1. Individual Issues Chapter 8 pp. 305-343
2019 National Income
Tax Workbook™

2. Summary
Charitable Contributions
Gambling Winnings and Losses
Tax Credits
Taxation of Children’s Income

3. Issue 1: Charitable Contributions p. 306
Std. deduction is $24,400 (2019 MFJ)
Charitable contribution deduction only if itemize or qualified charitable distribution from IRA

4. Qualified Organizations pp. 306-307
Government
Nonprofits
War veterans
Fraternal societies
Cemetery company

5. Not Qualified Organizations p. 307
Generally not qualified:
Political candidates/parties
Bar association
Chamber of commerce/civic league
Country/social club
HOA
Labor unions

6. Contribution to Individuals p. 307
Not deductible if earmarked
Ex. 8.1 contribution to Red Cross for disaster relief is OK
Ex. 8.2 contribution to hospital for specific individual is not OK

7. Donor Advised Funds pp. 307-308
Contribution to DAF is deductible:
Fund controlled by sponsor org.
Fund identified by ref. to donor
Donor has advisory privileges over distributions

8. Qualifying Contributions p. 308
Cash or property – not services
Can deduct amount contributed – less value of goods and services received
Charity benefit – reduce donation by FMV of admission

9. Insubstantial Benefit p. 309
Benefit disregarded if
FMV of benefit not more than lesser of 2% of payment or $111 or
Payment is $55.50 or more and receive only token items ($11.10 or less)

10. Disregard if for annual payment of $75 or less:
Membership Benefits p. 309
Disregard if for annual payment of $75 or less:
Admission (but not athletic event)
Parking
Discounts
Admission to member-only events

11. Athletic Tickets p. 309
After 12/31/17 no deduction for payment to higher education institution if receive right to purchase tickets or seating at an athletic event

12. Contribution of Property pp. 310-311
Limited deduction for contribution of partial interest
Clothing/household – good or better condition
Limit on vehicle donations
Limit on inventory donations

13. Rental Property p. 311
Donation of use of property is not deductible
Ex. 8.9 donate vacation home to auction at fundraiser. FRV is $300/night. Bidder pays $1,500. No deduction.

14. Contribution of Services pp. 311-312
Can’t deduct services but can deduct unreimbursed expenses incurred
Meals and lodging away from home
Directly connected
Incurred only b/c services provided
Not personal

15. Contribution of Services, Cont. p. 312
Deduct auto expenses (gas not depreciation)
Can use std. mileage rate
Deduct travel expenses
Not vacation or recreation

16. Examples p. 312
Ex John can deduct meals and travel to charity work site
Ex Mary cannot deduct meals and travel b/c personal
Ex Ruby can deduct travel to volunteer – but not child care

17. Determining FMV p. 313
Price at which willing seller sells to willing buyer – no compulsion and reasonable knowledge
Used clothes – thrift shop value
Cars and boats – “Blue Book” value

18. Substantiation pp. 313-315 Records of cash contribution
Cash $250 or more – CWA
Receipt for noncash less than $250
Noncash
$250-$500 CWA
Over $500-$5,000 – add’l subs.
Over $5,000 – qualified appraisal

19. Out-of-Pocket Expenses p. 315
Substantiate w/records
$250 or more need CWA

20. Contribution Limits pp. 317-318
50% limit orgs deduct up to 50% AGI (60% cash)
30% limit orgs deduct up to 30% AGI
30% limit for capital gain property – elect FMV then 50% (see Ex. 8.16)
50% for QCC (100% farmer/rancher)

21. Calculating Limits pp. 318-320
Ordering rules
Ex illustrates
Figure 8.1 deduction worksheet

22. Carryovers pp
5 yr carryover (15 for QCC)
Same % limits in carryover yr
Deduct current-yr first (except 50% carryovers deducted before 30% current yr)
Use carryover from earliest yr

23. Qualified Charitable Distribution p. 321
RMD from IRA to qualified charity
At least age 70.5
Up to $100,000
Excluded to the extent would have been included in tax. inc.

24. Reporting p. 322
Form Noncash Charitable contributions (over $500)
Form Donee Information Return

25. Issue 2: Gambling Winnings and Losses p. 323
1986 S.Ct. opinion & 1988 Indian Gaming Reg. set out framework for gaming on Indian lands. Now all states except Utah & Hawaii have gaming activity.

26. Wagering Gains & Losses p.323
Gains = amount won less amount bet (basis)
Loss = amount bet less amount won

27. Sec. 165(d) Limitations p.323
Loss limited to extent of gain
TCJA changes prior law – now no deductions in excess of wagers for professional gamblers

28. Professional Gamblers – QBI Deduction pp. 323-324
Under Groetzinger & Sec. 183 profit primary purpose
T or B not hobby
Could qualify for QBI deduction

29. Slots p. 324
AM sessions rule
Notice safe harbor for electronically tracked play

30. Sessions Rule p. 324
Wagering gain or loss recognized for casual gambler when tokens redeemed
Ex Wagering gains
Ex Wagering losses
No carryover of excess losses

31. Session Record Keeping p. 325
Shollenberger W/drew $500, won $2,000, each took $200 winnings to continue to play, $1,600 at the end of the day Court netted winnings and losses

32. Applies to electronic tracking for wagers only
Notice p. 325
Applies to electronic tracking for wagers only
At same gaming establishment
Same calendar day – same definition of session for all electronically tracked play at same establishment for yr.

33. Ex p. 325
Slot play-8:00 a.m. to 10:00 a.m. – left casino
Returned to same casino 6:00 p.m. – left 11:59 p.m.
= 1 SESSION

34. Same facts as 8.21-but not electronically tracked
Ex p. 325
Same facts as 8.21-but not electronically tracked
Safe harbor not applicable.
1 session if cashed in at 10:00 a.m. before leaving casino

35. Using Safe Harbor Method pp. 325-326
Casual Gambler
Write “Revenue Procedure 2015-X” on Line 21 of Sch. 1, 1040
Nonresident aliens report the same on 1040NR

36. Reporting Gambling Income p. 326
Professional Gamblers- Report Gross Inc/Losses - Sch C, Form 1040
Casual Gamblers, Report Gross Inc. Line 21, Schedule 1, Losses on Sch. A, not subject to 2% AGI

37. I.R.C. 6001 requires record keeping
Record Keeping pp
I.R.C requires record keeping
Even if electronic tracking
Verifiable information
Diary recommended- see Fig. 8.3

38. Threshold based on type of gambling
Payer Reporting pp
Payer issues W-2G
Threshold based on type of gambling
Slots, keno, bingo, etc.
Final Regs - net by session for
keno, slots

39. Issue 3: Tax Credits p. 329 Child tax credit (CTC)
Additional child tax credit (ACTC)
Credit for other dependents (ODC)
Earned income credit (EIC)
Education credits

40. Child Tax Credit p. 329
$2,000 for qualifying child
Relationship – child, etc.
Age – under 17
Residence – more than 1/2 yr.
Support – child not more than 1/2

41. Qualifying Child p. 330
Qualifying child more than 1 person:
Tiebreaker rules
Use Form 8332 to release

42. CTC Phaseout p. 331
begins phaseout at $400,000 MFJ
Fully phased out $480,000 MFJ w/ 2 kids

43. ACTC p. 331
Refundable portion
Max $1,400 for qualifying child
Percentage of earned income
Alt calculation for 3 or more kids

44. ODC pp
$500 for dependent – not eligible for CTC
E.g. child 17 or 18 (or and student), or child w/ no SSN

45. EIC p. 332 Refundable credit AGI below phaseout Valid SSN Not MFS
Citizen or resident alien
No Form 2555
Investment income $3,600 or less
Earned income

46. Earned Income pp. 332-333 Wages, salaries, etc. SE income Not:
Pensions, annuities
Interest dividends
Child support, etc.

47. EIC Rules to Qualify pp. 333-334
Relationship, age, residency, joint return tests
Only 1 person can claim
TP is not qualifying child of another TP
Add’l rules if no qualifying child

48. Education Credits p. 334
Qualified education expenses at eligible educational institution (college, university, trade school, etc.)

49. Qualified Education Expenses p. 335
Tuition and fees
Nonacademic fees paid to institution as condition of enroll.
Books, supplies, equipment
AOTC don’t have to be condition of enroll. But do for lifetime learning

50. Not Qualified Expenses p. 335
Don’t include
Personal expenses, e.g. room and board
Sports, games, etc. unless part of degree or (for lifetime learning) for job skills

51. Two Credit Choices p. 336
AOTC – up to $2,500 per student, part refundable
Lifetime learning – up to $2,000 per return
Figure 8.5 (p. 337) compares

52. Issue 4: Taxation of Children’s Income p. 338
Filing requirements
Ex $200 interest and $2,750 from job is less than $3,100 limit – Figure 8.6 filing requirements worksheet

53. Children’s Income p. 339
EARNED INCOME – wages, tips, payment for services – included in child’s income
UNEARNED INCOME – interest, dividends, cap gains, etc. – T & E rates apply

54. Filing requirements for Form 8615:
Form 8615 p. 339
Filing requirements for Form 8615:
Unearned income over threshold
Age requirements
One parent alive
Required to file a return
Does not file a joint return

55. Parent’s Election p. 340
Elect to include interest, dividends, cap gains on parent’s return
File from 8814

56. Calculating Tax pp
Tax on unearned income
Rates in Figure 8.7
Examples 8.24 and 8.25
Form 8615 (Figure 8.8)
Computation worksheet (Figure 8.9)

57. Kiddie Tax Planning p. 343 To reduce kiddie tax:
Ordinary income to cap gains
Defer recognition of unearned income
529 plan instead of gifts
Growth instead of income producing
Increase child’s earned income
Child claims educ. credits (Ex. 8.26)

58. QUESTIONS?