Questions and Answers
What is a 28% rate gain?
What is a 401(k) plan?
A defined contribution plan for employees to make contributions from paychecks.
What are abstract fees?
Expenses paid by a buyer to research the title of real property.
Define academic period.
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What is the accelerated cost recovery system (ACRS)?
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What is an accountable reimbursement plan?
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What is the accrual method?
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What does active conduct of a trade or business mean?
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Define active participation.
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What is active pay?
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What is the actual expense method?
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What is adjusted basis?
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What is considered an adopted child?
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What is an Adoption Taxpayer Identification Number (ATIN)?
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Define adjusted gross income (AGI).
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What are adjusted qualified education expenses (AQEE)?
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Study Notes
Tax Terms and Definitions
- 28% Rate Gain: Taxable gain from the sale of collectibles and qualified small business stock held for over five years.
- 401(k) Plan: Defined contribution retirement plan allowing pre- or after-tax employee contributions, often with employer matching; includes mandatory contributions in SIMPLE and safe harbor plans.
- Abstract Fees: Costs incurred by buyer to investigate real property title.
- Academic Period: Defined periods of study, such as semesters or trimesters, set by educational institutions; includes payment periods in absence of academic terms.
- Accelerated Cost Recovery System (ACRS): Depreciation method for assets placed in service between 1980 and 1986; replaced by MACRS for post-1986 assets.
Employee and Business Expenses
- Accountable Reimbursement Plan: Employee reimbursement plan requiring business connection, reasonable accounting, and timely repayment of excess reimbursements.
- Accrual Method: Accounting technique recognizing income when earned and expenses when incurred, differing from the cash method.
- Active Conduct of a Trade or Business: For section 179 deduction, a taxpayer must meaningfully participate in management to qualify; passive investors do not qualify.
- Active Participation: Involvement in significant management decisions relating to rental or business operations; does not diminish status if using agents but retaining final management rights.
Special Cases and Tax Identification
- Active Pay: Income received by military personnel while on active duty, differing from retirement pay.
- Actual Expense Method: Approach to calculate business vehicle expenses based on actual costs for fuel, maintenance, and other related expenses; contrasted with the standard mileage method.
- Adjusted Basis: Property cost incorporating improvements and deductions (like depreciation or casualty losses).
- Adopted Child: Legally placed adopted children regarded as biological children for tax purposes.
Tax Identification and Income Adjustments
- Adoption Taxpayer Identification Number (ATIN): Temporary IRS-issued ID for children in domestic adoptions lacking a Social Security Number, used for tax identification until final adoption.
- Adjusted Gross Income (AGI): Total income after subtracting certain deductions like IRA contributions and student loan interest.
- Adjusted Qualified Education Expenses (AQEE): Educational costs reduced by any tax-free assistance; ensures no double benefit on claims for tax credits or distributions.
- Adjustments to Income: Deductions that affect the AGI calculation, important for tax return accuracy.
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Description
Test your knowledge of tax terms with these Liberty Tax School flashcards. Each card contains a definition of important concepts like the 28% rate gain and 401(k) plans. Perfect for anyone preparing for tax-related exams or wanting to enhance their financial literacy.