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CPA TCP > Assorted > Flashcards

Assorted Flashcards

1
Q

What is taxable income for Non-Qualified Stock Option’s?

A

FMV on exercise date-Strike price * number of shares exercised

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2
Q

What is the spread for NSO?

A

MV at exercise-Exercise price=Spread

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3
Q

What is AMT?

A

Alternative minimum tax

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4
Q

How do you compute AMTI?

A

Regular taxable income + add back certain deductions personal and standard deductions, state and local taxes, misc. itemized deductions, interest on private activity bonds
Adjust income for specific items Depreciation, long-term contracts, ISOs subtract AMT exemption, account for deductions (mortgage int, and medical expenses limited to 10%=AMTI

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5
Q

What is a consolidated corporate return?

A

Affiliated group

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6
Q

What are capital assets?

A

Personal assets used for business or investment

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7
Q

How much worthless stock 1244 is deductible? S MFJ>

A

50k single 100K MFJ have to be original owners also

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8
Q

Do bad debts have to worthless to be deductible? Ordinary or capital?

A

Yes capital

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9
Q

What is Passive activity income?

A

Rental income business income

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10
Q

What is active income?

A

Salaries wages guaranteed payments business income materially participating

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11
Q

What is portfolio income?

A

Interest dividends annuities royalties capital gains losses

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12
Q

How do you calculate ROI?

A

ROI=Projected balance-total investment / Total investment *100
Pretax income= NI / (1-Taxrate)

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13
Q

What is capital loss max for individuals?

A

3000

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14
Q

When NOL losses are carried back or forward what are they considered?

A

Short term capital loss

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15
Q

What is capital loss for corporations?

A

Up to capital gain amount and the rest is carried forward or back based on rules

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16
Q

Are net capital losses deductible in year they occur?

A

No. Must have gain. if carried forward from prior year can offset to reduce remaining gain

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17
Q

Can capital losses offset ordinary income?

A

NO

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18
Q

What is the rule for carryforward and back for NOL losses?

A

Carryforward 5 years and carryback 3 years

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19
Q

What is partnership basis?

A

Beg Basis+income+partnership liabilites-distributions-losses= ending basis

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19
Q

Are guaranteed payments ordinary income?

A

YES

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20
Q

What is C Corp charitable deduction limit?

A

10% if there is no taxable income or operating loss 0% can be deducted

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21
Q

What is IC-DISC?

A

A tax exempt entity that pays no tax on commissions received from a US corporation which is the feature that creates tax savings for these entites

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22
Q

When a C Corp distributes assets to its shareholders in non liquidating distribution what is taxable?

A

Nonliqudating distribution the corporation treats as having sold the assets for FMV and is subject to any gain.

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23
Q

How do you calculate apportionment?

A

Payroll %+Sales%+Property%/3 = %

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24
Q

Is reorganization of a corporation tax free?

A

YES

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25
Q

What is the tax effect of the liquidation of 80% or more owned Sub?

A

In tax-free liquidation the parent corp takes over carryover basis in assets it received from the sub

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26
Q

Sub part F exists why?

A

to discourage taxpayers from using foreign corps to defer US taxes by accumulating income in CFCs
Income that must be immediately taxed is defined as foreign base company income 1 passive 2 active income tied to related party

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27
Q

BEAT rules apply to?

A

US Corporations with at least 500 million for 3 year taxable period ending with the preceding year with a significant amount of deductible payments to related foreign affiliates

28
Q

What happens when corp 382 limitation amount exceeds corp taxable income for the year?

A

Excess limitation amount is carried forward and added to following years limitation

29
Q

What is the treatment of net losses in excess of the at risk amount for an activity?

A

Any losses in excess of the at risk amount are suspended and carried forward without expiration and are deductible against income in future years from that activity

30
Q

What is the major difference between a foreign branch and a foreign subsidiary?

A

Income from the foreign branch is treated as being earned directly by the domestic corp but income from a foreign sub is not taxed until the income is repatriated to the US

31
Q

What is unified transfer tax based on?

A

A merger of the estate tax and federal gift tax

32
Q

Small business stock or 1244 qualifying stock can be deducted under what rules?

A

Must be original owners, treated as ordinary losses up to 50K in any tax year

33
Q

How do you calculate the section 382 limitation amount?

A

Section 382 limitation amount is an annual limitation that applies to the deduction of prechange NOL carryforwards against future taxable income. If limitation amount if greater than the taxable income amount for the year the unused section 382 limitation is carried forward.

34
Q

What is the requirement of foreign person to be considered US resident?

A

Must be present atleast 31 days during the current year and atleast 183 days for a 3 year period

35
Q

Do future interest qualify for gift tax?

A

No.

36
Q

What is used to determine the amount of a corps annual Section 382 limitation of pre change loss corp NOLs?

A

The amount on the deduction of pre-change NOL carryforwards in each post-change tax year by multiplying the FMV of the corp stock immediately before 382 ownership change by the federal long-term tax-exempt rate

37
Q

When is gain recognized in partnership when property is contributed with a liability?

A

A gain is only recognized when liability assumed by other partners is greater than the basis of property contributed

38
Q

What kind of business may not qualify for 501(c)(3)?

A

Partnerships are not referred to in IRC Section 501(c)(3)

39
Q

Realized gain formula?

A

FMV rec+ cash or liab assumed- Adjusted basis

40
Q

Recognized gain?

A

The lesser of boot received or the realized gain

41
Q

What is formula used to determine realized and recognized gains?

A

Giving up + new liab - Receiving + old liab realized is recognized gain or boot whichever is lesser

42
Q

Which IRA distribution of principal is taxable?

A

A distribution of principal from a traditional IRA is taxable if the taxpayer took a deduction when it was made

43
Q

Can consolidated groups decide yearly for filing returns together or seperate?

A

No. The election to file consolidated returns is binding for future years and may only be terminated by disbanding the group or seeking permission from the IRS

44
Q

If corp makes a distribution what is used?

A

FMV is always used by shareholder and c corp Distributions will be recorded at FMV. A gain/loss would be recorded by corp (FMV-basis) and shareholder has taxable income.

45
Q

How are gains accounted for in consolidated tax returns?

A

Gains between multiple companies in consolidated tax returns are eliminated.

46
Q

What is required to be eligible to join a consolidated tax return?

A

Must have atleast 80% of its voting stock

47
Q

When is non qualified stock options taxed?

A

At the time of exercise

48
Q

When are restricted stock units taxed?

A

Taxed at vesting

49
Q

If a donation is sold by a donee what is the contribution amount used on tax return for the donor?

A

If it is a tangible personal property that is put to use by something unrelated it is limited to AB even if has appreciated.

50
Q

Alternative minimum tax add backs

A

Standard deduction not allowed state and local taxes deductible for regular tax not for AMT home equity loan int- deductible for AMT, medical expenses deductible only if they exceed 10% AGI for AMT, depreciation use 150% declining balance,

51
Q

Foreign income exclusion

A

120 K residence for entire year and physically present in foreign country for 330 full days during 12 months

52
Q

FSA

A

roll over each year allow for qualified medical expenses

52
Q

What is kiddie tax for children?

A

1300 at 0% 1300-2600 at childs rate 2601 and over parents rate

53
Q

How are Traditional IRAs taxed

A

tax deductible contributions and deferred growth but penalty for early withdrawal 7500 single 15000 MFJ

54
Q

What is the mom and pop exception for PAL

A

If someone “actively participates” they can take $25k loss with AGI up to 100k phased out at 150K

55
Q

What is the amount of taxable gift?

A

Cash at face value and property gifts at FMV

56
Q

What kind of IRA distributions is the distribution of principal taxable?

A

A distribution of principal from a deductible traditional IRA if a deduction for the contribution was taken when it was made

57
Q

What types of income from CFC (foreign corp) is subject to immediate taxation?

A

Passive investment income

58
Q

What is considered Foreign Derived Intangible Income?

A

Sale of property to any person who is not US person for foreign use, services provided by taxpayer to any person not located in US

59
Q

If a corp has a direct distribution of assets to shareholders that results in complete liquidation who recognizes gain/losses?

A

in a complete corp liquidation a corp distributes assets to S/H, the corp recognizes gain or loss as if it has sold assets at FMV and S/H recognize capital gain or loss to extent the FMV of assets differs from basis

60
Q

What increases a corp FDII?

A

Sale must be to non US persons, for use in outside of the US, not to a related party for its own use

61
Q

What is included in Foreign-based income under Subpart F

A

Subpart F primarily exists to discourage taxpayers from using FC to defer US taxes by accumulating income in CFC. The immediate taxed income consists of passive income or active income tied to a related party

62
Q

What business can be formed for someone who isn’t US Citizen?

A

C Corp

63
Q

Do partnerships recognize a gain for non cash property dist?

A

No. Partnership distributions are nontaxable and no gain or loss is generally recognized by the partnership or the partner on the distribution of non cash property to a partner

64
Q

What is the partnerships tax year?

A

a partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed three months

65
Q

What is 1231 asset?

A

Real property and personal property used in business held over 1 year….1231 does NOT apply to ST property only LT hence held over 1 year

66
Q
A

CPA TCP (1 decks)

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