M2 - Gross Income: Part 1 Flashcards
(26 cards)
Gross income means:
Generally all income, unless specifically excluded:
- It includes:
- Employee achievement awards not in the form of tangible property
- Treasure troves
Portion of life insurance premiums included/excluded from income:
Not income to the employees up to the cost on the first $50,000 of coverage
Under a nonaccountable plan:
Any amounts received by an employee from the employer must be reported as part of wages (even if there was an overpayment that was reimbursed by the employee)
Accruable expense
Services has been received/performed but have not been paid for by the end of the reporting period
Taxable interest income includes:
- Interest from federal bonds (Treasury bonds)
- Interest from industrial development bonds
- Interest from corporate bonds
- *Interest paid by the federal or state gov for late payment of a tax refund
- *Gifts to open up a bank account
Tax-EXEMPT interest income:
- State and local gov bonds/obligations
- Bonds of a US Possession (such as Guam or Puerto Rico)
- US Series EE Savings Bonds
Exclusion of interest from US Series EE savings bonds is phased out when AGI reaches a certain level:
-Single/head of household: $85,800 - $100,800
-MFJ: $128,650-$158,650
Employer contributions to a qualified defined contribution plan and its earnings are:
Not taxable until it is distributed to the employee
Interest on a Series EE bond is not taxable if:
The interest is used to pay tuition and fees for the taxpayer, spose or dependent enrolled in higher education
A state refund from the previous year is not taxable if:
The taxpayer claims the standard deduction
Requirements for payments to be classified as alimony:
- cash or its equivalent
- cannot extend beyond death of the payee-spouse
- must be legally pursuant to a written divorce agreement
- cannot be made to members of the same household
- must not be designated as anything other than alimony
- spouses may not file a joint tax return
Maximum net loss deductible for capital loss
$3,000
In a divorce settlement, payments must first be allocated to:
- child support, then alimony
A Gain or loss on a sale of stock arises on the:
- trade date
For withdrawals of a traditional IRA, is the taxpayer subject to effective or marginal tax rate?
- marginal
If a person withdraws from an IRA before 59 1/2,
- they are subject to a 10% penalty tax
Amount withdrawn x marginal tax % x 10% penalty
Exceptions to the 10% IRA penalty tax (HIM DEAD)
- Home buyer (first time) $10,000 max (purchase must be made within 120 days of withdrawal)
- Insurance (medical) (if unemplyed 12 consecutive weeks or self-employed)
- Medical expenses in excess of AGI floor
- Disability
- Education
- Adoption or birth of a child
- Death
Generally, the FMV of prizes and awards is taxable. Exclusions to this include:
- winner is selected for the award without entering into a contest
- winner assigns the award directly to a gov unit or charity
What is the maximum % of Social Security benefits included in gross income?
85%
Can you deduct the loss on the sale of a personal residence?
NO
Maximum amount not taxed for employee reimbursed educational expenses:
$5,250
Exclusion amount for single taxpayer on proceeds on sale of home:
$250,000
Interest on Series EE savings bonds is tax-exempt when:
- Interest is used to pay for higher education of taxpayer, spouse, or dependents
- eligible higher education expenses are reduced by tax-free scholarships
- the taxpayer is over 24 when bonds are issued
- bonds are acquired after 1989
- interest exclusion is subject to a phase-out
Is a stock split a taxable event?
NO
