Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CPA - Regulation 1 > R1-Gross Income > Flashcards

R1-Gross Income Flashcards

1
Q

Wages – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Interest – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Dividends – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

State Tax Refund – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Alimony Received – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Business Income – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Capital Gain/Loss – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

IRA Income – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Pension and Annuity – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Rental Income/Loss – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

K-1 Income/Loss – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Unemployment Compensation – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Social Security Benefits – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Other Income – Gross Income? Adjustment? Itemized Deduction

A

Gross Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Education Expense – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

IRA – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Student Loan Interest Expenses – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Tuition & Fee Deduction – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Health Savings Account – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Moving Expenses – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the Exemption for 2014 per Taxpayer, Spouse, Dependent?

A

Itemized Deduction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Self-Employment Health Insurance – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Self-Employment Retirement – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Interest Withdrawl Penalty – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

One Half Self Employment Tax – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Alimony Paid – Gross Income? Adjustment? Itemized Deduction

A

Adjustment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Medical in excess of 10% of AGI – Gross Income? Adjustment? Itemized Deduction

A

Itemized Deduction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

State/Local Taxes – Gross Income? Adjustment? Itemized Deduction

A

Itemized Deduction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Interest Expense – Gross Income? Adjustment? Itemized Deduction

A

Itemized Deduction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Charity – Gross Income? Adjustment? Itemized Deduction

A

Itemized Deduction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Casualty/Theft (in excess of 10% of AGI) – Gross Income? Adjustment? Itemized Deduction

A

Itemized Deduction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Miscellaneous (in excess of 2% of AGI) – Gross Income? Adjustment? Itemized Deduction

A

Itemized Deduction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Is there an adjustment for Foreited Interest? What is the Penalty?

A

Bank credits the interest to the taxpayers’ account and then removes certain interest as a penalty for withdrawing the funds before maturity. This is an adjustment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

How is Dividend Income taxed?

A

Source determins taxability.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Dividends: Earnings & Profits/Current is distributed by

A

Current Year End

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Dividends: Earnings & Profits/Accumulated is distributed by

A

Distribution Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Dividends: Return on Capital is taxed as

A

No earning & profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Dividend: Capital Gains Distribution

A

No Earnings & Profits/No Basis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Taxable Dividends: Cash is taxed by

A

Amount Received

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Taxable Dividends: Property is taxed by

A

Fair Market Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

What type of Dividends get a Special (Lower) Tax Rate?

A

Qualified Dividends - Stock must be held for more than 60 days during the 120 dya period that begins 60 days before the ex-dividend date (the date on which a purchase share no longer is entitled to any recently declared dividends)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

What are the Tax Rates for Dividends in 2014 for Low, Most, and High Income Taxpayers?

A

15% for Most Taxpayers ﾅ 0% for Low Income (those in 10/15% ordinary income) ﾅ 20% for High Income Taxpayers (those in the 39.6% ordinary income)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

Are tax-free distributions exempt from Gross Income

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Name 4 types of Tax Free Distributions for Dividends

A
  1. Return of Capital - 2. Stock Split - 3. Stock Dividends (unless cash or other property option/taxable FMV) - 4. Life Insurance Dividend
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Return of Capital Exists when a company distributes funds but has no _______

A

Earnings and profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

What are the 3 types of Dividends? Describe them?

A

Taxable Dividends, Tax-Free Distribution, and Capital Gain Distribution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Capital Gains Distribution are distributions by a corporation that has no ________ and shareholder has ___________

A

Capital Gains Distribution are distributions by a corporation that has no earning & profits and shareholder has recovered his or her entire basis.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

What is the Medicare Tax?

A

Certain Unearned Income is subject to 3.8% Medicare Tax. Tax is levide on the lesser of Taxpayers net investment income or excess of modified AGI for the tax year over the threshold of $200,000.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

Taxable or not? Itemized in prior yaer = state or local refund is __________

A

Itemized in prior yaer = state or local refund is taxable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

Taxable or not? Standard deduction used in prior year = _________ state or local refund

A

Standard deduction used in prior year = nontaxable state or local refund

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

1040EZ is synomous with what deduction

A

Standard

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

Interest Income for State or Local Refund is or isn’t taxable

A

Interest Income is Taxable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

Alimony/Spousal Support is taxable or not taxable?

A

Taxable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

What are the 6 things needed to be deemed Alimony under Tax Law?

A

aaaaaaa

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

Is Child Support taxable or not taxable?

A

Nontaxable to Ex-Wife receiving the money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

When husband pays Alimony and Child Support - Where does the Payment go first?

A

Payment always goes to Child Support first, then when fully met, it goes to Alimony

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

Does the Deadbeat Dad loses adjustment for alimony?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

Property Settlement is taxable or not taxable?

A

Not Taxable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
59
Q

Net Income from self-employment is computed on _______

A

Schedule C. The net income from the sole properiorship is then transferred to Form 1040 as one amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
60
Q

Schedule C - What is Part I? What is Part II?

A

Part I is Income. Part II is Expenses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
61
Q

Schedule C - What is Part III? What is Part IV?

A

Part III is Cost of Goods Sold. Part IV is Information on your Vehicle. Part V is other expenses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
62
Q

Schedule C - How is inventory booked in Cost of Goods Sold in Part III

A

Must use Accrual Method for Inventory for Cost of Goods Sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
63
Q

Gross Income - Property is taxed by

A

Fair Market Value

64
Q

Cancellation of debt is income? Expense? Nondeductable expense?

A

Gross Income

65
Q

Expense or Nondeductable Expense (on Sch C)? Cost of Goods Sold

A

Expenses

66
Q

Expense or Nondeductable Expense (on Sch C)? Salaries and commissions paid to others

A

Expenses

67
Q

Expense or Nondeductable Expense (on Sch C)? Salaries and Commissions paid to yourself

A

None. You are taxed on “Net Profits”

68
Q

Expense or Nondeductable Expense (on Sch C)? State or Local Business Taxes Paid

A

Expenses

69
Q

Expense or Nondeductable Expense (on Sch C)? Office Equipment

A

Expenses

70
Q

Expense or Nondeductable Expense (on Sch C)? Actual Automobile Expenses

A

Expenses

71
Q

How much can you automobile depreciation can you claim on your taxes

A

Limited to only that portion used for business

72
Q

What kind of Automobile expenses can you claim?

A

Actual Automobile Expenses (depreciateion expense is limited to only that portion used for business) or Standard Milerage Rate (56c in 2014)

73
Q

Expense or Nondeductable Expense (on Sch C)? Business Meal and Entertainment Expenses. What percent?

A

Expensed. 50% and 100% may be deducted as an itemized deduction for charitable contributions.

74
Q

Expense or Nondeductable Expense (on Sch C)? Depreciation of business assets.

A

Expenses

75
Q

Expense or Nondeductable Expense (on Sch C)? Interest expense on business loans

A

Expenses. Interest expenses paid in advance by cash basis taxpayer cannot be deducted until the tax year/period to which the interest relates.

76
Q

Expense or Nondeductable Expense (on Sch C)? Bad debts actually written off for an accrual basis taxpayer only.

A

Direct writeoff method, not the allownace method, is used for tax purposes

77
Q

Expense or Nondeductable Expense (on Sch C)? Employee Benefits

A

Expenses.

78
Q

Expense or Nondeductable Expense (on Sch C)? Legal and Professional Services

A

Expenses.

79
Q

Expense or Nondeductable Expense (on Sch C)? Salaries paid to the sole proprietor

A

Nondeductible expense (They are considered a “draw”)

80
Q

Expense or Nondeductable Expense (on Sch C)? Federal Income Tax

A

Nondeductible expense

81
Q

Expense or Nondeductable Expense (on Sch C)? Personal Portion of Auto, Travel, Vacation Expenses

A

Nondeductible expense

82
Q

Expense or Nondeductable Expense (on Sch C)? Personal meals and entertainment expenses

A

Nondeductible expense

83
Q

Expense or Nondeductable Expense (on Sch C)? Interest Expense

A

Nondeductible expense. Itemized deduction if mortgage interest or investment interest is paid

84
Q

Expense or Nondeductable Expense (on Sch C)? State or Local Tax Expense

A

Nondeductible expense. Report as an itemized deduction on Schedule A

85
Q

Expense or Nondeductable Expense (on Sch C)? Health Insurance of a Sole Proprietor

A

Nondeductible expense. It is reported as an adjustment to arrive at AGI

86
Q

Expense or Nondeductable Expense (on Sch C)? Bad debt expense of a cash basis taxpayer

A

Nondeductible expense

87
Q

Expense or Nondeductable Expense (on Sch C)? Charitable Contributions

A

Nondeductible expense

88
Q

What are the two taxes on Net Business Income

A

Income Tax and Federal Self-Employment (S/E) Tax (Social Security)

89
Q

Can you deduct business loses against other sources of income? Carryover/Carryback?

A

Yes. 2 years back then 20 years forward.

90
Q

Can Husband and Wife who operate a business together file seperetly or partnership income tax?

A

aaaaa

91
Q

What is the Uniform Capitalization Rules?

A

When you make inventory, you have to capitlizate all the direct material, direct labor, and factory overhead

92
Q

What are the 3 rules for Capitalizing Inventory?

A

Direct Materials, Direct Labor, Factory Overhead.

93
Q

Whare are the 4 rules for Period Expenses

A

Selling, General, Administrative, Research & Development.

94
Q

How is income recognized for long term contracts?

A

Percentage of Completion

95
Q

What are some exceptions for income recognition for Long Term Contracts

A

Small Contractors, Home Construction Contractors, Long Term Construction Contract, Services provided by architect, engineer, designers, construction manageres, etc. PgR1-31

96
Q

What other methods to determine taxable income other than Long Term Contract can Small Contractors use?

A

Completed Contract Method,

97
Q

How is the Production Period Defined for Cash-Basis taxpayers?

A

Date on which the contractor incurs cost is Start Date. End Date is when the contract is complete (per contract) or 95% complete under contract

98
Q

What is a calculation for Percentage of Completion Method Income Recognition

A

Cost-to-Cost Method (to determine percentage) & Gross Income Recognition Calculator.

99
Q

What is the Cost to Cost Method?

A

Ratio of Total Cumulative Costs incurred to date at the end of tax year divided by total expected costs to be incurred under the contract. This determines percentage complete.

100
Q

What is the Gross Income Recognition Calculator?

A

Multiply the ratio determined using the Cost-to-Cost Method by the total contract price and subtract the amount of income that was recognized in prior years. Builds cumulatively

101
Q

In Longterm Contracts - Corporate earnings and profits must be calculated using the ___ method

A

Percentage of Completion

102
Q

In Longterm Contracts - Can you change accounting method?

A

No

103
Q

What portion of Social Security do you pay as Self-Employed?

A

Both.

104
Q

What is the difference in Schedules for Self Employed and Farms?

A

Schedule F for Farms.

105
Q

For Farmers- Inventories of produce, livestock, etc considered inventory for Cash Basis Taxpayers?

A

No. Expense Inventory.

106
Q

For Farmers- Inventories of produce, livestock, etc considered inventory for Accrual Taxpayers?

A

Yes. Must use inventory.

107
Q

What is Gains and Losses on Disposition of Property?

A

Amount Received minus Adjusted Basis of Asset Sold = Gain or Loss Realized

108
Q

What is IRA Income?

A

Withdrawing funds from IRA

109
Q

When can IRA be withdrawn?

A

59 1/2 years old

110
Q

What happens if you withdraw from your IRA early?

A

10% penalty tax on top of any increase in regular income tax

111
Q

How is a regular IRA taxed?

A

Funds will be taxed as ordinary income when received.

112
Q

How is Roth IRA taxed?

A

Nontaxable

113
Q

How is a Traditional Nondeductible IRA taxed?

A

Principle is not taxable. Accumulated earnings are taxable when withdrawn.

114
Q

What are the Exceptions to the Roth IRA 10% Penalty Tax

A

H I M D E A D - Home Buyer, Insurance (Medical) if unemployed 12 consecutive weeks / self employed, Medical Expenses in excess of 10% of AGI, Disability, Education, and, Death

115
Q

Annutieis are treated as

A

Depreciation

116
Q

Annuities - If you live longer than Actuarial Payout Period?

A

Fully Taxable

117
Q

Annuities - If you die before the Actuarial Payout Period?

A

The unrecovered portion is a miscellenous itemized deduction on the annuitants final income tax return, not subject to 2% of AGI floor.

118
Q

What type of passive income goes on Schedule E?

A

Rental Real Estate, Royalties… (The following are from K-1s) Partnership & Limited Liability Companies, S Corporations, Estates, Trusts.

119
Q

What is the basic formula for net rental income or loss?

A

Gross Rental Income + Prepaid Rental Income (Nonrefundable Deposit/ Last Month Rent) + Rental Cancellation Payment + Improvement in Lieu of Rent - Rental Expenses.

120
Q

How many days do you need for a Vacation Home to be treated as a Vacation Home?

A

15 or more

121
Q

How are expenses treated if Vacation Home is rented more than 15 days?

A

Prorated

122
Q

If Rented less than 15 days, is Rental Income included in your income

A

Yes

123
Q

Rental Use Expenses are deductible only to the extent of _________

A

Rental Income. No Rental Loss Allowed.

124
Q

Can Net Passive Activity Loss be deducted against other active income or portfolio?

A

No

125
Q

If you have a Nondeductible Passive Activity Loss (PAL), can it be carried back/forward?

A

Carry forward without any time limit (R1-43)

126
Q

What is the Passive Activity Loss Mom and Pop Exception?

A

May deduct $25,000 per year of net passive losses but have to be ACTIVE. Anything over $25K is carried forward forever/land sold.

127
Q

What is the Passive Activity Loss Mom and Pop Exception Phase Out Rule?

A

If Taxpayers AGI, without consideration fo this loss deduction, is over $100K. Eliminated completely at $150K.

128
Q

What is the Passive Activity Loss Mom and Pop Exception Phase Out Rule Exemption?

A

If you are a Real Estate Professional (50% and 750 hrs), because it is not passive.

129
Q

Is Unemployement Compensation taxable or taxfree?

A

Taxable

130
Q

Is Workers Compensation taxable or taxfree?

A

Tax-Free

131
Q

What are the ranges for Social Security Benefits? Low/ Middle/ Upper?

A

0% at 25K/32K - Middle Income Over $25K - 50% - Upper 85% over $34K

132
Q

Are Prizes and Awards Taxable? Exclusions?

A

Yes at FMV. Exclusion from income if did not apply (such as Nobel Prize)

133
Q

Gambling Winnings Taxable?

A

Yes

134
Q

Gambling Losses Deductable?

A

Yes to the extent of gambling winnings on itemized deduction.Not subject to 2% AGI

135
Q

Business Recovery - Taxable or Not Taxable?

A

Damage award is compension for lost profit - the award is Income. Taxable.

136
Q

Punitive Damages taxable?

A

Yes. Taxable except in Wrongful Death cases.

137
Q

Scholarships and Fellowships? Taxable?

A

Excludable up to amount actually spent on tuition, fees, books, supplies. Taxable if services are required. Taxable Room and board).

138
Q

Gifts and Inheritance- Taxable or Not Taxable?

A

Nontaxable for person receiving. Party paying gift/inheritance that pays tax.

139
Q

Medicare Benefits

A

Nontaxable

140
Q

Personal (Physical) Injury or Illness Award? Taxable or Non-Taxable?

A

Nontaxable

141
Q

Accident Insurance. Premiums Paid by Taxpayer?

A

Nontaxable

142
Q

How much can a taxpayer working abroad exclude from their income?

A

$99,200 (2014) - Must be resident of foreign country for full year and present for 330 days.

143
Q

What is the difference between Nonqualified and Qualified Stock Options?

A

aaaaa

144
Q

What is Nonqualified Stock Options?

A

A Nonqualified option is taxed when gratned if the option has a readily ascertainable value when granted. Otherwise, taxed when exercised.

145
Q

How do you know if a nonqualified stock option is readily available?

A
  1. The Option is Transferable - 2. Option is exercisable immedietly in full when granted - 3. No condition or restriction - 4. Fair Value of option privilege is readily ascertainable.
146
Q

How is Employee Taxation of Readily Ascertainable Value of Stock Options done?

A

Taxable at Grant. Recognized Ordinary Income in that amount in the year granted.

147
Q

How is Employee Taxation of Without Readily Ascertainable Value of Stock Options done?

A

Taxed at Exercise. Holding Period begins at exercise date. If option lapses, no tax consequence.

148
Q

How does an employer treat the value of a Stock Option when employee recognizes option?

A

Employer may deduct value of stock option as a business expense in the same year that employee is required to recognize option as ord. income.

149
Q

What are the two types of Qualified Options?

A

Incentive Stock Option & Employee Stock Purchase Plan

150
Q

What is an Incentive Stock Option?

A

ISO is granted to key employees and is a right to purchase the stock at a discount.

151
Q

What is the Employee Taxation on Incentive Stock Options?

A

Not Taxable as Compension. Capital Gain/Loss when sold. (Sale Price - Purchase = Gain or Loss)

152
Q

What is the Employer Taxation on Incentive Stock Options?

A

No Tax Deduction because it is not considered income to employee.

153
Q

What is the Employee Taxation on Employee Stock Option Plans?

A

Not Taxable as Compension. Capital Gain/Loss when sold. (Sale Price - Purchase = Gain or Loss)

154
Q

What is the Exemption on Employee Taxation on Employee Stock Option Plans?

A

If option price is less than FMV, then ordinary income is recognized as the lesser of the difference of the FMV of the stock when sold and the exercise price.

155
Q

What is the Employer Taxation on Employee Stock Option Plans?

A

No Tax Deduction because it is not considered income to employee.

CPA - Regulation 1 (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions