Consolidated Flashcards
Amortization - Sec 197 SL intangibles
e.g. covenant to compete, customer list, trade name, goodwill, licenses, trademarks, brand equity, intellectual property, franchise, trade secrets, copyrights, market knowledge, social media presence
full month convention in the month of acquisition and in the month of disposition
180 months or 15 years
Nonresidential real property
39 years (mid-month)
Residential real property
27.5 years
Syndication costs - e.g. stock filing
Not amortized
Section179 Deduction, phase out (tangible personal property)
(The cost of the asset may be deducted under either Sec 179 or as depreciation, but not both. There is no difference in the total amount that is deductible over the life of the asset).
Rankings
1. 179 first
2. Bonus dep
3. MACRS
max - 1220000
Phase out limit - 3050000
*Corps may elect to take Sec 179 deduction
*Real property (except qualified real property IMPROVEMENTS) is generally NOT eligible for Sec 179 ded
*Sec 179 deduction may be reduced based on total purchases
** It’s NOT allowed if there is a loss.
Office building not eligible for 179 expense , just fire alarm system inside office building or non-residential property only (firm alarm system inside residential building is not eligible for 179 expense)
Bonus Depreciationis 60% in 2024
20 year or less recovery period
(doesn’t apply to related party sale, doesn’t apply for personal use property, doesn’t apply to gift or inheritance)
Gift - basis for sale of shares
take carryover basis of donor
Greater than 40% but less than 50%
SUBSTANTIAL (Undisclosed position)
More than Likely (than not standard)
Greater than 50%
Reasonable basis standard
Greater than 20% (Disclosed position)
Annualized income method
Large corporation
Taxable income was more than 1mn or more for the last 3 years
Personal Holding Tax
(Personal holding company income = ROYALTIES + DIVIDENDS +TAXABLE INTEREST NOT bonus, NET RENT if less than 50% of ordinary gross income)
PHC includes consent dividends
PHC is a type of C corp that primarily generates income from interest, dividends or royalties and should be owned by 5 or fewer individuals with 50% or 60% of its income coming from investment income. - check % in BECKER. PHC is not subject to SE tax as it’s max income is derived from Inv Income which is passive income and is not considered as SE income. Shareholders may be subject to SE tax if they r treated as self- employed and not employees (rare scenario)
50% owned by 5 or fewer
(Personal Holding co. status applies if a corp is owned more than 50% by 5 or fewer individuals at any time during the LAST HALF OF THE TAX YEAR and at least 60% of the adjusted ordinary GROSS INCOME for the tax year is PERSONAL HOLDING COMPANY INCOME (which would include income from investments in stocks and securities).
AAA can be imposed (regardless of the number of the stockholders in the corporation) on PSC not on PHC ,
Minimum accumulated earnings credit
The additional Accumulated tax rate is flat 20%
limit $250,000
Accumulated Earnings Tax
Penalty tax imposed ONLY on C CORP
Max $250,000 lifetime acc earning
Personal service corp - max $150,000
Foreign income taxes paid by a corp
can either be claimed as a credit or deduction
Tax Return Preparer Compliance Penalties
Disclosed Position Reasonable basis standard Greater than 20%
Undisclosed position Substantial Authority Standard 40-50%
Listed/reportable transaction More likely than not standard >50%
Disclosure forms
1. Form 8275- if not contrary to U.S. Treasury Regulations
2. Form 8275-R, if contrary to U.S. Treasury regulations
543000 Book Income
-20000 Dep
-25000 Int Earned on municipal bonds
10000 Fines (not deductible)
36000 rental income
544000
380000 Book Income
-50000 Municipal Bond Int
170000 Fed Income tax expense
2000 Int expense on debt incurred
502000
Student loan interest - $2500, subject to phase out
Married taxpayers must file jointly to qualify
Loan is used to pay for the qualified higher educated expenses (e.g. tuition, fees, room, board) of the taxpayer, spouse or a dependent (at the time the debt was incurred).
Student - enrolled on at least a half-time basis.
Rental real estate loss
50% of (AGI - 100,000)
25,000 of rental real estate loss can be deducted against income that is not from passive activites if the taxpayer ACTIVELY participates in the RENTAL REAL ESTATE ACTIVITY.
Long-term care insurance PREMIUMS on qualified policies - DEDUCTIBLE
PREIMUMS on life insurance and disability insurance - NON DEDUCTIBLE
Tax Shelter (listed or reportable transaction)
Disclosed position = Reasonable std >20%
Undiscosed position (substantial
More likely than not (50% or not)
The first $50,000 of GTL provided by an employer is a non-taxable fringe benefit.
=(200000-50000) * 2.76
___________________
1000