Becker Flashcards
How do you determine the tax due or refund?
Gross income (Adjustments) = Adjusted gross income (Standard deduction OR Itemized Deductions) (Exemptions) = Taxable Income. Federal income tax (Tax Credits) \+ Other taxes (Payments) = Tax Due or Refund
What is included in Gross Income?
Wages, interest, dividends, state tax refunds, alimony received, business income, capital gain/loss, IRA Income, Pension and Annuity, Rental Income/Loss, K-1 Income/Loss, Unemployment compensation, social security benefits, other income
What is included in adjustments
Educator expenses, IRA, Student loan interest expenses, tuition & fee deduction, health savings account, moving expenses, one half self employment FICA, Self employed health insurance, Self employed Retirement, Interest withdrawal penalty, Alimony Paid
What is another term for adjustments?
Deductions to arrive at AGI
What are itemized deductions?
Medical, Taxes - State/Local, Interest expense (Home & Investment), Charity, Casualty/Theft, Miscellaneous, Other Miscellaneous
How is medical applied to AGI?
Medical is in excess of 10% of AGI
How is charity applied to AGI?
Charity is up to 50% of AGI
How is casualty/theft applied to AGI?
Casualty/theft in excess of 10% of AGI
How is miscellaneous applied to AGI?
Miscellaneous in excess of 2% of AGI
What determines a qualifying child?
CARES. Close Relative, Age Limit (19/24), Residency and Filing Requirements (more than one half of tax year), Eliminate Gross Income test, Support test changes
What determines a qualifying relative?
SUPORT.
Support (over 50%) test,
Under a specific amount of taxable gross income test,
Precludes dependent filing a joint tax return test,
Only citizens resident of U.S. canada or mexico test,
Relative test
OR
Taxpayer lives with individual for whole year test.
What is realization?
Realization = Real world. Requires accrual or reciept of cash, property, services, or a change in the form or natuure of the investment (Sale or exchange)
What is recognition?
Recognition = Record. Realized gain included on the tax return
What is passive?
Passive = Rental activity. Only passive losses may offset passive income.
Is interest income taxable?
All interest income is taxable unless it is specifically excluded.
What is Series EE?
Series EE = Educational expenses, tax exempt
What items are exempt from gross income (Non taxable)?
Return of capital, Stock split, Stock dividend, Life insurance dividend
What are two taxes on net income?
Income tax, Federal self employment tax
What are the exceptions to Penalty tax?
HIM DEAD. Home buyer (1st time 10,000 maximum), Insurance, Medical expenses in excess of 10% of AGI, Disability, Education, and Death
What is all rental activity?
All rental activity = Passive activity
How are Incentive stock options and employee stock purchase plans taxed?
Not taxable as compensation, capital gain/loss when sold
When is there no IRA deduction?
Rich and in retirement plan
How do you record cash basis?
Deduct in year paid, not in year it applies to.
What taxes are nondeductible?
FIB.
Federal taxes (including social security),
Inheritance taxes for states,
Business and rental property taxes
How do you calculate casualty and theft losses?
Smaller loss (Insurance Recovery) = Taxpayers loss (100) = Eligible loss (10% AGI) = Deductible loss
What are personal tax credits?
Reduce tax, but no refund
What are refundable credits?
Reduce tax, and can create a refund
How do you calculate alternative minimum tax
Regular taxable income, \+- Adjustments, \+Preferences = Alternative minimum taxable income (Exemption) = Alternative minimum tax base, x Tax computation = Tentative AMT tax (tax credits) = Tentative minimum tax (regular income tax) = Alternative minimum tax (Pay in addition to regular tax)
Which tax do you pay for Alternative minimum tax
Pay greater of Regular tax OR Tentative minimum tax
AMT Adjustments
PANIC TIMME. PANIC ( increase or decrease) TIMME (only increase). Passive activity losses, accelerated depreciation, net operating loss, installment income, contracts, Tax deduction, Interest deductions on some home equity loans, Medical deductions, Miscellaneous deductions not allowed, Exemptions - personal and standard deduction.
AMT Tax Preference Items
PPP. (always add backs).
Private activity bond interest income,
Percentage depletion the excess over adjusted basis of property,
Pre 1987 accelerated depreciation
AMT Credits
FACCE. Foreign tax credit, Adoption credit, Child tax credit, Contributions to retirement plans credit, Earned income credit
Is there gain or loss recognized on shareholder contributing property in exchange for common stock?
No gain or loss recognized if 80 percent control and boot not involved
What is the start up costs caculation?
$5000 + Excess 15 years (amortized 180 months)
What is the capital loss carryover?
3 back/5 forward
What are net operating losses?
Carryback 2 years, Carryfoward 20 years
What are the adjusted current earnings to ATM?
MOLDD.
Muni interest income,
Organizational expense amortization,
Life insurance proceeds or key employees,
Difference between AMT and ACE depreciation,
Dividends received deduction
What are adjustments when calculating AMT?
LID.
Long term contracts,
Installment sales,
Depreciation adjustment for property placed into service
Personal Holding company
NIRD.
Net rent (less than 50 percent of ordinary gross income),
Interest that is taxable,
Royalties,
Dividends from unrelated domestic corporation.
Not required to file form 990
CHRIST. (50,000 or less gross receipts) Churches, High schools- religious, Religious orders, Internal support auxiliaries, Societies - missionary related, Tax exempt - organized by congress
What are the individuals net capital loss deduction and loss carryover rules?
3000 maximum deduction and carry forward an unlimited time until exhausted.
Taxable events for partnership taxation as well as individual taxation?
Event Taxable = Income at FMV & Basis at FMV.
Event Non taxable = No Income & Basis at NBV.
What are the security exemptions?
BRINGS. (Securities issued by) - Banks and savings, Not for profit organizations, Government, Regulated common carriers (railroads), Short term commercial paper, Insurance policies.
Three requirements of a legally enforceable contract?
- Offer and acceptance
- Exchange of consideration
- Lack of defenses
Defense of fraud
MAIDS.
Misrepresenation of material fact,
Scienter (statement was false, reckless disregard),
Induce victim to rely on misrepresentation,
Actual and justifiable reliance on misrepresentation, Damages
What are the statue of frauds - Six contracts requiring a writing
MYLEGS. Marriage, Year (cannot be performed within a year), Land, Executors contracts, Goods $500 or more, Surety (pay debt of another)
Four exceptions to the sale of goods $500 or more must be evidenced by writing.
SWAP. Specially manufactured goods, Written confirmation from merchants, Admitted contracts in court, Contracts that have been performed.
To be a negotiable instrument
Must be in writing, Signed by maker or drawer, Unconditional promise, Fixed amount of money, Payable on demand or definite time, Be payable to order or to bearer with the exception of checks
Real defenses against Holder in due course and non HDC transferees
FAIDS. Fraud in the execution, Forgery, Adjudicated insanity, Material alteration, Infancy, Illegality, Duress, Discharge in bankruptcy, Surety ship defenses, Statue of limitations
Priorities of rights between conflicting interests in collateral
Buyer in the ordinary course of business, Perfected PMSI, Perfected (non PMSI), Unperfected (attach only), Debtor
Certain debts of an individual are not discharged under chapter 7 or 11
WAFTED. Willful or malicious injury, Alimony, Fines, Fraud, Taxes, Embezzlement, Educational loans, Debts
Bankrupts priorities - Distribution of debtors estate payment and priorities
SAG WEG CTI. Support obligations to spouse and children, Administrative expenses, Involuntary case gap claims, Wage claimes up to 12,475, Employee benefit plans up to 12,475, Grain farmers and fisherman, Consumer deposits, Tax claims, Personal injury claims arising from intoxicated driving.
Defenses of surety
CPRS. Creditor bad faith, Payment and tender of payment, Release of principal debtor, Surety incapacity or bankruptcy.
Agency power can arise through
Grant of actual authority,
Apparent authority or estoppel,
or Ratification.
Fundamental corporate changes that require shareholder approval
DAMS.
Disolution,
Amendments to articles of incorporation,
Mergers consolidations and compulsory share exchanges,
Sale of substantially all the corporation assets outside the regular course of business.
Two types of companies must register their securities
- Companies whose shares are traded on a national exchange
2. Companies that have more than 10 million in assets, at least 2000 shareholders OR 500 shareholders
To qualify as a merchants firm offer
- Seller must be a merchant.
- Offer must be in writing and signed by the merchant.
- Offer must give assurances it will be kept open for a certain time.
Who must join petition if owed?
- Fewer than 12 creditors - one or more owed 15,325
2. 12 or more creditors - three owed 15,325
