,100 to:trust tax rate

profit of selling home

non taxable up to $500,00 for couple, 250,000 for single

AMT preference

private activity bond

child and dependent care credit | 勤労収入のある独身ないし共働きの夫婦において、扶養家族である13才未満の子供や障害者(配偶者なども対象)などのためのディケア費の一部が認められます。

3,000 for child | 6,000 for 2 and more

adoption credit

legal fee, agent fee is allowed | but not for medical exp

accuracy related penalty is for

Either 1. 10% + 2. 5,000 USD

estimated tax for AGI higher than 150,000USD

1. 90% of current year tax basis | 2. 110% of prior year tax basis (if AGI is more than 150,000USD)

business expense is

100% deductible against business income = above the AGI

The deduction for investment interest expense is now limited to the

individuals amount of net taxable investment income if investment income is tax free, deduction is not allowed. Disallowed interest expense has unlimited carry forward.

Jury Duty

Taxable as other income | not deductible item

Schedule A : itemized B : interest and dividends C : Business income and losses

``` D : Capital gain/losses E : supplement income - rental activity - royalty - partnership income - S corp - trust ```

Deductible for arriving at AGI

* Self employed SEP * Forfeit interest * Keogh * 1/2% self employment tax * % self employed health insurance

Non-business bad debt (such as loan for friend) is | always treated as

short term capital loss

Loss from sale of Sec 1244 stock is treated as

Ordinary loss "sale of business property"

Non-itemized deductible tax

federal tax inheritance tax gift tax social security

interest income from tax free bond is

tax free!

Subscription for investment publication

NO deductible in 2019

interest expense on a home equity line of credit for personal use is non-deductible

but it's deductible if the loan is for for business use interest exp on 750,000 USD of debt for 2 houses

Estimated income tax paid is

itemized deductible

Disability income insurance premium

Not includable in medical deduction

registration fee for car

Non deductible

A cash basis taxpayer should report gross income

for the year in which income is either actually or constructively received whether in cash or in property

Prepayment interest

deduct the current year's interest only and amortize the balance over next years

Nonpassive activity rule

work 500 hours a year

1040EZ is for

those who only do standard deduction refund of state tax can be taxable only for those who did itemized deduction in last year. but interest on refund is taxable for both all

FICA tax Federal Insurance Contribution Act

owner needs to withheld from employee's wages. owner is not exempted.

No more itemized deduction for Employee business exp

home equity loan interest exp is no more deductible

Pension benefit exclusively paid by employer is taxable

Pension benefit exclusively paid by employee(beneficiary) is non taxable, it's return of capital.

On W-2, state income tax is stated.

Don't forget to put this amount to 1040 sch.A! and deductible state/property/RE tax is up to 10,000USD.

deductible interest exp on Mortgage loan is only for

Purchase/improve home. loan for other purpose is non deductible!

Foreign charity is not deductible. | political party contribution is

not deductible!

Charity less than 250USD doesn't require

supporting document (per donee)

An individual taxpayer reports the following items for the current year: Ordinary income from partnership A, operating a movie theater in which the taxpayer materially participates $70,000 Net loss from partnership B, operating an equipment rental business In which the taxpayer does not materially participate (9,000) Rental income from building rented to a third party 7,000 Short-term capital gain from sale of stock 4,000 What is the taxpayer's adjusted gross income for the year?

70,000+4,000=74,000 passive activities inc.Rental activity :(9,000)+7,000=(2,000) Remember, you cannot deduct passive activity loss! actively-participated rental activity is the only exception passive loss can be taken(up to 25,000)

For taking gambling loss, you must use itemized deduction

standard deduction cannot take particular gambling loss.

Earned income credit will be granted to those who have AGI with 5,000+

but the EIC will be reduced for excess portion of 5,000USD

IRA deduction would be limited if you are covered by

employer's retirement plan If neither spouse was covered by employer-sponsored pension plan, then IRA contribution is deductible

FUTA Federal Unemployment Tax Act

corporation will pay, no withhold from employee is needed

Child tax credit under 17YO (16YO is OK)

2,000USD per child

If you are a nonresident alien, you cannot claim the

standard deduction

Above the line deduction

* IRA * Student loan interest * Moving expense is no more, except for military person

Estimated income tax for those AGI was lower than 150,000USD

either lower of 1. 90% of this year's TL 2. 100% of current year's TL

A claim for refund must be filed?

3 years from the date of original return or 2 years after paying the tax, which is later

Under a divorce settlement, Joan transferred her 50% ownership of their personal residence to Jim. The joint basis of the residence was $200,000. At the time of the transfer, the property's fair market value was $300,000. What was Joan's recognized gain and Jim's basis for the residence?

NO gain, Basis is 200,000 no gain recognition in divorce settlement which covers lump-sum payment or property settlement. Divorce settlement is nontaxable to the recipient and nondeductible to the giver.

Casualty loss incurred in a federally declared disaster

itemized deduction subject to the $100-per-casualty and 10%-of-AGI limitations

Jury Duty pay > need to include in AGI

Jury duty remitted > deductible above the line!!

qualified educator can deduct up to

250 USD for unreimbursed business expenses, school supplies, course fee etc

nonbusiness bad debts

deductible if it's completely worthless

AMT adjustment - not so many

standard deduction:not allowed SALT:not allowed All property taxes excess depreciation

charitable contribution below 250USD

no need of substantiate for deduction 証明書が無くてもdeductできる！

the Tax Cuts and Jobs Act of 2017 suspends the deduction for interest paid on home equity loans from 2018 through 2025

unless they are used to "buy, build, or substantially improve the taxpayer’s home that secures the loan."

Under the new law...interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not..

As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.

Under the new tax code, nurses can no longer write off their scrubs. Salespeople can't deduct their travel expenses. Professors can't subtract research costs.

Previously, employees could potentially write off work-related expenses that added up to more than 2 percent of their gross income, and for which an employer didn't reimburse them.

Sec 179 1,000,000 USD spending cap:2,500,000USD

For new and used equiopment, off the shelf software

Individual taxation Flashcards

(84 cards)