TCP T1 Notes

The lesser of earned income or $7,000 (2024). Taxpayers age 50 or older can contribute an additional $1,000. A married taxpayer can use a spouse's earned income to make an IRA contribution.

The child's gross unearned income, minus the minimum standard deduction ($1,300), minus the income that is taxed at child's rate ($1,300).

AKA, unearned income in excess of $2,600 is taxed at their parents' marginal rate.

Only gifts of a present interest will qualify for the annual exclusion. Gifts of a future interest will not qualify for the annual exclusion. A life estate is a current gift.

FMV of the property at the date of gift/death. If gifted, the donee's basis is the donor's basis. If estate transfer, the donee's basis is the FMV of the property at the date of death.

$10,000

Losses from real estate where the taxpayer actively participates are allowed to be deducted against active income up to $25,000. It's phased out at 50% of AGI between $100,000 and $150,000. (AGI includes cap gains and dividends) (AGI of $120,000 means $20,000 x 50% = $10,000 is phased out and $15,000 remains to be deducted).

-Save the remaining funds for the beneficiary's future educational needs
-Contribute the remaining funds to the beneficiary's Roth IRA
-Withdraw up to $10,000 to pay qualified education loans of the beneficiary or siblings -Transfer the remaining funds to a member of the beneficiary's family Cannot contribute remaining funds to Traditional IRAs!

Assets owned by students (such as a custodial account) carry more weight than assets owned by parents (529 savings plan is not considered owned by the student).

This is the full amount of the gift, before the gift exclusion ($18,000). It includes the values of future gifts! A life estate is a current gift. The taxable gift is a different story.

401(k) (for profit) and 403(b) (not-for-profit) are aggregated together. For an employee <50yr, it is $23,000 per year between both plans. 457(b) (government) have a separate $23,000 annual limitation.

The principle investment is divided over the total months of expected recovery (life). This amount is nontaxable each month. The remainder is taxable each month.

Pay attention to how many months have passed when they ask!

-PALs
-Accelerated depreciation
-NOLs
-Installment method
-Contracts (long-term)

Taxes and standard deductions are ADDED to AMTI.

-Interest income from private activity bonds are added back, since they are tax exempt for regular tax they are included in AMTI
-Completed contract method is required for AMTI, so an addition or subtraction is used to bring income to be as if completed contract method was used
-Installment method is not allowed by dealers in property sales for AMT, resulting in an addition or subtraction to remove this method from AMTI

First, sum up ONLY the total losses. Then, find the ratio of each activity's loss to the total losses. Then, multiply each activity's ratio by the net loss (that includes income).

-Option exercise price >85% of the FMV of the stock when granted or exercised (whichever is less)
-Not allowed to employees who own >5% voting power
-Holding requirements once exercised is 2 years after grant date and 1 year after exercise date

-Option exercise price >FMV of the stock on grant date
-Not allowed to employees who own >10% voting power
-Holding requirements once exercised is 2 years after grant date and 1 year after exercise date

-Grant date: no taxable income
-Exercise date: no taxable income
-Basis: exercise (option) price
-Gain/Loss: capital if stock is held 2 years after grant date and 1 year after exercise date

-Grant date: FMV of option (if ascertainable) = ordinary income
-Exercise date: bargain element (if no ascertainable value) = ordinary income
-Basis: exercise (option) price + previously recognized income
-Gain/Loss: capital if stock is held 1 year after exercise date

-Pretax contributions for qualified medical expenses
-Use it or lose it in current year

-Pretax contributions for qualified medical expenses
-Continues to accumulate

The lesser of:
-90% of current year tax
-100% of prior year tax (110% if prior year AGI>$150,000)