R1

Question 1

Due date for return

Answer 1

April 15

*automatic 6 month extension for filing only

Question 2

Qualifying Widow(er) (Surviving Spouse) with dependent child requirements

Answer 2

1. have a qualifying dependent child
2. child must live for the WHOLE year
3. pay for over 50% of the household costs

Question 3

Head of Household

Answer 3

• individual must live for over HALF of the year and falls into these categories:
  1. single mother
  2. nursing home for parents (if they don’t live with you, you must pay costs for entire year of residence)
  3. dependent relatives (no freeloading friends)

Question 4

Spouse as Personal Exemption on a Separate Return

Answer 4

1. spouse has no income

2. spouse cannot be claimed by another taxpayer

Question 5

Phase-Out of Personal and Dependency Exemptions

Answer 5

2% for every $2,500 increment over limit

Question 6

Qualifying Child Requirements

Answer 6

C lose relative
A ge (under 19 or 24 if full-time college student) (5 different months must be spend at college)
R esidency (primary residence) 
E liminate Gross Income Test
S upport test changes

Question 7

Qualifying Relative Requirements

Answer 7

S upport test ( > 50%)
U nder exemption amount ($3,950) (TAXABLE income)
P recludes filing joint unless filing for a refund
O nly citizends of US or residents of US, Mexico, or Canada
R elative
T axpayer that lived with the individual for the entire year

Question 8

General Rule - Custodial Parents

Answer 8

parent who has custody of the child for the greater part of the year takes the exemption

Question 9

Multiple Support Agreements

Answer 9

1. aggregate must be over 50%

2. claiming individual must contribute at least 10%

Question 10

Four types of income

Answer 10

1. Ordinary
2. Portfolio
3. Passive
4. Capital

Question 11

Partially Taxable Fringe Benefits - Life Insurance Premiums

Answer 11

*premiums above the first $50,000 of coverage are taxable income to the recipient

Question 12

Nontaxable Fringe Benefits

Answer 12

1. medical insurance
2. life insurance proceeds
3. de minimis fringe benefits
4. meals and lodging
5. employer payment of employee’s education expenses
6. qualified tuition reductions
7. qualified pension, profit-sharing, and stock bonus plans (benefits are taxable when distributed)
8. flexible spending arrangements
   * *up to $2,500 and expires 2 1/2 months after year end

Question 13

Taxable Interest Income

Answer 13

1. federal, industrial, and corporate bonds
2. premiums received for opening a savings account
3. interest paid for late payment of a tax return

Question 14

Tax Exempt Interest Income

Answer 14

1. state/local bond interest

2. Series EE Bonds (must be used for higher education and taxpayer must have ownership)

Question 15

Kiddie Tax

Answer 15

First $1,000 excluded
Second $1,000 taxed at child’s rate
Thereafter at parent’s rate

Question 16

Is forfeited interest a deduction or an adjustment?

Answer 16

adjustment

Question 17

Tax-Free Distributions

Answer 17

1. stock dividends
2. stock splits
3. return of capital
4. life insurance dividends

Question 18

Requirement to include state refund from prior year in income

Answer 18

1. itemized last year
   AND
2. received a refund

*amount is the lesser of the refund or the amount by which the itemized deduction exceeded the standard deduction

Question 19

Is alimony income for the receiving spouse?

Answer 19

Yes

Question 20

Is alimony a deduction or an adjustment for the paying spouse?

Answer 20

adjustment

Question 21

Is child support included in income?

Answer 21

No

*look for what percentage is excluded past the age of 18

Question 22

How are property settlements treated persuant to a divorce?

Answer 22

Nontaxable

Question 23

For Schedule C, which method must be used for inventory?

Answer 23

accrual method

Question 24

Nondeductible expenses for Schedule C

Answer 24

• federal income tax
• salary paid to you
• personal portion of other expenses
• bad debt for cash basis
• charitable contributions

Question 25

Two taxes on self-employment income

Answer 25

1. income tax | 2. Federal self-employment tax

Question 26

Net Operating Loss for Individuals

Answer 26

*can offset any other type of income Carryback 2 Carryforward 20

Question 27

Uniform Capitalization Rules

Answer 27

Capitalized * direct materials * direct labor * manufacturing overhead Period Expense * R&D * selling * general * administrative

Question 28

Long-Term Contracts for Schedule C

Answer 28

* requires use of % of completion unless: * *small contractors * *home construction contractors * *professional services * *services performed under warranty and maintenance

Question 29

Cost-to-Cost Method

Answer 29

costs incurred in period / total expected costs

Question 30

Gross Income Recognition Method for LT Contracts

Answer 30

Cost-to-Cost % times contract price (cumulative)

Question 31

Farming Income

Answer 31

Schedule F Cash Basis (most) **inventories of produce, livestock, are not considered Accrual Basis **must be used and maintained

Question 32

IRA Income

Answer 32

*cannot be withdrawn until the individual reaches the age of 59 1/2

Question 33

IRA Income Penalty

Answer 33

10% for early withdrawal

Question 34

IRA Income Penalty Exclusions

Answer 34

``` H ome buyer (1st time) I nsurance (medical) M edical expenses D isability E ducation a nd D eath ```

Question 35

Annuities should be treated like _____

Answer 35

Depreciation (i.e. portion is recovered principle)

Question 36

Basic Formula for Net Rental Income/Loss

Answer 36

Gross Rental Income Prepaid Rental Income Rent Cancellation Payment Improvement In-Lieu-of Rent

Question 37

Rules for Vacation Home

Answer 37

Rented less than 15 days **rental income is excluded Rented more than 15 days **pro rate expenses

Question 38

Rental Use Expenses are limited by

Answer 38

Rental income; cannot be a rental loss

Question 39

Passive Activity Losses

Answer 39

* net passive activity loss cannot be deducted * carry forward without limit * suspended losses are used to offset passive income in future years * become fully tax deductible in the year the property is sold

Question 40

Mom and Pop Exclusion

Answer 40

Rental Activity Income with Active Participation * $25,000 can be deducted * phased out by 50% of the excess over $100,000

Question 41

Rental Income/Loss is what type of income

Answer 41

Passive

Question 42

Is rental activity for a real estate professional passive or active?

Answer 42

Active so long as: * 50% of services are performed in real estate * performs more than 750 hours for real property services

Question 43

Is unemployment compensation taxable?

Answer 43

Yes

Question 44

Social Security Income (general income exclusion rules)

Answer 44

Low Income = 0% | High Income = 85% (15% was deducted out so this amount should be excludable)

Question 45

Taxable Miscellaneous Income

Answer 45

Prizes and awards Gambling Winnings and Losses Business Recoveries Punitive Damages

Question 46

Partially Taxable Miscellaneous Items

Answer 46

1. Scholarships for Degree-Seeking Student * *excludable up to amount spent on tuition, fees, books, and supplies * *no services can be performed

Question 47

Nontaxable Miscellaneous Items

Answer 47

Life Insurance Proceeds (interest income is taxable though) Gifts and Inheritanes Medicare Benefits Workers compensation Personal (Physical) Injury or Illness Award Accident Insurance

Question 48

unemployment benefits vs. workers compensation

Answer 48

unemployment = taxable | worker's compensation = nontaxable

Question 49

Are punitive damages included in gross income?

Answer 49

Yes

Question 50

Employee Stock Option Types

Answer 50

Qualified Options **Incentive Stock Option (ISO) **Employee Stock Ownership Plan (ESOP) Nonqualified

Question 51

Taxation for Nonqualified Employee Stock Options

Answer 51

With Ascertainable Value = taxed at grant **ordinary income for FV of option **basis = taxable income recognized + exercise price Without Ascertainable Value = taxed at exercise **ordinary income for difference between FV and option price **basis = exercise price + ordinary income

Question 52

Employer taxation for nonqualified employee stock options

Answer 52

deductible in the year in which the employee reports income

Question 53

Taxation for Qualified Employee Stock Options

Answer 53

ISO * taxed when ultimately sold * exercise price may not be less than the FMV of the stock * employer gets no deduction * basis = exercise price ESOP * taxed when ultimately sold * cannot be sold to someone owning more than 5% combined voting power * employer gets no deduction * basis = exercise price * exception; income if option price is less than the FMV of the stock on grant date

Question 54

Employer Payment of Employee's Educational Expenses

Answer 54

*limited to $5,250 and is nontaxable up to that amount

Question 55

Conditions needed to exclude prize money from gross income

Answer 55

1. did not enter into the competition | 2. all proceeds go to charity

Question 56

Qualified Dividend Holding Period Requirement

Answer 56

60 days