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REGULATION > R2 - Individual > Flashcards

R2 - Individual Flashcards

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0
Q

What are deductibility requirements for traditional IRA?

A

BOTH conditions are met:

  1. High AGI (112k max for MFJ)
  2. Active participation in ER plan

Both spouses are evaluated individually UNLESS super rich (AGI over 183K)

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1
Q

What qualified educator expenses must be reduced by?

A
  • excludable Series EE bond interest
  • non taxable earnings from Coverdell
  • non taxable qualified state tuition program earnings
  • any reimbursement NOT reported on W-2
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2
Q

Minimum age to get an additional IRA catch-up contribution?

A

50 years

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3
Q

IRA mandatory distributions begin at the age of?

A

70.5 years

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4
Q

When are earnings distributions from a Roth IRA non taxable?

A

Made at least 5 years after the 1st day of the year of 1st contribution AND:

  1. After you are 59.5 years old
  2. Or disabled
  3. Or you are the beneficiary of the deceased Roth
  4. Or you are a first time homebuyer
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5
Q

Maximum contribution to Coverdell IRA?

A

2,000 per beneficiary

Independent of other IRA contribution limitation

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6
Q

Coverdell IRA limitations?

A
  1. For kids under 18
  2. 2,000 per kid
  3. MUST be distributed by the age of 30:
    • to beneficiary - taxable + 10% penalty
    • roll over to another family member - no tax or penalty
  4. Subject to phase out
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7
Q

Coverdell IRA benefits?

A

Per kid
Can be used for room and board
Can be combined with AOC!!!
Both principal and earnings non taxable

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8
Q

Student loan interest expense maximum amount?

A

2,500 subject to phase-out (80k/160k cutoff)

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9
Q

Tuition and fees deduction maximum amount?

A

4,000 subject to phase-out

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10
Q

Who qualifies for Archer MSA?

Limitations?

A

Self-employed or employees of small businesses (BTR)
Must be high deductible plan
Contributions lower than in HSA - 2,100 and 4,200

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11
Q

Moving expenses limitations

A

39-week in one year if employee
78 weeks in two years if self-employed

Travel & lodging and transporting household goods ONLY

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12
Q

Non deductible moving expenses?

A

Meals
House hunting
Breaking the lease
Temporary living expenses

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13
Q

Keogh maximum contribution and deduction?

A

Both limited to the lesser of 50,000 or

  1. 20% of SE income before Keogh deduction - for deduction
  2. 100% of net earnings (deduction amount 4X) - for contribution
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14
Q

How do you report attorney fees paid in discrimination cases?

A

Adjustment to AGI, limited to the amount claimed as income from judgement

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15
Q

Dependent’s standard deduction?

A

The GREATER of:
950
OR earned income + 300 (not to exceed regular st.deduction)

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16
Q

Dependent for medical deduction purposes?

A

SNR/T
Support - over half by TP
North American citizen
Whole taxable year lived with TP or a relative closer than a cousin/foster parent

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17
Q

Which insurance premiums do and do NOT qualify as deductible?

A

Accident insurance is OK

Life or against loss of earnings insurance - NOT OK

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18
Q

What part of real estate taxes is non deductible?

A

Street
Sewer
Sidewalk assessment taxes

I.e. anything outside your house except school

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19
Q

How are mortgage points deducted?

A

acquisition of indebtedness - deductible immediately

Refinancing - amortize over the loan period

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20
Q

What is investment income for investment interest deduction purposes?

A

Interest and dividends
Rents
Royalties in excess of expenses
Net STCG and LTCG - if elected to be taxed at marginal tax rate

Dividends automatically become ordinary when purchased with borrowed funds and are used in calculating the limitation for IIE

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21
Q

How is prepaid interest accounted for payee and payer?

A

Payer, borrower - spread over the life of the loan

Payee, lender - include all when received

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22
Q

Rules for deductibility of appreciated property?

A

At FMV if held over a year
At basis if held less

Limited to 30% of AGI

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23
Q

How is a contribution of services deducted?

A

Disallowed - value of time

Allowed - out-of-pocket expenses including mileage at 14 cents

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24
Foreign exchange full-time student deduction (Kristiane deduction)?
Full-time K-12 or under $50 per each full month (15+ days)
25
Charitable contribution carryover timeframe?
5 year carryforward
26
What is the base for calculating casualty loss?
The lesser of adjusted basis or decrease in FMV
27
When a casualty loss of personal property canNOT be deducted?
If you have insurance and you didn't notify the insurer.
28
Casualty loss is not allowed for?
Lost Misplaced Broken! property
29
When educational expenses are deductible as a miscellaneous deduction?
- maintain or improve skills (CPE credits) - keep the job (employer requirement) But not to meet minimum requirements!
30
Business use of home deductibility requirements (3)?
Used for work exclusively, on a regular basis and for the convenience of the employer
31
Which job hunting expenses are not deductible?
Finding a first job or an entirely new job
32
Tax prep fee deductibility limitation?
Non deductible if incident to divorce UNLESS related to tax planning or pursuing taxable income
33
When does a hobby become an activity for-profit?
Shows profits in any 3 out of 5 years preceding the tax year Horses - 2 out of 7
34
Miscellaneous deductions NOT subject to 2% AGI?
Gambling losses | Federal estate tax paid on income in respect of a decedent
35
Individual tax rates?
10, 15, 25, 28, 33, 35
36
Refundable credits?
``` Child tax credit Earned income credit Long-term unused minimum tax credit AOC Adoption credit ```
37
How is child and dependent care tax credit calculated?
20-35% of qualified expenditures, BOTH parents are working Maximum amount of qualified EXPENDITURES: 3,000 - one child 6,000 - two or more children
38
Child and dependent care amount limitation?
Lesser of: Earned income of spouse with lesser amount Actual expenditure Maximum amount (3,000/6,000)
39
Child and dependent care credit - definition of child and dependent
Qualifying child under 13!!! Any disabled person - if more than half of the support provided by TP (doesn't apply to disabled spouse) Disabled = unable to take care of himself
40
Elderly and/or permanently disabled credit eligibility?
65 or older Or retired because disabled 15% of eligible income
41
How is elderly and disabled credit calculated?
Base amount (5000 or 7500) LESS: social security LESS: one half of excess of AGI over 2nd base (7500 or 10000) 15% of balance is your credit
42
Describe AOC
100% of the first 2,000 25% of the next 2,000 40% refundable (1,000 max) Not available if the student is convicted of a drug offence
43
Describe lifetime learning credit
``` 20% of qualified expenses up to 10,000 ONE credit per family Unlimited years, but books not eligible MBA or CPE ok phase-out higher than for AOC ```
44
Describe adoption credit amount limitation and expense eligibility
12,650 per child, sick OR special needs Medical expenses NOT OK - go itemize Not for adopting spouse's child or surrogate parenting
45
Describe retirement savings contribution plan eligibility (3)
At least 18 by year end Not a full-time student Not a dependent Maximum amount of contribution 2,000 Maximum credit - 1,000 (i.e. 50% before phase out)
46
Describe foreign tax credit calculation and carryovers
Lesser of: 1. Foreign taxes paid 2. Foreign income/ Total income * US tax Carryback 1, carryforward 10
47
General business credit limitation?
Take 100% on the first 25,000 of tax 75% on amounts over 25,000 of tax
48
Describe Work Opportunity Credit amount and eligible groups
40% of first 6,000 of first year's wages 40% of first 3,000 of certain summer youth Handicapped 18-24 year olds from poor families Vietnam veterans from poor areas Food stamps people
49
Describe child tax credit amount and eligibility
1,000 CARS except must be under 17!!! May be used against FICA and MediCare taxes paid if a very low income family
50
Earned income credit age limitation and refundability? | How does having a qualifying child affect EIC?
26-64, both spouses if there are no qualifying children QC increase the percentage of earned income credit
51
What are EIC percentages?
7.65 up to 45% Cannot take if you have "disqualified income" over 3,100 Passive, portfolio, capital
52
Small employer startup costs credit amount
500 maximum 100 or less employees
53
How is AMT applied?
26% on the first 175,000 | 28% on the rest
54
Name AMT adjustments
``` P - passive activity losses A - accelerated depreciation post-1986 N - NOL I - installment contract of a dealer C - contract percentage of completion T - tax deductions I - interest on home equity loans M - medical, floor raised to 10% M - miscellaneous E - exemptions and/or standard deductions ```
55
AMT exemption formula?
33,750 - 0.25(AMTI - 112,500) single | 45,000 - 0.25(AMTI - 150,000) MFJ
56
AMT tax preference items?
Always add-backs: P - pre-1987 accelerated depreciation P - private activity bond interest P - percentage depletion in excess of basis
57
How is credit for elderly and permanently disabled calculated?
5,000 or 7,500 (MFJ and both qualify) Less: excludable social security Less: 50% of the excess of taxable income over 7,500/10,000 And then 15% of the balance is the credit
58
What is the statute of limitations for refund claims?
The later of: Regular statute Or 2! Year from the time tax was paid if not with the return
59
What is the statute of limitations to claim a refund related to bad debt or worthless securities?
7 years from the later of: Due date Filing date
60
When are estimates required?
Tax owed is 1,000 or more | W-2 with holdings are less than 90% of current year or 100% of last year's tax (110% if AGI is over 150K)
61
How does a nonaccountable reimbursement plan work?
No proof of expenses All allowance is included in gross income Any expenses taken against gross income (mileage, reimbursements etc) are itemized deductions subject to 2%

REGULATION (4 decks)

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