Individual Taxation Flashcards
(45 cards)
A taxpayer’s spouse dies in the current year. What is the taxpayer’s filing status for the current year?
Married filing jointly. The surviving spouse is considered to be married (and thus able to file as married filing jointly) for the entire current year even if the spouse dies earlier in the year.
In order to file HOH filing status when claiming a parent as a dependent, how long does the parent have to have lived in the assisted living home for during the taxable year?
Parent would have to live in the assisted living home for the entire year
Where is the deduction for qualifying business income (QBI) applied in the individual tax formula?
As a deduction from adjusted gross income separate from the standard deduction and itemized deductions
How does a self-employed cash basis taxpayer report interest on the income tax return?
Cash basis taxpayers deduct interest in the year paid or the year to which the interest relates, whichever is later.
Which costs are required to be capitalized under the uniform capitalization rules?
(Name 13 IC)
Direct materials, direct labor, and applicable indirect costs. Applicable indirect costs include utilities, warehousing costs, repairs & maintenance, indirect labor, rents, storage, depreciation and amortization, insurance, pension contributions, engineering and design, repackaging, spoilage and scrap, and administrative supplies.
The Uniform Capitalization Rules apply to retailers whose average gross receipts for the preceding three years exceeds what amount?
25 Million
What are the treatment options for a net operating loss occurring in tax years after December 31, 2017?
Net operating losses may not be carried back (for tax years beginning after December 31, 2017), but can be carried forward indefinitely. Also, note that the net operating loss utilized in one tax year is limited to 80 percent of taxable income.
How does each shareholder in an S corporation report gross income?
Each shareholder reports his/her pro rate share of the S corporation’s taxable income (non-separately stated) in his or her gross income. The distributions are not taxable to the extent the shareholders’ basis exceeds the distribution (and increased for any income reported by them during the year).
What is the 2019 dollar limit phase out amount for the qualifying business income deduction for a specified service trade or business?
A specified service trade or business with taxable income over the $210,700 for 2019 is not eligible for the QBI deduction.
How are expenses reported under a nonaccountable plan?
Under a non accountable plan (i.e. expenses are not reported to the employer), any amounts received by an employee from the employer must be reported by the employer as part of wages on the employee’s W-2 for the year (and subject to income tax withholding requirements). The gross amount received is reported as income.
Is group term life insurance a taxable or nontaxable fringe benefit? Is there a limitation?
The first $50,000 of group term life insurance is a nontaxable fringe benefit.
If two individuals agree to trade their services, how is the amount reported as? At what amount and as income or expense?
In the case of non cash income, the amount of income to be reported is the FMV of the property or services RECEIVED not the FMV of services rendered.
A cash basis taxpayer should report gross income for the year in which income is…
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
What type of life insurance proceeds are nontaxable to the corporation?
Life insurance proceeds on the life of an officer when the corporation is the owner and beneficiary are not reported as taxable income of the corporation. Also note that any expense related to the premiums would not have been tax deductible for the corporation.
What is the IRA deduction on a CY joint tax return? What is the phase-out?
In 2019, taxpayers can contribute and deduct up to $6,000 to an IRA. For couples filing a joint return, where at least one spouse is an active participant in a retirement plan, the deductible portion is phased out. For a spouse who is an active participant, the phase-out range in 2019 begins at $103,000. For a spouse who is not an active participant, but is married to someone who is, the phase-out range in 2019 begins at $193,000.
What is the maximum amount of charitable contribution that may be deducted as an itemized deduction for long-term capital gain appreciated property (ex. land donation, donated stocks) in the CY? And at what amount? How long is the carryforward period?
The taxpayer can deduct long-term (i.e. held longer than 12 months) capital gain appreciated property at the higher FMV (higher than cost basis) without paying capital gains tax on the appreciated property. The deduction is limited to 30 percent of adjusted gross income (AGI). A five-year carry forward period applies.
What is the maximum amount of charitable contribution that may be deducted as an itemized deduction for a charitable contribution in the CY?
The contribution limit for a church or charity is 60% of the contribution base (adjusted gross income in this case). The individual can take their CY contribution plus the PY carryover if it is under the current year limit.
How is allowable casualty loss calculated? (4 steps)
Step 1: Start with LESSER of decrease in FMV or adjusted basis
Step 2: Reduce amount by insurance proceeds
Step 3: Less $100 floor (applied to each separate casualty loss)
Step 4: Less: AGI threshold applied to all casualty losses in the aggregate
What is the amount and limitation for interest on a qualified education loan?
The adjustment for education loan interest is limited to the amount paid or $2,500 (whichever is lower), and all qualified education loan interest is allowed as part of the adjustment.
The adjustment is phased-out for single taxpayers with modified AGI between $65,000 and $80,000 (2018) and MFJ between $135,000 and $165,000 (2018).
Charitable contributions subject to the 60-percent limit that are not fully deductible in the year made may be…
carried forward 5 years
What is the additional standard deduction available for individuals age 65 or older?
$1,300 per person over age 65
For a taxpayer who itemized deductions, what is the deductibility of interest on a construction loan?
Mortgages of up to $750,000 to buy, build, or substantially improve a home allow for the full deduction of interest.
How is estimated tax for the current year computed in order to make timely estimated tax payments and avoid the underpayment of estimated tax penalty?
To avoid penalties, if a taxpayer owes $1,000 or more in tax payments beyond withholdings, such taxpayer will need to have paid in for taxes the lesser of: 90% of current year’s tax (the annualized method), or 100% of last year’s tax (the prior year method). However, if the taxpayer had adjusted gross income in excess of $150,000 in the prior year, 110% of the prior year’s tax liability is used to compute the safe harbor for estimated payments.These payments would have had to be made in 4 equal installments.
What is the maximum annual deductible amount for self-employed individuals to a Keogh Plan?
The maximum annual deductible amount for self-employed individuals to a Keogh Plan is the lesser of $56,000 or 25% of net earnings. “Net earnings” is defined as business income minus business expenses minus 50% of self-employment taxes minus the Keogh deduction. Because the Keogh deduction is part of the equation to obtain the “net earnings” amount, the mathematical equivalent of 25% of net earnings is to multiply 20% [25% / 125%] by the self-employment earnings before the Keogh deduction.
