CFP - Tax planning Flashcards
All assets are capital assets except
ACID
Accounts/ notes receivable, Copyrights and creative works, Inventory and Depreciable property used in a trade or business
Section 1231 assets specifically includes
Timber, Coal, Iron Ore, Certain Livestock and Unharvested crops
Adjustments to Basis
Gain and Loss Treatment
Benefits of section 1231
Gains will qualify for LTCG rate and losses will not be subject to the limitations that typically apply to capital assets
Only way to have a section 1231 gain on a section 1245 property is to sell it for more than original purchases
Depreciation/ CAT CORN
CAT - 5 year property - computer, autos and trucks 1254 recapture
O - 7 year property - office furniture and fixtures , 1245 recapture
R - residential real property - 27.5 year , 1250
N - non residential real property - 39 year, 1250 recapture
Kiddie Tax only applies to “unearned income “ in excess of
$2500
Child and Dependent Care credit amount
AGI of $43k and above 20% x eligible costs ( $3000 for 1 child and $6000 for two)
AMT Preference Items
- Percentage depletion
- Intangible drilling costs
- Interest on private activity bonds
Risk Management Guidelines
Dividend Options
CRAPO
Cash, reduce future premiums, accumulate at interest, paid -up permanent additions , One year term additions
Comparison of life insurance 1
Comparison Life Insurance 2
3 year property
Tractors , rent to own property
5 year property
Autos, computers, office equipment
7 year property
Office furniture and fixtures
27.5 year property
Rental Home
39 year
Office building
Dependency Tests
Gross income
Support test
Not a qualifying child
Citizenship
Joint filing test
Section 1202
Gain recognition on qualifying small business stock
1244
Single taxpayer can deduct up to $50,000 ( $100,000 for MFJ) of the loss on small business stock as an ordinary loss
Section 1033
Involuntary conversion of property due to destruction, theft, seizure or condemnation
Section 1033 allows
Defer gains to the extent the proceeds received are reinvested in replacement property
Time period ends 2 years ( 3 years for condemnation of realty) from the year- end of year that gain is realized
Child Credit (17)
$2000 ($1600 refundable)
Child & Dependent credit
$600 & $1200
Non child dependent ( 17 plus)
$500
Gross income social security benefits
Single under $25k = 0
MFJ over $44k = 85%
