Tax exam 2

What are the three categories for AGI?

• Directly related to business activities

• Indirectly related to business activities

• Subsidizing specific activities

Profit - motivated activities that are deductions for AGI are classified as?

• Business activities

• Investment activities

Trade or business expenses MUST BE

• Directly connected to business activity

• Ordinary and necessary for the activity

• Reasonable in amount (not extravagent)

Schedule C claimes ______ and _______ for ______ and ____

revenues and expenses for trade and business

What is the tax basis limitation?

Losses may not exceed an investor’s amount at risk in the activity

At-risk limitation is the same as tax-basis except…

types of debt that increase taxpayer’s at risk amount are more restrictive

A limited partner and rental property are examples of…

passive activities

What is the exception to the passive activity limitation law?

Mom and Pop exception, $25,000 may be deducted until phase out from 100,000 to 150,000

What is the passive activity limitation law?

can’t deduct passive activity losses unless you have passive income generators

What is a residence with minimal rental use?

renting a home for 14 or fewer days

What is a nonresidence?

We rent but don’t use personally at all (rental property)

Business use of home deduction is qualifies if…

• self - employed

• principal place of business

• place to meet clients in normal course of business

What are the deductions indirectly related to business activites?

• IRA

• Health insurance

• SE tax

• HSA (health savings account)
  Penalty for early withdrawal savings

What is an HSA?

Health Savings account

Itemized deductible medical expenses include…

• Med exp to treat them or dependents

• Reiumbursed payments, prevention diagnosis, cure of sum

• Medical transportation purposes

Itemized deductible taxes include…

• state, local, foreign

• state and local real estate taxes

• s & l on prop tax that are assesed on value of specific property

• sales and local sales

  LIMITED TO 10,000 TOTAL (5000 if MFS)

Itemized deductible charitable contribitons must be made to a….

qualified charity

Does a go fund me to an individual count as an charitable contribution? Homeless person?

NAH

Does a go fund me to a charity count as an charitable contribution?

YAH