2006 Income Tax Seminar Book - Part II

Table of Contents / Page No.

NEW TAX LAW
Tax Increase Prevention and Reconciliation Act  1-10
Children under age 18 subject to kiddie tax  1
AMT exemption amounts for 2006 are increased  2-3
Capital gains rates on qualified dividends are extended for two years  3
AGI limit on conversion of non-Roth IRAs to Roth IRAs is eliminated  4-6
Code Section 179 expense election limits extended for two years  6-8
Taxation of unrecaptured section 1250 gain  8
New Law Requires Partial Payment for Offers in Compromise  9-10
Pension Protection Act of 2006  11-23
Strengthening Traditional Pension Plans  11
Investment Advice  11
IRA distributions donated to charity in 2006 and 2007 may be tax-free  12
Saver’s credit is made permanent  13
Waiver of 10% penalty for certain public safety employees  13
Rollovers to Roth IRAs from qualified plans allowed after 2007  14-16
IRS to provide for direct payment of tax refunds to IRAs  16
Form 8888, Direct Deposit of Refund  17
Nonspouse beneficiaries can roll over qualified plans into IRAs  18
Recordkeeping requirements are toughened for cash contributions  19
Deduction isn't allowed for contributions to certain donor advised funds  19-22
Deductions for contributions of clothing and household items are limited  22-23
FEDERAL DEVELOPMENTS
New Law Expands IRA Options for Military  24
Repeal of 10% Penalty for Distributions to Active Duty Military Reservists  25-25
Work clothing deductions – proof  25
Dependency exemption – support test – proof  25
Activities not-for-profit – lemon farming  25-26
IRS Begins Outreach to Entertainment Industry on Gift Bags  26
Self-employed individuals - special rules for health insurance deductions  27
10% additional tax on early IRA distributions – exceptions  27
No above-the-line deduction for health insurance bought by sole
S Corporation shareholder-employee  27-28
Emotional injury – Income exclusions under Code Section 104(a)  29
Divorce settlement - temporary orders vs. voluntary payments—proof  29
Unreported income - reconstruction of income  29
Cost of removing building's mold is currently deductible  30
Government to Stop Collecting Long-Distance Telephone Tax  30-33
Form 1040EZ-T, Claim for Refund of Federal Telephone Excise Tax  34
IRS “Dirty Dozen for 2006” – 12 Common Scams  35-37
Wesley Snipes accused of tax fraud  37-38
Payments made under settlement agreement - qualification as alimony  38
2007 Social Security Changes Cost-of-Living Adjustment (COLA)  39
IRS Announces Pension Plan Limitations for 2007  40-41
Failure to Renew Extenders Equals Tax Increases  41-42
"Understanding Tax Cuts"  43-44
TAX PLANNING STRATEGIES AND CONSIDERATIONS
Employ the Children Before Year-End  45
Starting a Roth IRA for a Working Child  45-46
Make Use of $12,000 Gift Tax Annual Exclusion  46-47
Donating Appreciated Assets to Charity  47-48
IRA Distributions Donated to Charity in 2006 and 2007 May be Tax-Free  48-51
Individual Retirement Accounts (IRAs)  52-53
Roth –IRA  53-54
Annual Roth vs. Deductible IRA Contribution  55-61
Required Minimum Distribution Rules  62-65
Conversion to Roth IRA  66-72
Net Unrealized Appreciation  73-76
SEP Worksheet – 2006  77
SIMPLE Worksheet – 2006  78
FEDERAL TAX UPDATE
Form 1040  79-133
Dependent – Qualifying Child  81-85
Head of Household  86
Pre-Act Dependency Requirements - Qualifying Relative  87-88
Uniform Definition - Qualifying Child – Flowchart  90
Child Tax Credit  91
Dividends  92-93
Social Security Benefits  94-95
Health Savings Accounts  97-98
Moving expenses  98-99
Self-employed Health Insurance Deduction  99
Student Loan Interest  100
Domestic production activities deduction  101-111
Standard Deduction  113
Personal Exemption  114
Alternative Minimum Tax  114-115
Education Credits  115-116
Residential Energy Credits  117-120
Form 5695, Residential Energy Credits  119-120
Child Tax Credit  121
Alternative Motor Vehicle Credit  121-127
Form 8910, Alternative Motor Vehicle Credit  127
Earned Income Credit  128
Nontaxable combat pay election  128
Additional Child Tax Credit  129
Estimated Tax Penalty  130
Form 4868 - Automatic 6 month extension  130
Where to File Form 1040, Form 1040V, Form 4868  131-133
Form 1040, Schedule A  134-153
Medical and Dental Expenses  135-138
Income Taxes  138
Real Estate Taxes  139
Home Mortgage Interest  139-142
Investment Interest Expense  143-145
Charitable Contributions  145-150
Car Donations  146-150
Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes  149
Casualty and Theft Losses  150-151
Gambling Losses  152-153
Form 1040, Schedule B  154-156
Form 1040, Schedule C  157-169
Accounting Methods  159
Gross Receipts or Sales  160-161
Car and Truck Expenses  162
Depreciation and Section 179 Expense  163-166
Pension and Profit Sharing Plans  166
Repairs and Maintenance  166-167
Travel, Meals, and Entertainment  167
Home Office Expenses  168-169
Form 1040, Schedule D  170-189
Definition of Capital Asset  172
Capital Gains Rates  173
Basis of Mutual Funds  175-178
Sale of Residence  182-187
Form 1040, Schedule E  190-208
Renting your Residence for Less than 15 Days  190
Vacation Home Rules  190-192
Rental Income  192-193
When To Report Rental Income on Schedule C  194
Repairs and Improvements  194-195
Renting Part of Property  197
Passive Activity Rules  197-199
Activities That Are Not Passive Activities - Real Estate Professionals  199-204
Part II: Partnership and S Corp., Income and Loss  205
Form 1065 – (Schedule K-1)  207 - 208
Form 6251, Alternative Minimum Tax – Individuals  209-211
Form 6252, Installment Sale Income  212-215
APPENDIX  216-224
Form 1099-INT, Interest Income  217
Form 8901, Information on Qualifying Children Who are Not Dependents  218
Form 8907, Nonconventional Source Fuel Credit  219
Form 8908, Energy Efficient Home Credit  220
Form 8909, Energy Efficient Appliance Credit  221
Form 8911, Alternative Fuel Vehicle Property Credit  222
Where to File Form 1040ES  223
Dependent Test (Qualifying Child / Qualifying Relative)  224