When to file?Due date April 15

Can extend 6 months to October 15

Still must make estimated payment by April 15

Filing Status optionsSingle

Married Filing Jointly

Married Filing Separately

Qualifying Widow(er) (Surviving Spouse)

Head of Household

Single Filing RequirementsSingle or legally separated as of 12/31

Status as of 12/31 decides status

Married Filing Jointly RequirementsIf married during year can file MFJ,

If divorced during year CANNOT file MFJ

(status at 12/31 decides)

If one spouse dies during year, a joint return is allowed

Qualifying Widow(er) (Surviving Spouse) RequirementsAvailable 2 years subsequent to spouse death provided a dependent child is involved, and no remarriage

Must maintain household for whole taxable year was principal

residence of child (inc. step; blood or adoption)

Widower = Whole Year

Head of Household Filing Requirements1) Individual is not married, is legally separated, or lived apart for >6 months at end of year

2) Not a Qualifying Widow(er)

3) Not a Nonresident Alien

4) Maintains a residence for > half the year, that is principal residence of

a) Dependent son or daughter (Divorced Mom)

b) Father or Mother (not required to live with TP) (Nursing Home)

c) Dependent Relative (must live with TP) (Not Freeloading Friends)

Head of Household = Half Year

Personal ExemptionsIf you are claimed on another persons return, not allowed the personal exemption

Folks use it, you lose it

Married Taxpayers (MFJ and MFS)Each spouse gets an exemption in MFJ

If MFS, to get both on one, spouse must meet two tests:

1) spouse has no gross income

2) spouse not claimed by another taxpayer

Birth or death during the year exemption?If someone dies or is born, get the exemption for the whole year, no proration

Phaseout of ExemptionsReduces Exemptions by 2% for every $2,500 or portion of for GI exceeding

MFJ = 305,050

HoH= 276,650

Single = 254,200

MFS= 152,525

MFJ makes 317,050: 317,050305,050=12/2.5=4.8 round to 5 (always up). 5x2%=10%, 100%10%=90% of exemptions

Dependency ExemptionsPeople not Pets

CARES = Qualifying Child

SUPORT = Qualifying Relative

CARES Method for Qualifying ChildClose Relative

Age Limit = 19 or 24 (college)

Residency = must have same principal residence > half year

Eliminate Gross income test = does not apply to a child

Support Test Changes = can not contribute more than half their own support.

SUPORT Method for Qualifying RelativeSupport Test = supply more than 50% of the support for year

Under Exemptions amt of Taxable GI = less than $3,950 taxable, not (Soc. Sec, Tax Exempt int, tax exempt scholarship)

Precludes Dependent filing Joint Return

Only citizens of USA, Mexico, or Canada

Relative

Taxpayer lives with individual for whole year

Gross IncomeEvent

Realization vs RecognitionRealized Real World

Recognition Record

4 types of income characterization1. Ordinary

2. Portfolio

3. Passive (Rental Activity)

4. Capital

8 items included in Salaries and Wages1. Money

2. Property (FMV)

3. Cancellation of Debt

4. Bargain Purchases

5. Guaranteed Payments to a Partner

6. Taxable Fringe Benefits

7. Partially Taxable Fringe Benefits (Portion of Life Ins. Premiums above $50K in coverage)

8. Nontaxable Fringe Benefits

Nontaxable Fringe Benefits IncludeLife Insurance Proceeds, Accident, Medical, and Health Insurance (employer paid), De Minimis Fringe Benefits, Meals and Lodging, Employer Payment of Employee's Education Expenses, Qualified Tuition Reductions, Qualified Employee Discounts, Qualified Pension, Profit Sharing, and stock bonus plans, and Flexible spending arrangements

Qualified Pension, Profit Sharing, and Stock Bonus Plan PartsPayments made by employer (nontaxable)

Benefits Received (taxable)

Interest Income (4 types)1. Taxable Int. Income (GR All Interest income is taxable unless specifically excluded)

2. Tax Exempt interest income

3. Unearned Income of a Child under 18 (kiddie tax)

4. Forfeited Interest Adjustment

Taxable interest incomeFederal, industrial development, and corporate bonds,

Premiums for opening a savings account, Interest paid by fed, state, or local gov't for late payment of a refund

Tax Exempt interestState and local government bonds/obligations,

Bonds of a US possession,

Series EE Bonds (Educational Expenses),

VA Insurance

Unearned Income of a child under 18Kiddie Tax

under 18 (or 24 if parent provides > half support)

taxed at parents higher rate

01000

Dividend income (sources and taxability)E&P/Current=Distribute at CY End

E&P/Accumulated=Distribution Date

Return of Capital=No E&P

Capital Gain Distribution=No E&P and No Basis

Three categories of Dividend income1. Taxable Dividends

2. Tax Free Distributions

3. Capital Gain distributions

Taxable Dividends (Amount and Rates)Cash=Amount Received

Property=FMV

Qualified Dividend Holding Period: must be held more than 60 days during the 120 period that begins 60 days before dividend date

Tax Rates: 0% (low income 10 or 15 ordinary), 15% (most), 20% (high 39.6 ordinary bracket)

Tax Free Distributions (4 types)Return of Capital

Stock Split

Stock Dividend (unless option for cash or property)

Life Insurance Dividend

State and Local Tax Refunds (taxable vs nontaxable)If itemized prior year=state and local refund is taxable

If standard deduction (1040EZ) in prior year=nontaxable state and local refund

Payments from a divorce (spouse receiving)Alimony is Income, and must be:

legally required

in cash or equivalent (pay cc bills or college fees)

must end at death

Child Support is:

Nontaxable and taken first if Deadbeat dad"

Property Settlements are:

nontaxable"

Business income or loss (location/Formula)On the Schedule C

Gross Business Income

Business Expenses

=Profit or Loss

Expenses Included in Schedule CCOGS, Salaries Paid to Others (not yourself), State and Local Business Taxes Paid,

Office Expenses, Actual Auto expenses,

Business Meals and Entertainment (50%), Deprec. of business assets,

Interest on business loans (incurred and paid"), Employee Benefits,

Legal and prof. fees,

debts under accrual"

Nondeductible on Schedule CSalaries to the sole proprietor,

federal income tax,

personal portion of: auto, travel, vacation, personal meals, interest expense, state and local tax expense,

health insurance of sole proprietor,

charitable contributions

Two taxes on Net Business Income (Schedule C)

What about loss?Income Tax, and

Federal SelfEmployment Tax

Loss has 2 year carryback and 20 year carry forward

Uniform Capitalization Rules

1) Types of Property?

2) Capitalized Vs. Period Expense3 Types of Property:

1) Produced for Use (Tangible)

2) Produced for Sale (Tangible)

3) Acquired for Resale (Tangible) preceding 3 years average gross receipts less than 10 million

Capitalize: Direct Materials, Direct Labor, OH

Expense: Selling, General, and Admin, R&D

IRA Income TaxationMust be 59.5 years old to withdraw (if not 10% penalty Tax, unless exception)

Traditional Deductible IRA Distributions are ordinary income

Nondeductible (Traditional, Roth)

Traditional Principal (non tax), accum earnings (taxed)

Roth nothing taxed

IRA Income Penalty ExceptionsHIMDEAD

Home Buyer (1st time, up to 10K)

Insurance (medical

Medical Expenses (excess of 10% AGI)

Disability

Education

And

Death

Rental of Vacation HomeIf rented less than 15 days: rental income is excluded

If rented 15 days or more, & used for personal for greater of 14 days or 10% of rental days: expenses are prorated and deductible to the extent of income

Taxable Miscellaneous Income (4 types)1) Prizes and Awards FMV is included unless, won without entering and given to charity

2) Gambling: Winning included in GI, Losses only to extent of winnings

3) Business Recoveries

4) Punitive Damages

Partially Taxable Miscellaneous Items (3 items)1) Degree seeking Student: Scholarships excludable unless used for room and board or service required

2) Scholarships rewarded to nondegree seeking candidates

3) Tuition Reduction

Nontaxable Miscellaneous Items (7)1) Life Insurance Proceeds

2) Gifts and Inheritance

3) Medicare Benefits

4) Workers Compensation (Unemployment Comp is taxable)

5) Personal Injury or Illness Award

6) Accident Insurance

7) Foreign Earned Income Exclusion

When is a Nonqualified option taxed?At the grant date when there is a readily ascertainable value, otherwise, taxed when exercised

Generally, a taxpayer must file a return if his or her income is equal to or greater than:the personal exemption + the regular standard deduction + additional standard deduction (for taxpayers age 65+ or blind) [except for married persons filling separately]

which individuals must file income tax returns even if their income is lower than the general rule" requirement?"1. net earnings from selfemployment are $400 or more

2. can be claimed as dependents on another taxpayer's return, have unearned income, and gross income of $1000(2014) or more

3. receive advanced payments of earned income credit

How can an individual receive an automatic six month extension to file?File Form 4868 by April 15

When do taxpayers who are out of the country file?Automatic twomonth extension just by including documentation, and can request the other extensions under the same rules as for other taxpayers.

in a _____ state, a husband and wife who elect to file using the married filing separately status must report their own income, exemptions, credits and deductions on their own individual income tax returns.separate property state

in a ____ state, most of the income, deductions, credits, etc., are split 50/50.community property state

what are the two requirements to have qualifying widower (surviving spouse)" status?"1. two years after spouse's death

2. principal residence for dependent child

what are the requirements for the principal residence for dependent child" requirement for surviving spouse status"the surviving spouse must maintain a household that, for the whole taxable year, was the principal place of abode of a son, stepson, daughter, or stepdaughter (whether by blood or adoption). The surviving spouse must also be entitled to a dependency exemption for such individual.

what are conditions to be considered a father or mother" under the head of household requirement?"not required to live with the taxpayer, provided the taxpayer maintains a home that was the principal residence of the parent for the entire year. maintaining a home means contributing over half the cost of upkeep. This means rent, mortgage interest, property taxes, insurance, utility charges, repairs, and food consumed in the home.

what are conditions to be considered a dependent relative" under the head of household requirement?"parents, grandparents, brothers, sisters, aunts, uncles, nephews, and nieces (step and inlaws included) qualify as relatives.

must live with taxpayer.

cousins, foster parents, and unrelated dependents do not qualify.

how can a married taxpayer filing separately claim his spouse's personal exemption?if the spouse has no gross income,

not claimed as a dependent of another taxpayer

if the parents of a child are able to claim the child but do not no one else may claim the child unless __________________that taxpayer's AGI is higher than the AGI of the highest parent

what type of relationships qualify under close relative" requirement of qualifying child status for dependency exemptions?"taxpayer's son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, or a descendent. adopted children and foster children too.

what is the age limit to be considered a qualifying child for dependency exemptions?younger than the taxpayer, under age 19 (or 24 in college), no limit to permanently disabled (school attendance at night does not qualify)

what are the residency and filing requirements to be considered a qualifying child for dependency exemptions?child must have the same principal place of abode as the taxpayer for more than one half of the tax year.

cannot file joint tax return for the year (unless filed only for a refund claim)

How much money can a child earn to be considered a qualifying child for dependency exemptions?any amount

what is the support test to be considered a qualifying child for dependency exemptions?child must not contribute more than onehalf of his support (doesn't need to be by parents though)

what is the support test to be considered a qualifying relative for dependency exemptions?the taxpayer must have supplied more than one half of the support. scholarships are not included. social security and state welfare payments are included to the extent that such amounts are actually expended for support purposes

how do multiple support agreements work for dependency exemptions?when two or more taxpayers contribute more than half support, the contributing taxpayers (who must be qualifying relatives or lived the entire year with), one gets it. contributor must have given more than 10% of support and meet other dependency tests.

what is the multiple support declaration that joint contributors are required to file?form 2120

a person may not be claimed as a dependent unless the dependent's gross income is _______less than the exemption amount ($3950 in 2014)

a taxpayer will lose the exemption for a married dependent who files a joint return unless __________the joint return is filed solely for a refund of all taxes paid or withheld for the taxable year

what are the citizen/residency requirements of qualifying relatives for dependency exemptions?only citizens of the u.s. or residents of the u.s., mexico, or canada.

how can kissing cousins or foster beer be counted as an exemption?if they live with the taxpayer the entire year.

how are children of divorced parents treated for exemption purposes?whoever has custody of the child for a greater period of time (financial support irrelevant). if same, parent with higher AGI.

what is form 8322written declaration that waives the right of a custodial parent to take the exemption for a child. must be attached to noncustodial parents return. custodial can revoke by giving one years notice and copy form 8322 claiming the revocation on their return.

what can you get for being 65+ or blind?additional standard deduction (not an additional exemption)

if an event is taxable, what is the income and basis?fair market value

_____ requires the accrual or receipt of cash, property, or services, or change in the form or the nature of the investment (a sale or exchange)realization

_____ means that the realized gain must be included on the tax returnrecognition

what are the four characterizations of incomeordinary, portfolio, passive, capital

what falls under ordinary income?salaries and wages, state and local tax refunds, alimony, IRA and pension income, self employment (schedule C) income, unemployment compensation, social security, prizes, the taxable portion of scholarships and fellowships, gambling income, and anything else.

what falls under portfolio income?income a taxpayer would earn on his portfolio of assets, such as interest and dividends.

what is passive income?activity in which taxpayer did not actively participate.

only ______ may offset passive income.passive losses

how are net passive losses treated?not deductible on tax returnsuspended and carried forward until passive income exists to offset it, unless an exception exists.

what can you get for being 65+ or blind?additional standard deduction (not an additional exemption)

if an event is taxable, what is the income and basis?fair market value

_____ requires the accrual or receipt of cash, property, or services, or change in the form or the nature of the investment (a sale or exchange)realization

_____ means that the realized gain must be included on the tax returnrecognition

what is passive income?activity in which taxpayer did not actively participate.

only ______ may offset passive income.passive losses

how are net passive losses treated?not deductible on tax returnsuspended and carried forward until passive income exists to offset it, unless an exception exists.

what are two types of passive income?rental income and royalties/ beneficiaries of trusts and investments in Partnerships, LLCs, and S Corporations

life insurance premiums: under ____ plans only, premiums above the first $______ of coverage are taxable income to the recipient and normally included in W2 wages.nondiscriminatory plans only; $50,000

the proceeds of a life insurance policy paid because of the death of the insured re general excluded from the gross income of the beneficiary....except:the interest income element on deferred payout arrangements if fully taxable.

For policies issued after 8/17/06, if a life insurance policy is companyowned (COLI), the beneficiary may exclude from gross income benefits received only up to _____the total amount of premiums and other amounts paid by the policy holderany excess would be taxable. [many exceptions apply family]

accident, medical and health insurance premium payments are ______ the employee's income when the employer paid the insurance premiumsexcludable from

accident, medical, and health insurance amounts paid to the employee under the policy are includable in income unless such amounts are:1. reimbursement for medical expenses actually incurred by the employee

2. compensation for the permanent loss or loss of use of a member or function of the body

what are de minimis fringe benefits?benefits that are so minimal that they are impractical to account for and may be excluded from income

what are examples of nontaxable fringe benefits?life insurance proceeds; accident, medical, and health insurance; de minimis fringe benefits; meals and lodging; employer payment of employee's educational expenses; qualified tuition reductions; qualified employee discounts; qualified pension, profitsharing and stock bonus plans; flexible spending arrangements stems; economic recovery payments

up to _____ may be excluded from gross income of payments made by employer on behalf of an employee's educational expenses. the exclusion applies to ____ level education.$5,250; both undergrad and grad level education

grad students may exclude tuition reduction only if___they are engaged in teaching or research activities and only if the tuition reduction is in addition to the pay for the teaching or research.

to be excludable, tuition reductions must be offered on a ____ basis.nondiscriminatory

to what extent are merchandise discounts excludable?limited to the employer's gross profit percentage. any excess must be reported as income.

to what extent are service discounts excludable?limited to 20% of the FMV of the services. any excess discount must be reported as income.

the value of employerprovided parking up to ___ (in 2014) per month may be excluded$250. available even if the parking benefit is taken by the employee in place of taxable cash compensation.

the value of employerprovided transit passes up to ___ (for 2014) per month may be excluded$130

generally, payments made by an employer to a qualified pension, profit sharing, or stock bonus plan are ____ to the employee at the time of contributionnot income

benefits received the amount that is exempt from tax (plus any income earned on such amount) is taxable to the employee when?in the year in which the amount is distributed or made available to the employee

what is a flexible spending arrangement stem (FSAS)plan that allows employees to receive a pretax reimbursement of certain (specified) incurred expenses

employees have the ability to elect to have part of their salary (generally up to $____ per year) deposited pretax into a flexible spending account. the employee has the option to use the deposited funds to pay for _____ and/or ____ costs and submits claims to the plan admin for reimbursement$2500;

qualified healthcare and/or qualified dependent care costs

flex spending arrangement funds not used within ____ after the yearend or not claimed within a period of time (usually ____ months) are forfeited.2.5 months; 6 months

are economic recovery payments taxable?not taxable.

what is the general rule for interest?all interest is taxable, unless specifically excluded

is interest income from federal bonds taxable?yes

is interest income from industrial development bonds taxable?yes

are premiums received for opening a savings account (prizes and awards) taxable? at what value?yes, at FMV

is interest income from part of the proceeds from an installment sale taxable?yes

is interest on state and local bonds/obligations taxable?no

are mutual fund dividends for funds invested in taxfree bonds taxable?no

is interest on the obligation of a possession of the US taxable?no

when is interest of series EE bonds tax exempt?1. used to pay for higher education (reduced by taxfree scholarships, of the taxpayer, spouse or dependents)

2. there is taxpayer or joint ownership (spouse)

3. the taxpayer is over age 24 when issued; and

4. the bonds are acquired after 1989

is there a phaseour for allowable tax exempt interest income from series EEyes

is interest on veterans administration insurance taxable?no

what are the four examples of tax exempt interest incomestate and local gov bonds/obligations; bonds of a u.s. possession; serious EE; veterans Administration insurance

what is the purpose of kiddie tax?prevent people from putting their unearned income to their kids to have a lower tax liability

how is the kiddie tax calculated?child's total unearned income (from dividends, interest, rents, royalties, etc.( and subtracting $2000 (the childs allowable 2014 standard deduction of $1000 (or investment expense, if greater) + $1000 (which is taxed at the child's rate))

when can parents elect to include on their own return the unearned income of the applicable child?provided the income is between $1000 and $10,000 and consists only of interest and dividends.

what happens with forfeited interest? (early withdrawal of savings)the bank credits the interest to the taxpayer's account and then, in a separate transaction, removes certain interest as a penalty. the interest received is taxable, but the amount forfeited is also deductible as an adjustment in the year the penalty is incurred. (theoretically netted, but not technically)

what are the four examples of distributions that are exempt from gross income?1. return of capital

2. stock split

3. stock dividend (unless cash or other property option/taxable FMV)

4. life insurance dividend

how to account for a stock dividend of the same stock.original basis is divided by total shares

how to account for a stock dividend of a different stock?original basis is allocated based on the relative FMV of the different stock.

how are capital gain distributions treated?distributions by a corp that has no e&p, and for which the shareholder has recovered his entire basis, are treated as taxable gross income

the receipt of a state or local income tax refund in a subsequent year is not taxable if _______.the taxes paid did not result in a tax benefit in the prior year (itemize or standard deduction)

payments for the support of a spouse are ____ to the spouse receiving the payments are are ______________ by the contributing spouseincome; deductible to arrive at agi

is child support taxable?no

if the divorce settlement provides for a lumpsum payment or property settlement by a spouse, that spouses gets ____ for payments made, and the payments are _____ of the spouse receiving the paymentno deduction; not includible in the gross income

for business income, must use ____ method for inventoryaccrual

types of business expenses1. COGS

2. salaries and commissions (paid to others)

3. state and local bus tax paid

4. office expenses

5. actual auto expenses, or standard mileage rate

6. business meal & entertainment at 50%

7. depreciation of business assets

8. interest expense on business loans (when incurred and paid)

9. employee benefits

10. legal and professional services

11. bad debts (accrual tax payer only)

which salaries and commissions are considered business expenses?ones paid to others, not to yourself

when can business meal and entertainment expenses be 100% deductible?when all proceeds go to benefit a charity

interest expense paid in advance by a cash basis taxpayer cannot be deducted until ________the tax year/period to which the interest relates

what bad debt write off method is used for tax purposes?direct write off method, rather than allowance method

what are nondeductible expenses for schedule c?1. salaries paid to the sole proprietor

2. federal income tax

3. personal portions of stuff

4. bad debt expense of a cash basis taxpayer (who never reported the income)

5. charitable contributions

where are charitable contributions reported?itemized deduction on schedule A

what are the two taxes on net business income?income tax and fed selfempoyment (S/E) ax

an adjustment to income is allowed for _______ of S/E tax (medicare plus social security) paidonehalf (which is 7.65% of up to 115,500 of selfemplyment income in 2014 plus 1.45% of self employment income thereafter)

all self employment is subject to the ______ tax, but only up to $115,500 in 2014 is subject to the ______ tax2.9% medicare tax, 12.4% social security tax; Total 15.3%

how is a net taxable business loss treated?a business with a loss may deduct the loss against other sources of income. when the loss exceeds these amounts, the excess net operation loss is permitted as a carryover

2 year carryback, 20 year carryforward

unless an exemption exists for a taxpayer or a contract, longterm contracts must be accounted for using the ____ method to determine taxable income for a particular contractpercentageofcompletion

which contracts are exempt from the longterm requirement that they use percentageofcompletion?1. small contractors (no more than 2 yrs)

2. home construction contractors

3. contract that includes land and where less than 10% of the total contract costs relates to the actual construction of property on the land

4. services performed by architects, engineers, etc (contracted to perform services but are not generally responsible for the final product under contract)

5. services performed under warranty and maintenance agreements related to the longterm contract

unless an exemption exists for a taxpayer or a contract, those involved in longterm contracts must use _______ to account for their longterm projects in construction.cost allocation rules (essentially the Uniform Capitalization Rules)

which contracts are exempt from the cost allocation rules required for tax for longterm construction contracts?small contractor and home construction.

Small contractor and home construction contractors are required to allocate _______ related to the contract to the costs of the projectproduction period interest

home construction projects that are not also small constructions projects must use ______uniform capitalization rules

in cost allocation rules for longterm construction contracts, interest for the production period need not be capitalized if_______________the total cost of the project is $1 mil or less and the project is estimated to take less than 12 months to complete

for cash basis taxpayers, the starting date of production is generally the date on which the contractor ____incurs costs (other than the startup engineering, design, etc. costs that are excluded from cost allocation) under the contract.

for accrual basis taxpayers the starting date is _________the later of the date for cash basis taxpayers or the date the taxpayer has incurred at least 5% of the total costs initially estimated under the contract

the end date of the production period is generally the date on which _____the work under the contract is complete (per contract provisions) or on the date the taxpayer has incurred at least 95% of the total costs expected under the contract

what is the costtocost method of calculating the percentageofcompletion?ratio of the total cumulative costs incurred to date at the end of the tax year divided by the total expected costs to be incurred under the contract.

the ______ method is required to be used for Alternative Minimum Taxation, regardless of the method used for regular tax (except for home construction contracts)percentageofcompletion

even if the percentageofcompletion method is used for regular tax purposes, there are still likely to be differences in the calculation of taxable income because ___________the calculation of alternative minimum taxable income must take into account not only the method of income recognition, but also other alternative minimum tax rules (e.g. depreciation methods)

_________ must be calculated using the percentage of completion method, even if the corporation uses the completedcontract method for regular tax purposes.corporate earnings and profits.

in order for the manufacture of personal property to qualify as longterm contract, not only must the contract not be completed within the year it was started, but it also must be ____________for the manufacture of a unique" item (i.e., an item that is made specifically for a customer and could not be sold to others, is not generally part of a taxpayer's normal inventory, and requires significant preproduction costs)"

if a taxpayer performs services for a contractor that is required to account for a longterm contract entered into with a related party using the percentageofcompletion method, the taxpayer (even those providing engineering or design services) must also use the percentage of completion method because of _____, unless the exception exists where ______because of the related party impact. the exception is where over 50% of the 3year average annual gross receipts of the same items stem from unrelated parties.

most farmers use the ___ basis of accounting.cash

how does the cash basis work for calculating farming income?inventories of produce, livestock, etc., are not considered. gross income includes the cash and the value of all other items received from the sale of produce, livestock that has been raised by the farmer, and for livestock or other items a farmer may have bought, profit is computed by subtracting the purchase price from the sales price.

which farmers are required to use the accrual method?certain corporate and partnership farmers as well as all farming tax shelters.

how does the accrual basis work for calculating farming income?value of inventories at year end

+ proceeds received from sales

value of inventories at the beginning of the year

cost of inventory purchased during the year

= gross profit

whether on a cash or accrual method of accounting, taxpayers who sell stock or sell securities on an established securities market must recognized gains and losses as of the ___ date, not the ____ date.as of the trade date, not the settlement date.

generally, retirement money cannot be withdrawn until the individual reaches the age of ____ or the individual elects _______________59.5; elects to receive equal periodic distributions over his life expectancy.

what is RMD?required minimum distribution (for IRAs) by age 70.5

when a person retires the funds will be taxed as ______ when receivedordinary income (regardless of what type of income, such as capital gain, was earned while the funds were invested)

are qualified benefits received from a roth IRA taxable?no

what is taxable in a traditional nondeductible IRA?principal not taxable. accumulated earnings taxable when withdrawn

what is the penalty for withdrawing on an IRA early?10% penalty tax (on top of any increase in regular income tax) if the individual has not met an exception

there is no penalty if the premature distribution on an IRA was used to pay for:H home buyer (1st time) $10,000 max exclusion (w/in 120 days)

I insurance (medical) if you're unemployed longer than 12 weeks / self employed

M medical expenses in excess of 7.5% of AGI

D disability (permanent/indefinite)

E Education

D Death

excess contribution to an IRA plan are subject to ______________ until the excess is correctedcumulative 6% excise tax each year

if an annuitant lives longer than expected, then further payments are _____.fully taxable

if an annuitant dies before all the payments are collected, the unrecovered portion is a _______ on the annuitant's final income tax returnmiscellaneous itemized deduction not subject to the 2% AGI floor.

Schedule _ is used to compute supplemental income and/or loss from rental real estate, royalties, partnerships and lLLCs, S corps, estates, trustsSchedule E

what is the basic formula for the determination of net rental income or loss?gross rental income

+ prepaid rental income

+ rental cancellation payment

+ improvement inlieuofrent

rental expenses

= Net rental income / loss

rental of vacation home rented less than 15 days what are the tax implications?rental income excluded from income. treated as personal residence. mortgage interest and real estate taxes are allowed as itemized deductions. depreciation, utilities, and repairs are not deductible.

rental of vacation home rented 15 or more days what are the tax implications?treated as personal/rental residences. expenses are prorated between personal and rental use. (taxes prorated by annual period, utilities and depreciation by annual usage). rental use expenses are deductible only to the extent of rental income.

how are nondeductible PALs treated?passive activity losses can only be offset by passive income! carryforward foreverif still unused, suspended losses become fully tax deductible in the year the property is disposed of (sold)

if the taxpayer becomes a material participant in the passive activity, how are unused passive losses treated?the can be used to offset the taxpayer's active income in the same activity.

who are the taxpayers subject to passive activity loss rules?individuals, estates, trusts, personal service corps, and closely held C corps

an individual may deduct rental activity losses if:mom and pop exception, real estate professional

what is the mom and pop exception of the passive activity loss disallowed net loss exception?taxpayers ay deduct up to $25,000 per year of net passive losses attributable to rental real estate annually if the individuals are actively participating/managing

for the carryforward after the mom and pop exception, an estate can qualify for the ___ years following the decedent's death if the decedent actively participated in the operation2 years

what is the phaseout for the mom and pop exception?reduced by 50% of the excess of the taxpayer's AGI (without consideration of this loss deduction) over 100,000. (so up to $150,000)

what are the conditions to be considered a real estate professional (so that the rental activities are not considered passive and the taxpayer can fully deduct losses from the rental activities against other income)?1. more than 50% of the taxpayer's personal services during the year are performed in real property businesses

2. the taxpayer performs more than 750 hours of services in real property businesses during the year

the taxpayer must include in gross income the ___ amount received for unemployment compensationfull amount

are social security benefits included in income?mayyyybe, depends on how much you make! (5 levels of provisional income)

what is provisional income?AGI + taxexept interest + 50% of social security benefits (MODIFIED ADJUSTED GROSS INCOME)

if you are low income, how much of your social security benefits are taxable?zero. provisional income: less than $25,000 single, $32,000 MFJ

if you are upper income, how much of your social security benefits are taxable?85%. provisional income: more than $34,000 single, $44,000 married

what do you need to add to your AGI to end up at MAGI?1. income excluded for foreign earned income exclusion

2. exclusion or deduction claimed for foreign housing

3. interest income from series EE bonds that you were able to exclude bc you paid qualified higher education expenses

4. deduction claimed for student loan interest or qualified tuition and related expenses

5. any employerpaid adoption expense you excluded

6. any deduction you claimed for an annual (nonrollover) contribution to a regular IRA

an exclusion from income for certain prizes and awards applies where the winner is _________where the winner is selected for the award without entering into a contest and assigns the award directly to a gov'tal unit or charity

when can gambling losses be deducted?only to the extent of gambling winnings. allowable amount is deductible on schedule A as an itemized deduction, but the amount is not subject to the 2% floor.

to decide whether a business recovery is excludible, one must determine _______what the damages were paid in lieu of. (if for lost profit, then it's income)

when are punitive damages taxable?fully taxable as ordinary income if received in a business context or for loss of personal reputation. also if personal injury case, except in wrongful death cases

how are graduate teaching assistants and research assistants who receive tuition reductions taxed?they are taxed on the reduction if it is their only compensation, but not if the reduction is in addition to other taxable compensation.

does gross income include property received from a gift or inheritance?no

what is the taxable portion of a gift?any income received from such property (interest income, rental income, etc)

are medicare benefits included in gross income?no

when can you exclude from gross income payments received (even with multiple recoveries) from accident insurance?if the individual paid all premiums for the insurance

taxpayers working abroad may exclude from gross income up to $____ of their foreignearned income. in order to qualify for the exclusion, the taxpayer must satisfy one of the two tests:$99,200. bonafide residence test (for an entire taxable year), physical presence test (present for 330 full days our of any 12consecutive month period.

is treasury stock a capital asset?no

are copyrights, literary music or artistic compositions that have been purchased capital assets?yes

is section 1231 assets capital?no

how is the gain/loss calculated when you sell property that was gifted to you?if the fmv is higher, then selling price basis.

if fmv value is lower, then gain = selling price basis and

loss = fmv selling price.

anything in between is no gain or loss.

how do you calculate gifted property depreciation?Lesser of

Donor's adjusted basis at the date of the gift

or

FMV at the date of gift.

what is the holding period when you receive property as a gift?normally assume the donor's holding period. unless the FMV is used (as a loss basis) as the basis of the fit, the holding period starts as of the date of the gift.

what is the alternative valuation date for inherited property?the earlier of 6 months after death or the date of distribution/sale

what is the general rule for inherited property basis?Property acquired by the bequest or inheritance generally takes as its basis the stepup (or down) to FMV at the date of the decedent's death

how is the holding period determined for property acquired from a decedent?automatically considered to be longterm property regardless of how long it has actually been held.

a gain is not taxed for the following:H Homeowner's exclusion

I Involuntary Conversions

D Divorced Property Settlement

E exchange of LikeKind Business/Investment assets

I Installment Sale

T Treasury and capital Stock Transactions

What is the dollar amount of the homeowner's exclusion from gross income for gain?$500,000 for married couples filing a joint return and certain surviving spouses;

$250,000 for single, married filling separately, and head of household

who qualifies for the homeowner's exclusion from gross income for gain?taxpayer owns and used the property as a principal residence for two years or more during the 5 year ending period ending on the date of the sale or exchange. either spouse for a joint return must meet the ownership requirement, but both spouses must meet the use requirement with respect for the property. may not use exclusion more than once every 2 yrs (could get partial if other reasons though)

how are involuntary conversions treated for gains?nonrecognition treatment is given because the reinvestment of proceeds restores him to the position he held prior to the conversion. if the taxpayer does not reinvest all the proceeds, his gain on the transaction will be recognized to the extent of the unreinvested amount.

in an involuntary conversion, when must property be reinvested by?personal property = 2 years from year end, business property = 3 years

in an involuntary conversion, when the gain exceeds $100,000, __________property acquired from related parties and certain close relatives don't qualify as replacement property

how are losses dealt with in an involuntary conversion?losses are recognized!

nonrecognition treatment is accorded to like kind" exchange of property used in the trade or business or held for investment, EXCEPT:"inventory, stock, securities, partnership interests, and real property in different countries

how do you determine the amount of income to report in an installment sale for the year?earned revenue = cash collections x GP %

how are treasury and capital stock transactions by a corporation treated for tax purposes?sales of stock by corporation, repurchase of stock by corp, and reissue of stock are exempt from gain and losses are disallowed. essentially corporations are precluded from tax benefits or income taxes resulting from dealing in their own stock.

which losses on sales of property are nondeductible?W wash sale loss

R related party transactions

P Personal loss

what is a wash sale?when a security is sold for a loss and is repurchased within 30 days before or after the sale date

who falls under a related party?brothers and sisters, husband and wife, lineal descendants, entities that are more than 50% owned by individuals, corps, trusts, and/or partnerships

capital gains taxes are imposed on all sales of nondepreciable property between all related parties except:1. husband and wife (basis is merely transferred)

2. individual and a 50% controlled corp or partnership (where the gain is taxed as ordinary income

what are the basis rules for selling property under related party transactions?same as giftbasis rules

no deduction is allowed for the loss on a nonbusiness disposal or loss. an itemized deduction may be available in the category of ______casualty and theft

what is the holding period and tax rate for short term capital gains?one year or less, tax rate is treated as ordinary income.

long term gains on ________ are taxed at 28% (for taxpayers not in the 10%, 15% or 25% tax brackets)collectibles, antiques, and small company (section 1202) stock

individual taxpayers realizing a net long or shortterm capital loss may only recognize (deduct) a max of ___ of the amount realized from other types of gross income (ordinary income, passive income, or portfolio income)$3,000

for individuals, what is the carryback of a net capital loss?no carryback. but you can carry forward an unlimited time until exhausted.

how is a personal (nonbusiness) bad debt treated?a shortterm capital loss in the year debt becomes totally worthless

how are worthless stock and securities treated under net capital losses?the cost (or other basis) of worthless stock or securities is treated as a capital loss, as if they were sold on the last day of the taxable year in which they became totally worthless

what are the netting procedures for capital gains and losses for individuals?gains and losses are netted within each tax rate group, creating net shortterm and longterm gains or losses by rate group. resulting shortterm and longterm loses are then offset against short term and longterm gains (respectively) beginning with the highest tax rate group and continuing to the lower rates

how are net capital gains for c corps treated?added to ordinary income and taxed at the regular rate (do not get the benefit of lower capital gains rates). section 1231 gains are entitled to capital gain treatment

how are net capital losses for c corps treated?corporations may not deduct any capital loss from ordinary income. only use capital losses against capital gains. net capital losses are carried back 3 years and forward 5 years as a short term capital loss.

how are section 1231 assets treated in a business in terms of gains and losses?gains treated as capital" assets used in the business while losses are treated as ordinary losses."