Tax Planning & Preparation Flashcards

Which of the following is NOT a requirement to deduct home office expenses under the exclusive-use test?

Answer: The space must be used occasionally for personal activities

The exclusive-use rule requires the home office area to be used ONLY for business; any personal use disqualifies the deduction entirely.

The Section 179 expense election allows a business to:

Answer: Immediately deduct the full cost of qualifying property in the year placed in service

Section 179 allows businesses to expense the full purchase price of qualifying equipment and software in the year it is placed in service, up to the annual limit.

A taxpayer who is single with no dependents and takes the standard deduction files using which primary form?

Answer: Form 1040

All individual taxpayers file their federal income tax return using Form 1040, regardless of filing complexity or age.

The 'kiddie tax' rules apply to a child's unearned income when:

Answer: The child is under age 19 (or under 24 if a full-time student) and unearned income exceeds the threshold

Under the kiddie tax, a qualifying child's net unearned income above the annual threshold is taxed at the parent's marginal tax rate.

Which of the following retirement plan contributions is made with after-tax dollars?

Answer: Roth 401(k)

Contributions to a Roth 401(k) are made with after-tax dollars, allowing qualified withdrawals in retirement to be tax-free.

A taxpayer sells a capital asset held for 14 months at a gain. This gain is classified as:

Answer: Long-term capital gain

Assets held for more than 12 months qualify for long-term capital gain treatment, which is taxed at preferential rates (0%, 15%, or 20%).

Estimated quarterly tax payments are generally required when a taxpayer expects to owe at least:

Answer: $1,000 in federal tax after withholding and credits

Taxpayers must make estimated payments if they expect to owe at least $1,000 in tax after withholding and credits to avoid underpayment penalties.