#1 Flashcards
How are casualty losses calculated?
Adjusted basis - Insurance Proceeds - 10%AGI - $100
What is the limit on charitable contributions for cash?
60% of AGI for public and private operating foundation.
30% for private non-operating foundations.
Are scholarship proceeds included in gross income?
Scholarships are nontaxable for degree-seeking students to the extent that the proceeds are spent on tuition, fees, books, and supplies.
How is self-employment tax used when calculating net earnings from self-employment?
Self-employment tax and self-employment health insurance expenses are adjustments from total gross income. They are not deducted from self-employment earnings.
What is the limit for deduction on interest on investment idebtedness?
Interest is limited to net investment income for the year.
What are always add backs on AMT?
Private activity bond interest income
Percentage depletion deduction (excess over adjusted basis of property)
Pre-1987 accelerated depreciation
When does a transfer pricing issue occur?
A transfer pricing issue occurs when a US based tax payer shares costs with an affiliate that is not subject to the US income tax or does not file a consolidated income tax return with the US based tax payer.
What is the amount realized by a partner selling their partnership interest?
Cash received plus liabilities assumed by the purchaser (liabilities that were owned by the partner prior to selling)
What are the rules for an organization to qualify as tax-exempt?
- Both organized and operated exclusively as religious, charitable, scientific, literary or educational purposes; public safety testing, prevention of cruelty to children or animals; or to foster national or international amateur sports competition.
- No part of its net earnings goes to any private S/H or individual
- No substantial part of its activities consists of carrying on propaganda or otherwise attempting to influence legislation. (direct participation in political campaign is prohibited.)
How is the generation-skipping transfer tax imposed?
Imposed in addition to any gift or estate tax that may result from a transfer.
Under common law, what is the liability on a CPA who commits fraud?
A CPA who commits fraud is liable to anyone who is injured by the fraud. Ie, anyone that suffered a loss as a result of the fraud.
Where is the deduction for QBI applied in the individual tax formula?
QBI deductions is taken from adjusted gross (below the line) But it is separate from the standard deduction and itemized deductions.
When should a cash basis tax payer report gross income?
For the year in which income is either received or constructively received whether in cash of property. (FMV)
What income sources are considered when determining if a company should be a personal holding company?
Net rent
Interest that is taxable (Nontaxable is excluded)
Royalties (but not mineral, oil, gas, or copyright royalties)
Dividends from an unrelated domestic corporation
What is the advance pricing agreement program? (IRS)
The APA is a binding contract between the IRS and the taxpayer by which the IRS agrees not to seek a transfer pricing adjustment for a covered transaction if the taxpayer files its return for a covered year consistent with the agreed transfer pricing method.
How does a corporation deduct foreign income tax paid?
Foreign income taxes paid by a domestic corporation may be claimed either as a deduction or as a credit, at the option of the corporation.
What contractual duty does a principal owe to an agent?
A principal ALWAYS has a duty to indemnify the agent for expenses the agent has incurred on behalf of the principal.
What doctrine under which a corporation is made liable for the torts of the corporation’s employee when the torts are committed within the scope of employment?
Respondeat superior
What will a plaintiff need to prove in order to recover damages from an accountant under Section 10(b) Rule 10b-5?
The plaintiff must prove:
Reliance on the misstated financial statements
Material misstatement or omission in audited FS
Suffered a loss (damages)
Error was due to the reckless misconduct or intent to deceive (Scienter)
