Gross Income - Sec. 62 deductions (above the line)
= adjusted gross income
- Greater of itemized or standard - personal exemptions
= Taxable income
X Tax rate = gross tax liability
- credits = net tax liability or refund
If there is inventory, you must use the accrual method?
True.
Trade date is when you receive income?
True. It is not the settlement date.
If services are paid for in property, then what is gross income?1
It is the FMV of the property received. This also becomes the basis of the property.
What is alimony?
Must be paid in cash
Paid as a part of a written divorce or separation agreement
Not labeled as anything but alimony
Terminates at the time of the death of the recipient
Not paid to a member of the same household.
Not paid to the spouse whom the taxpayer is filing a joint return.
Is a property settlement alimony?
No. It is a gift and excluded from gross income (not for resident aliens). For this, the exchange must ocurr within one year of the divorce.
Are employer contributions to a 401(k) gross income?
Generally, no.
Payout of life insurance or endowment contracts are gross income?
No. But may if employer-provided (if proceeds greater than premium contributions).
Is the discharge of debt gross income?
Generally, yes. May not be if: creditor gratiuosly cancels a debt, bankruptcy, insolvent, farm, related to principal residence (but reduce basis; exclusion up to $2M, after 2006).
Is a forgiveness of a student loan considered gross income?
No, if engages in employment in a specified location, for a specified period, for a specified employer.
Is income from illegal activies gross income?
Yes.
Is a scholarship or fellowship income?
No, if it s for a person who is a candidate for a degree from a qualified educational institution and the amounts are used for tuition/fees, books, supplies, or equipment. Room and board does not apply.
Is a prize income?
Yes. If not cash, then you use the FMV of the property received. If you reject the prize, there is no tax. Exceptions: employee achievement awards (de minimis benefit); scholarship; religious, scientific, charitable achievement; paid to a nonprofit; employee achievement for safey/length of service ($400 for nonqualified, $1,600 for qualified; cannot discriminate).
Is unemployment gross income?
Yes. but first $2,400 is not.
Compensation for injuries gross income?
Not for: Workers compensation for personal injuries or sickness; Payments under an accident and health policy purchased by the taxpayer (even if for lost income); If an employer-paid accident or health plan, it would be reimbursement for medical care and payments for permanent injury or loss of bodily function; Pension or annuity for personal injuries or sickness for those in active service. However, punitive damages are considered income. So is the money purely for emotional distress.
Income if you receive benefits from an employer accident/health policy?
Not if for permanent injury or loss of bodily function and reimbursement for employee, spouse or dependents. Any excess of medical costs is income (but may be reduced for employee contributions).
Disability benefits income?
No, if the premiums paid by the employee. But employer-paid benefits are income.
Employer-paid life insurance income?
No. But if the coverage is above $50,000, the additional premiums are considered income.
Employer-paid long-term income?
No.
Pension benefits income?
Not for those where the employee paid. After this is used up, there will be taxes.
Rental value for a minister income?
No, even so if takes deductions for home expenses.
Gambling winnings income?
Yes. You can deduct losses but only to the extent of the winnings and subject to the 2% AGI limit (misc deduction).
Qualified moving expense reimbursement income?
No
Adoption assistance income?
No. But there must be an adoption plan. The max exclusion is $12,150 (phases out based on AGI, $182 to $222,180). US citizen, can take deduction for year expenses made; for non-citizens, it is in the year the adoption becomes final. Eligible child must be under 18 or physically or mentally incapable. Qualified adoption expenses: fees, court costs, attorney fees. Not: surrogate, adopt spouse's kid.
Are reimbursed employee expenses income?
No so long as reimbursements = expenses and the employee makes an accounting (or return excess). If not, then the expenses are income and you can deduct them on Schedule A, but subject to the 2% AGI.
Are employee fringe benefits income?
No so long as: no-additional service, qualified employee discount, working condition fringe, de minimus fringe, qualfied transportation fringe, qualified moving expense reimbursement, employer-provided educational assistance.
Is a No-additional-cost service income?
No. This is a product or service the employer provides to its customers on an ordinary basis. Essentially, the employer must not pay any additional typical costs. Also, the benefit must be provided on a nondiscrimanatory basis to its employees (cannot be just for executives, for example).
Is an employee discount income?
No so long as the product/service is qualified (used in the normal course of biz). But the employee discount may not exceed:a) the gross profit percentage in normal offers by the employer to customers orb) 20% of the price offered to customers in the case of qualified services.
Is a working condition fringe income?
No. This is a cost that would be considered ordinary and necessary to the employer's business. Generally, this means something that would be deductible as a business expense. An example would be the use of a company car (max $15,000).
De Minimis Fringe income?
No. This is when the cost of the service or product is minimal. Examples: use of copy machines, tickets to a game, coffee and donuts and so on. Also, up to $230 a month can be used for commuting vouchers or tokens for public transit. The same amount is for parking, too.
Employer-Provided Educational Assistance income?
No. Up to $5,250 can be excluded from income for such assistance. This does not apply to graduate or teaching assistants who receive tuition reduction. And expenses cannot be tools or supplies that are used after the course as well as the cost of meals, lodging and transportation.
Is foreign-earned income income?
US citizens and qualifying resident aliens may exclude up to $91,400 of foreign-earned income and statutory housin cost allowances from gross income. Must have foreign income, a tax home in a foreign country and at least: US citizen who is a bona fide resident of a foreign country for uninterrupted period that includes one year; or US resident alien who is a citizen/national of a country the US has a treaty with; US citizen at least 330 full days.
A below market loan is income?
Generally, yes. These are either demand loans or term loans. No interest imputed if below certain amounts. Gift loan ($10K) or loan less than $100,000.
Dividends are ordinary income?
Yes, but subject to a max tax of 15%.
How long must a mutual fund be held to get long-term capital gainst treatment on distributions?
Does not matter. No time requirement.
Stock dividend income?
Generally no. Exceptions: if can elect to receive cash or stock; some receive preferred, others common; distribution is preferred.
