Tax Planning

Question 1

Section 1231

Answer 1

Section 1231 specifies that the net loss on the sale of all such property is treated as an ordinary loss

Question 2

Donor/Donee basis for gain/loss

Answer 2

The donee’s gain basis for the property received is the same as that of the donor.

The donee’s loss basis is the lower of the donor’s adjusted basis or fair market value on the date of the gift.

Basis will be increased for the portion of the gift tax that is attributable to the donor’s unrealized appreciation. In this example, there wasn’t any unrealized appreciation so there wasn’t an increase in basis.

Question 3

Amount of education loan interest deduction

Answer 3

Only the student loan interest up to $2,500/yr is a deduction for AGI

Question 4

Taxable income =

Answer 4

taxable income = salary - standard deduction ($15,300)

Roth contributions are non-deductible

Question 5

Major Itemized Deductions

Answer 5

CMIT

• Casualty/Charity
• Medical
• Interest
• Taxes

Question 6

Kiddie Tax requirements

Answer 6

• not attained 19 before EOY,
• or full-time student not attained age 24 before EOY

Question 7

Gross income =

Answer 7

Gross Income = unearned income (int/div) + earned income (W2)

Question 7

Kiddie Tax limits/threshold

Answer 7

• unearned income above $2,700 is taxed as parent’s marginal tax rate

Question 8

Itemized Deductions are subject to

Answer 8

7.5% AGI floor

Question 9

Kiddie Tax (definition)

Answer 9

Taxation of dependent child’s unearned income

Question 10

Unearned income

Answer 10

interests and dividends

Question 11

Child’s standard deduction

Answer 11

greater of
* $1350, or
* earned income + $450 ($15k limit)

Question 12

Unearned income of the child above X is taxed at X

Answer 12

**Unearned income of the child above $2700 is taxed at parents marginal tax rate

Question 13

Medicare net investment income tax

Answer 13

3.8% extra net investment income tax (may apply)

does it come into play?
over $250k - jt/survivng spouse
over $150k - MFS
over $200k - everyone else

Question 14

Kiddie Tax steps

Answer 14

1. Subtract $1350 (SD)
2. Subtract $1350 (taxed at CR of 10%)
3. remainder “net unearned income” (taxed at PR)

total unearned income
-$1350 (child CD)
-$1350 (taxed at CR of 10%)
=net unearned income (taxed at PR)

Question 15

Child Care Credit

Answer 15

$3k/for 1 child
$6k/for 2 or more

Question 16

Child Tax Credit

Answer 16

$2,000/per qualifying child per year

refundable up to $1,700/per child