Earned Income
T/F
Tips are considered earned income.
True
How long does a taxpayer need to own an asset to be considered short-term? How about long term?
Long term assets are held for > 12 months.
Short term assets are held for < or = 12 months.
When is rental income not taxable?
When rented less than 15 days.
Name 3 types of dividends
1) ordinary,
2) non taxable distributions
3) capital gains distribution
T/F
Property transfer is not considered alimony.
True
Rachel is an employee at In N Out. What form would she receive from In N Out that states her Wages, tips and other compensation?
W-2 Form
Tina acquired Burger stock on 10/10/16 for $500. Tina sold her stock on 10/01/17 for $300. Please classify the asset as short term or long term.
Short Term
Kobe and Vanessa Bryant actively manages their cabin in Mammoth, CA which they rent out. What type of income is this considered?
Passive Income
Dunkin Donuts distributed $5000 to their stockholders (it was a good year!) on what schedule is this listed under?
Schedule B
Alimony payments are listed on what form and which section?
Form 1040, Adjusted Gross Income
Brad Pitt decides to quit acting and start a daycare business. On what schedule would Brad need to complete to report his profit / loss.
Schedule C
Tanya has a long term capital gain of $20,000 and a short term capital loss of $2000. What is Tanya’s net capital position?
Long term capital gain of $18,000
Tanya decides to rent her Malibu beachfront home for the duration of the olympics which would be a total of 16 days. Please calculate the percentage allocated to rental and personal use.
1) 4% rental
2) 96% personal
T/F
All ordinary dividends are considered qualified.
False
All qualified dividends are considered ordinary
If Brad Pitt wants to deduct his alimony payments to Angelina Jolie, 5 requirements must be met, please list at least 3 of the 5 requirements
Must be in cash and received by ex-spouse
Must be made in connection with written instrument
Can’t continue after death of ex-spouse
Can’t be designated as anything other than alimony
Parties may not be members of the same
household
Joey owns a coffee shop and is a die hard Laker fan. Once in a while he will take himself as well as a couple of other employees to a Laker game. When filing his taxes for 2017, he wants to report the basketball tickets as an expense. Can Joey report this on his schedule C? Why or Why not?
No.
Joey cannot report this an expense. Entertainment must be either directly related to, or associated with, active conduct of business.
Louise has a net capital loss of $10,000 for 2017. How much per year may she take against ordinary income? How much can she carry over?
3,000 per year
7,000 carry over
Lebron James has a rental real estate loss of $10,000, and currently has active income of $50,000. How much of his loss can be used to offset his active income?
$0.
T/F
Ordinary and qualifying dividends are taxed at the same rate.
False
(Ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.)
Sophia’s ex-husband pays her $2000 per month in child support. However, from July-Sept of 2016 he did not provide her with child support. If Sophia’s ex-husband wants to report his alimony payments as a deduction, what must he do?
He must bring his child support payments current
For 2017, Monica has a net earnings of $700 dollars from her catering business. Is she required to pay self employment tax? If so, what form will she have to use to report her earnings?
Yes, taxpayers with a net earnings of $400 or more are required to pay self-employment tax. File Sched SE with Form 1040.
Phoebe acquired Friends stock on Jan 1, 2015 for $1000 and sold it on July 7, 2016 for $8,000. Is this considered a long-term or short term asset? What is the selling price, cost basis and gain/loss?
Long term,
Selling price $8,000,
Cost Basis $1000
Gain $7,000
Chris Paul, former Los Angeles Clipper, moved to Houston, Texas in hopes of winning his first championship. Chris Paul left behind his beautiful Los Angeles Mansion, which his family used 50% this year. The property was rented the other half of the time. Using the data below, what is his net rental income.
Rental Income $8000
Taxes $1000
Interest - $2000
Utilities - $1500
Depreciation $6000
Rental Income $8000
Taxes <$500>
Interest <$1000>
Net Rental Income $6500
(Utilities and Depreciation is not deductible)
Fiona receives the following in 2018: cash dividend $2000, alimony $8000, Child support $5,000 and interest income $1500, and rewards $500. Which of the following does she need to report on schedule B?
Cash Dividend $2000
Interest Income $1500
Total $3500
T/F
Kobe Bryant and Vanessa Bryant finalize their divorce on January 1, 2019. Since Kobe Bryant and Vanessa Bryant do not have a prenuptial agreement, he will have to pay Vanessa Bryant $200,000 per month. When filing their taxes next year, Kobe will be able to deduct the alimony and Vanessa will have to report the alimony as taxable income.
False - Starting 2018 alimony is no longer deductible to payer and taxable to payee.