BIG INCOME TAX (Every Day) Flashcards
The recognized gain is what?
The lesser of the boot or realized gain
During inflationary period- FIFO ______ earnings.
increases
Which of the following is an AMT preference item?
Cost depletion in excess of adjusted basis Municipal bond interest (public purpose) Personal exemption MACRS Standard deduction
MACRS (not straight line)
percentage depletion is, cost depletion is not
Schedule E is for the reporting of
K1 income
Schedule K-1 is a federal tax document used to report the income, losses, and dividends of a business’ or financial entity’s partners or an S corporation’s shareholders. The Schedule K-1 document is prepared for each individual partner and is included with the partner’s personal tax return.
LLC has the same basis rules as a _____.
partnership
Can an S corp take more or less losses than an LLC?
Less.
The charitable deduction for gifts of short-term Capital gains property is limited_____ and _____.
basis and 50% of AGI
What is the child and dependent care credit?
50% of childcare expenses up to a credit of $8,000 per child (max $16,000)- THIS IS INCREASED BECAUSE OF THE AMERICAN RESCUE ACT
https://www.kiplinger.com/taxes/602508/child-care-credit-expanded-for-2021
What is the MACRS depreciation percentage during year 1 for a 5 year property? What about during year two?
20 percent during year one
32 percent during year two
What is the MACRS depreciation percentage during year 1 for a 7 year property? What about during year two?
- 29% during year one
24. 49% during year two
Are premiums deductible in a cross purchase agreement?
no
Are premiums deductible in an entity purchcase agreement?
No
What is the “other dependent credit”
$500
What is the qualified adoption tax credit?
$14,400 (subject to phase out starting at $216K)
When is alimony received included in gross income?
When the divorce was before 1/1/2019
What are the dates for paying ESTIMATED taxes?
April 15, June 15, etc
What are the requirements to file as a widow
- must remain unmarried
- maintains a home for a child
What are the limitations of home office deduction?
only for self employed
limited to net business income
must not have another fixed location where substantial business is done
exclusively for business on a regular basis
are office parties deductible?
yes
How much are business meals deductible?
50%
for qualifying meal costs. Apply in 3 different ways:
1. salaried employee (unreimbursed expense) (….?)
Can a corporations that pays 100% of meal expenses as entertainment deduct the cost?
no- it’s entertainment
Can self employed person that pays 100% of meal expenses deduct the cost?
yes- 50%
Can a SALARIED employee who is not reimbursed for entertainment expenses deduct the remaining expense on schedule a?
no
When talking about business entities, if someone’s business is “profitable” what should I automatically think of?
C corp (losses? probably don’t do a c corp)
How many shareholders for an S corp?
no more than 100
What is a PSC?
it’s a C corp that is owned and funded by fees from professionals that perform service (HALE)
In a C corp (including a PSC) limited liability refers to what and not what?
general liability, not professional acts of the owners
If someone borrows money for business purposes relating to his SOLE PROP how much of the interest is deductible?
unlimited (schedule c deduction)
What does partnership basis include that s corp basis doesn’t?
bank loans
Who can be a shareholder of an S corp stock
individuals (not nonresident aliens)
certain trusts
estates
Cash distributed by an S corp is considered what? What does it do?
nontaxable return of investment
reduces basis
For an S corp, how much in losses can be deducted????? Mike owns an s corp. He takes a salary. Put in 50,000 cash. Lent it 30,000. Business has NOL of 100,000.
Losses can be deducted up to basis
he can deduct 80k as a loss
remaining will be carried forward to next year
When talking about business entities, if someone’s business is “risky” what should I automatically eliminate?
partnership
When talking about amortizing intangible things like goodwill (intangibles) how is this done?
under section 197
a lot like straight line depreciation
Can a 179 deduction be used for used property?
No, must be new and tangible
What are the main types of property that cannot be 1031d?
Inventory of a business (may be tested)
non business tangible property
personal residence (the property being received may use acquired homes in the exchange and not be taxed as long as it’s used in business or investment moving forward- doesn’t work for giving up home though)
marketable securities
If there is NO boot received what must the recognized gain be?
$0
short term gains and 1245 recaptures are subject to what rates?
ordinary
If someone needs to move for a new job and it’s less than 50 miles away can the seller use the exclusion?
no
Regarding bonds, what’s ones of the biggest ways to avoid amt for the test
buy public, not private
Can losses from a PTP be used to offset passive income from other sources?
no
Net losses from a PTP may what?
carried forward
used only to offset against future income from SAME partnership
the loss in the top PTP cannot escape the circle
carried forward until used against income in that same partnership or sold
Can PTP (public limited part) income offset PALs (passive activity losses)?
no
What DOES offset PALS?
PIGS
passive income generator
COULD s corp income be passive income if the person owns 30% but doesn’t materially participate?
yes it COULD
Is there an income phaseout limit for the low income program housing credit?
no
How does the low income housing credit work?
It’s allows annually over a ten year credit period
depreciation is over 27.5 years
