Individual Taxation: Part 2

Question 1

what is the formula to calculate a simplified employee pension (SEP) IRA deduction?

Answer 1

net business income
(50% of SE taxes)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
SE earnings before Keogh
x
20%
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
calculated SEP IRA deduction

compare to 57,000 max and take the lesser

Question 2

what would preclude a TP from deducting student loan interest expense?

Answer 2

if the TP is claimed as a dependent of another TP

Question 3

what is the maximum Traditional IRA contribution deduction that can be taken per TP? When does the deduction get phased-out?

Answer 3

6,000 per TP. the 6,000 gets phased-out when the TP is an active participant in another qualified plan

Question 4

what is the max Roth IRA contribution that can be made by a TP in a year?

Answer 4

6,000

Question 5

how many years can charitable contributions that are not fully deductible in the year made be carried forward?

Answer 5

5 years

Question 6

what is the deduction for interest expense on investment indebtedness limited to?

Answer 6

net investment income (investment income - investment expense)

Question 7

formula for calculating itemized deduction for casualty loss

Answer 7

lesser of adjusted basis or decrease in FMV
(insurance recovery)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
TP's loss
(100)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
eligible loss
(10% of AGI)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
deductible loss on Schedule A

Question 8

when is the only time home equity debt is deductible?

Answer 8

when its used to substantially improve the TP’s home that secures the loan

interest on mortgage up 750,000 is fully deductible

Question 9

charitable contributions of LT property vs ST property, is the FMV or cost the deductible amount?

Answer 9

LT property (owned more than 1 yr) = FMV

ST property (owned 1 yr or less) = lower of cost or FMV

*the 30% or 50% AGI limitation applies

Question 10

is transportation to a physician’s office for required medical care a deductible medical expense?

Answer 10

YES

Question 11

what are the only refundable tax credits?

Answer 11

child tax credit, earned income credit, withholdings taxes, American Opportunity credit (40%), and excess SS taxes paid

Question 12

do medical expenses qualify for the adoption credit?

Answer 12

NO

Question 13

if taxes are due after withholding, when would there not be a penalty for underpayment of estimated taxes?

Answer 13

the taxes due after withholding are not over $1,000

Question 14

what are the minimum payments required for a TP to avoid the penalty for underpayment of estimated taxes?

Answer 14

90% of current year’s tax paid in 4 equal installments or 100% (110% if AGI above $150,000) of prior year’s tax liability paid in 4 equal installments

Question 15

for who is the child tax credit available fully?

Answer 15

TPs with AGI up to $400,000 (joint return), children under 17.

full credit is $2,000 per child

Question 16

how much is the failure to pay penalty?

Answer 16

200

Question 17

starting in 2013, a 3.8% Medicare tax is levied on the lesser of…

Answer 17

the TP’s net investment income or the excess of modified AGI over a threshold amount

Question 18

how do you calculate the amount that is taxed at the parent’s marginal tax rate (kiddie tax)?

Answer 18

unearned income - 1,100 allowable standard deduction - 1,100 taxed at the child’s marginal tax rate

*2,200 total deduction

Question 19

what is the carry forward rule for the AMT credit?

Answer 19

can be carried forward indefinitely and applied only to regular tax

Question 20

T or F, only AMT attributable to timing differences is allowed as a credit against future regular tax?

Answer 20

T e.g., amount attributable to LT construction contract