Liberty Tax School Flashcards

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Questions and Answers

What is a 28% rate gain?

Gain from the sale of qualified small business stock held for more than 5 years (correct)

Gain from the sale of real estate

Gain from the sale of stocks held for less than 5 years

Gain from the sale of collectibles (correct)

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.

A semester, trimester, quarter, or other period of study determined by an educational institution. Signup and view all the answers

What is the accelerated cost recovery system (ACRS)?

A depreciation system for property placed in service after 1980 and before 1987. Signup and view all the answers

What is an accountable reimbursement plan?

An employee reimbursement plan with specific conditions regarding business connection and expense accounting. Signup and view all the answers

What is the accrual method?

An accounting method that reports income when earned and expenses when incurred. Signup and view all the answers

What does active conduct of a trade or business mean?

A taxpayer meaningfully participates in the management or operations of the trade or business. Signup and view all the answers

Define active participation.

Making significant rental or business management decisions. Signup and view all the answers

What is active pay?

Military income received by a service member while on active duty. Signup and view all the answers

What is the actual expense method?

A method for calculating business automobile expenses based on actual costs. Signup and view all the answers

What is adjusted basis?

The original cost of property plus certain additions and improvements, minus deductions. Signup and view all the answers

What is considered an adopted child?

An adopted child is treated as your own child. Signup and view all the answers

What is an Adoption Taxpayer Identification Number (ATIN)?

A temporary taxpayer ID number for a child in a domestic adoption. Signup and view all the answers

Define adjusted gross income (AGI).

Total income reduced by certain amounts like traditional IRA contributions. Signup and view all the answers

What are adjusted qualified education expenses (AQEE)?

Qualified education expenses reduced by tax-free educational assistance. Signup and view all the answers

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.