AGI

Question 1

What schedule is used for Rent, Royalty and Flow-through entities (S Corps and partnerships)

Answer 1

Schedule E

Question 2

What schedule is used for itemized deductions

Answer 2

Schedule A

Question 3

What Schedule is for activity from sole proprietorships

Answer 3

Schedule C

Question 4

What Schedule is for Farm income and expenses

Answer 4

Schedule F

Question 5

When a residence is used for both personal and rental use, how many days must it be rented to have rental income included and expenses deducted

Answer 5

> = 14 days a year

If personal use is more than 14 days a year or 10% of rental days, then expenses are divided between rental and owner use and expense deduction is limited to rental income

Question 6

If stock held for < 1 year (ordinary income property) is donated to a qualified charity, is FMV or ajd. basis used when determining amount of deduction?

Answer 6

The lower of adjusted basis or FMV is used

Question 7

What are the limitations to the QBI deduction

Answer 7

1. unlimited QBI deduction = 20% of QBI if TI < section 199A threshold. IF TI is between threshold and upper limit:
2. Wage limitation = wages x 50%
3. Wage/property limitation = wages x25% + property x 2.5%
4. take the greater of 2 or 3 as limitation
5. take 1 - 4
6. Calculate phaseout % (TI - Section 199A threshold)/ 50,000
7. phase out amount = 5 x 6
8. QBI deduction = 1-7

IF TI is > than upper limit - > Full wage or property limitation (step 4)

Question 8

Are points paid to refinance a loan on a primary residence deductible as an itemized deduction?

Answer 8

Yes, but it is considered prepaid interest and must be amortized over the life of the loan.

Ex 1,500 for 15 yr loan = 1500/15 =$100 deductible interest that year

Question 9

When are points paid for the purchase or improvement of a principal residence deductible?

Answer 9

In the year of payment. Deductible as itemized deduction on schedule A

Question 10

What types of expenses can be itemized? (COmMITT)

Answer 10

Charitable contributions
Other Miscellaneous (gambling, estate taxes IRD)
Medical/dental
Interest on qualified home mortgage and investments
Taxes (SALT or general sales, property)
Theft and certain casualty losses (federally declared disaster area)

Question 11

What are the charitable contribution limits for cash and noncash donations?

Answer 11

50% of AGI limit for noncash
60% of AGI limit for cash

Question 11

What is the active participation exception for rental real estate?

Answer 11

Rental real estate losses are deductible to the extent of passive income unless the active participation exception applies

up to 25k of losses after offsetting passive income are deductible against nonpassive income. MAGI threshold = 100k and is eliminated at 150k.

(Excess MAGI over 100k - 100k) x 50%= phase out
25,000 - phaseout = deductible loss

Total passive rental loss - deductible loss = suspended loss (carried forward)

Question 12

The QBI deduction is the lesser of:

Answer 12

Combined deductible amounts or 20% x (TI - Net capital gain)

Question 13

What is the charitable contribution limit for long-term capital gain property?

Answer 13

long-term capital gain property donations are limited to 30% of AGI

Question 14

What factors are involved in determining the basis of the charitable gift for noncash property?

Answer 14

If the FMV < Adj Basis -> use FMV

If FMV > Adj Basis and property would create ordinary income if sold -> use lesser of adj. basis or FMV

If FMV > Adj Basis and property would NOT create ordinary income if sold ->

Question 15

When do accrual basis taxpayers recognize revenue

Answer 15

at the earlier of when earned or collected

Ex. advance payments are revenue in year received. Rent, lease cancellation payments, and insurance premiums excluded, they are recognized in year received

Question 16

Determine Net Investment Income (NII)

Answer 16

Investment income - Deductible investment expenses other than interest

investment income = taxable income from property held for investment. Does NOT include tax-exempt income

Question 17

What is one type of income cash-basis taxpayers do not recognize as income when received?

Answer 17

Prepaid interest - it must be amortized over the periods covered by the prepayment

Question 18

What type of personal taxes are deductible?

Answer 18

SALT property
SALT real estate property
Foreign income taxes
Either but not both SALT:
Income taxes OR
Sales Taxes

Question 19

What is RESPA?

Answer 19

Real Estate Settlement Procedures Act
Regulates mortgage lenders
Requires full disclosure to home buyers regarding the procedures and costs involved in the settlement of mortgage loans

Question 20

Student loan interest deduction limitations are:

Answer 20

$2,500 annual max for AGI deduction on qualified student loan
Cost of tuition, fees, room, board, books, supplies, equipment and transportation qualify
Student must be enrolled at least half-time and working toward a degree
Subject to an inflation adjusted phaseout based on MAGI

Question 21

Deductions FOR AGI

Answer 21

I EMBRACED, Health, and Farmers

I - Interest in Student loans

E - Self-employment tax (50%)

M - Moving expenses (military only)

B - Business expenses (Schedule C)

R - Rental, Royalty & flow-through entities (Schedule E)

A - Alimony paid (divorce prior to 2019)

C - Contributions to most retirement plans

E - Education Savings account contributions

D - Jury duty

Health - HSA contributions

Farm - Farming income (Schedule F)

Penalty on early withdrawal of savings

Question 22

Deductions FROM AGI

Answer 22

Standard or itemized deductions

Qualified business income deduction

Question 23

What is the Student Loan Interest deduction limitations

Answer 23

The lesser of Student loan interest paid or $2,500

Subject to phase out from AGI
(AGI-bottom phaseout threshold / phase out range) x 2500

$2,500 - phased out amount = deduction limit

Question 24

Can a MFS taxpayer claim a student loan interest deduction?

Answer 24

No. Also taxpayer can not be claimed as a dependent on anyone else's return

Question 25

Name examples of business expenses deductible on schedule C FOR AGI

Answer 25

All costs of running a business All taxes paid by the business except federal income tax Bad debts recognized under direct write-off method Expenses under UNICAP Gifts to customers up to $25 per recipient per year 50% meals (Entertainment expenses no longer deductible after 2017) 100% of business travel

Question 26

What is the deduction limit if a charity does not use the contributed property for its tax exempt purpose?

Answer 26

Tax deduction is limited to adjusted basis Only if the deduction is > $5000

Question 27

What are Other Misc Expenses in regards to itemized deductions FROM AGI

Answer 27

Gabling losses - deductible to extent of winnings, cannot be carried forward Estate taxes - on income in respect of a decedent

Question 28

Can a taxpayer deduct medical costs paid for a non dependent?

Answer 28

Yes if the taxpayer provides over 50% of support

Question 29

Mortgage Interest expense is deductible if

Answer 29

loan is 750,000 or less, used to buy, build, or substantially improve the home that secures the loan, includes loans that replace previous acquisition indebtedness, may be claimed on both a primary and secondary residence, includes points paid to acquire (deducted immediately) and to refinance (amortize)

Question 30

Can you deduct interest from a home equity loan?

Answer 30

Yes, if proceeds are used to make improvements in the home. Not if used for paying of CC or other personal expenses.