Dalton Quizzes Flashcards
Tony Scarponi has come to you asking about the basis of property that his brother Calvin gave to him. The property had a market value of $75,000 and Calvin’s adjusted basis in the property was $18,000 at the time of the gift. Calvin paid gift tax of $3,500 on the gift. Tony wants to know what his adjusted basis in the property is. Assume Calvin had utilized his annual gift tax exclusion for gifts previously given to Tony that year. What will you tell him?
A)Tony’s new basis is $18,000, the same as Calvin’s basis was at the time the gift was made.
B)Tony’s new basis is the fair market value of the gift at the time of the gift.
C)The adjusted basis for Tony is $20,660.
Rationale
The correct answer is “C.”
Increase in Donee’s Basis = (Appreciation of the Property/ Taxable Gift) x Gift Tax Paid FMV of Property at Date of Gift
[($57,000 ÷ $75,000 = .76) x $3,500] + $18,000 = $20,660
D)The adjusted basis for Tony is $21,500.
As a direct result of the rules under TCJA 2017, qualifying dividends will be treated in which manner:
Under TCJA the capital gain breakpoints are at set dollar amounts not corresponding to the current tax brackets. See provided tax tables in Helpful Documents within Blackboard.
What kind of tests of corporation must meet to be considered a personal holding company?
a.) Ownership test—During the last half of the taxable year, more than 50% of the value of the outstanding stock of the corporation is owned by five or fewer individuals.
b.) Passive income test—At least 60% of the corporation’s adjusted ordinary gross income consists of personal holding company income.
■ Adjusted ordinary gross income is the company’s gross income, with several adjustments. Adjustments include reductions for property taxes, depreciation, and interest expense.
■ Personal holding company income is generally defined as passive income and certain income from services.
c.) Undistributed personal holding company income is the corporation’s adjusted taxable income, less the dividends paid deduction.
What are the Itemized deductions that are deductions from AGI?
These include charitable contributions, medical expenses, mortgage interest, taxes paid, and casualty losses in a federally declared disaster area. c. These deductions are also known as Schedule A itemized deductions.
What is the maximum capital loss for individuals?
Capital losses can offset capital gains without limit. a. Capital losses are deductible against a taxpayer’s ordinary income up to $3,000 ($1,500 for taxpayers filing as MFS) annually, with an unlimited carry-forward amount. b. Any capital losses unused after filing a taxpayer’s final federal income tax return are lost and may not be used by the estate or a beneficiary. c. A corporation can use capital losses only as an offset against capital gains. 1.) Capital losses in excess of a year’s capital gains may be carried forward for five years or carried back to each of the preceding three tax years. 2.) The loss is treated as a short-term capital loss for the year in which it is carried forward or back. 3.) Remaining capital losses that cannot be fully utilized in the carryover periods (three years back and five years forward) are not deductible.
cost recovery
成本回收
Which of the following appropriately describes senior worker’s social security benefit situation?
Her benefits would have been reduced $1 for every $3 she earned in excess $48,600 (2020) in the year in which she attained full retirement and there is no penalty after normal age retirement
Factors affected the money purchase plan are:
Forfeitures may reduce employer contributions due to contribution offsets or Section 415 limitation on annual additions. Increased compensation will result in increased contributions by the employer, subject to Section 415 limitations. Returns on portfolio assets and actuary funding are a concern in defined benefit plans. A money purchase plan is defined contribution plan.
A rabbi trust
A rabbi trust is a irrevocable trust but, unlike a funded deferred compensation plan, the assets are subject to the claims of the employer’s creditors. This avoids constructive receipt by the employee and delays income taxation until distribution.
Which of the following statement(s) concerning Unrelated Business Taxable Income (UBTI) is/are accurate?
I. Dividends, interest, and other types of income derived from investments in a business are not subject to UBTI.
II. A partnership interest in an investment enterprise, whether active or passive, is subject to UBTI.
III. A direct business activity carried on for the production of income is considered a trade or business for UBTI purposes.
IV. Securities of the employer purchased with loan proceeds by an Employee Stock Ownership Plan (ESOP) are not subject to UBTI.
A)I only. B)I, II and III only. C)II, III and IV only. D)I, III and IV only. Rationale The correct answer is "D." Direct investment in a business generates income which is UBTI. Any investment which is purchased with "leverage" or borrowed funds generate UBTI except for a qualifying ESOP or LESOP.
ERISA
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.
5144Question 19 of 24Retirement and EE Benefits Quiz 4
An employer has made a contribution equal to 5% of each plan participants income into a profit sharing plan. The plan with a one-year service requirement is found to be top heavy. Which of the following statements is true?
A)The top-heavy condition must be corrected before the end of the plan year or the plan will be disqualified.
B)The plan must use a 2-6 or shorter vesting schedule.
C)An additional contribution of 3% to Non-Highly Compensated Employee (NHCE) accounts is mandated.
D)Highly compensated employees must have their contributions reduced so the plan is no longer top-heavy.
Rationale
The correct answer is “B.” A top heavy plan mandates a 3-year cliff vesting or 2-6 graded vesting schedule (or faster if elected by sponsor.) Top heavy plans must make a minimum contribution of 3% to non-key employees. This PSP had already made a 5% contribution so no additional contribution is required. Top heavy plans are still qualified as long as minimum vesting and contribution requirements are met.
Which of the following penalties are assessed when prohibited transactions occur?
I. 10% of the amount involved unless shown that ERISA fiduciary standards were satisfied.
II. Penalties can continue when ongoing transactions carry over to subsequent years.
III. The plan must be restored to a financial position no worse than if the transaction had never occurred.
IV. Income tax will be assessed against those plan participants who were party to the transaction by the courts.
A)I and III only.
B)II and III only.
C)III and IV only.
D)I and II only.
Rationale
The correct answer is “B.” The first tier excise tax for prohibited transactions is 15% of the amount involved and is automatic even if the violation was inadvertent. The second tier excise tax is 100% of the amount involved and is assessed if the prohibited transaction is not remedied. There are no income taxes applied; all remedies are made through restitution and excise taxes.
Gia, age 45, is married and has two children. Her employer, Print, Inc sponsors a target benefit plan in which she is currently covered under. Which of the following statements is true regarding her plan?
A)She can name anyone she wishes as her beneficiary.
B)A target benefit plan favors younger employees.
C)A target benefit plan is covered under PBGC.
D)The investment risk is on the employee.
Rationale
The correct answer is “D.” The investment risk is on the employee because this is a defined contribution plan. She can only name someone other than her spouse if she has a valid waiver signed by the spouse. This applies to all pension plans. A target benefit plan favors older entrants. A target benefit is not covered under PBGC.
an “incidental benefit” if offered through a defined contribution plan?
Life insurance in a qualified plan is limited, under the incidental benefit rule, to 25% of aggregate contributions to the participant’s account for Term and Universal life plans. Whole life plans may constitute 50% of the contribution.
QJSA？
A qualified joint and survivor annuity (QJSA) provides a lifetime payment to an annuitant and spouse, child, or dependent from a qualified plan.
Pension plans are required to offer a QJSA to participants， including：
I. Cash balance plan.
II. Target benefit plan.
III. Defined benefit plan.
IV. Money purchase plan.
A profit sharing plan is not subject to QJSA requirements.
QJSA rules apply to money-purchase pension plans, defined benefit plans, and target benefits. They can also apply to profit-sharing and 401(k) and 403(b) plans, but only if so elected under the plan.
A supplemental deferred compensation plan that pays retirement benefits on salary, above the Section 415 limits, at the same level as the underlying retirement plan is known as:
A)A Supplemental Executive Retirement Plan (SERP).
B)A funded deferred compensation plan.
C)An excess benefit plan.
D)A Rabbi trust.
Rationale
The correct answer is “C.” An excess benefit plan extends the same benefits to employees whose contributions to the plan are limited by Section 415 (e.g., employee earns $285,000 yet receives $57,000 contribution instead of $70,000 contribution due to Section 415 limitation on a 25% money purchase plan). An excess benefit plan would put additional $13,000 into non-qualified retirement plan. Do not confuse with a SERP which provides benefits in excess of the Section 415 limits AND ignores the covered compensation limits (i.e., $285,000 in 2020) applied to qualified plans.
which of the following components must be factored into the calculation of the maximum annual addition limit?
Employer and employee contributions to all defined contribution plans.
Annual additions are defined as new money contributed into the individual account of a participant. Because forfeitures reduce employer contributions and are not added directly to employee’s individual accounts, the forfeitures are not included in annual additions. Annual earnings and rollover contributions are not included in annual additions.
The rule of withdraw and rollover the IRA
Once an individual has participated in a rollover where funds have been withdrawn and held and then reinvested, he or she is ineligible for such a transaction again for one year from the date of receipt of the amount withdrawn.
Pension Benefit Guaranty Corporation (PBGC),
while PBGC insures CB Cash Balance Plans, it does not insure 401(k) plans.
How do cash balance plans differ from 401(k) plans?
The employer bears the risks and rewards of the investments in a Cash Balance Plan, while under 401(k) plans, participant bear the risks and rewards of investment choices.
qualified profit-sharing plans
Profit-sharing plans should make contributions that are “substantial and recurring.
While contributions to profit sharing plans are generally discretionary, meaning a plan sponsor can decide from year to year whether to make a contribution or not, the IRS expects that contributions will be “recurring and substantial” over time in order for a plan to be considered ongoing and remain viable
In a profit sharing plan, if the plan sponsor has failed to make substantial contributions in three out of five years, there may be a discontinuance of contributions
IRA investment
Most investments are permitted in an IRA.
- ) Stocks, bonds, mutual funds, and limited partnerships are examples of investments that are permitted within an IRA.
- ) Prohibited investments are the following:
a. ) Collectibles—includes art, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages, and certain other tangible personal property. (Certain U.S. coins are permitted.)
b. ) Life insurance
What are the prohibited transactions for a defined benefit plan?
Prohibited transactions
- ) Sale, exchange, or lease of any property between the plan and a party in interest
- ) Loan between the plan and any party in interest
- ) Transfer of plan assets to or use of plan assets for the benefit of a party in interest
- ) Acquisition of employer securities or real property in excess of legal limits
What’s the hardship test of withdraw from 401K?
- ) Financial needs test: The hardship must be due to an immediate and heavy financial need of the participant-employee.
- ) Resources test: The participant must not have other financial sources sufficient to satisfy the need.
- ) In addition to meeting both of these tests, the money may only be withdrawn for the following reasons:
a. ) Payment of unreimbursed medical expenses for employee, spouse, or dependents
b. ) Purchase of a primary residence or repair of casualty loss damages of a pri-mary residence
c. ) Payment for up to the next 12 months of higher education expenses for the participant, the participant’s spouse, or dependent children
d. ) Payment necessary to prevent foreclosure on the participant’s primary residence
e. ) Burial or funeral expenses for an employee’s deceased parents, spouse, children, and dependents
f. ) Safe harbor: Plan may identify a distribution to satisfy a financial need without the requirement that all other employee resources be exhausted if certain requirements are met. - ) When a hardship withdrawal is taken, the participant’s right to make elective deferrals must be suspended. 5.) Finally, if a hardship withdrawal is approved and made, the distribution is tax-able, and a possible 10% penalty applies.
401k distributions are subject to:
- ) Distributions from 401(k) plans are subject to qualified plan distribution rules.
- ) 401(k) plans often allow participants to make in-service withdrawals (withdrawals before termination of employment).
- ) 401(k) accounts based on elective deferrals cannot be distributed before occurrence of one of the following events: a.) Retirement b.) Death c.) Disability d.) Separation from service with the employer e.) Attainment of age 591⁄2 by the participant f.) Plan termination g.) Hardship
- ) Many preretirement distributions will not only be taxable but may also be subject to the 10% early withdrawal penalty tax.
What is the pass-through entity?
The S corporation, LLC and Partnership are considered “pass through” entities. “Pass through” means that the entity is not taxed separately from its owners, but passes its profits and losses through to the owners in their pro rata share of ownership.
describes the tax benefits of premiums paid on a long term care policy?
The IRS provides guidelines for the amount of premiums that are deductible based upon the insured’s age. The amount of premiums paid is included in the medical expense deduction for total expenditures exceeding 7.5% of AGI (SECURE Act 2019) and is from AGI. The policy must be guaranteed renewable or non-cancelable to be qualified.
Which of the following credits are fully refundable?
"I. The Earned Income credit. II. The American Opportunity credit. III. Lifetime Learning credit. IV. Child Tax credit. V. Adoption credit. A)I, IV and V only. B)I only. Rationale The correct answer is ""B."" The Earned Income credit is refundable; able to create a negative tax liability. The American Opportunity credit and Child tax credit may be partially refundable. C)I and V only. D)None of the choices."
How to calculate the loss on small business stock?
The loss on small business stock Section 1244 is recognized as an ordinary loss not subject to the capital loss rules.
What’s the amount of high deductible healthy plan for a family in 2020?
HDHP is $2,800 for family and $1,400 for a single person
Ginger, age 21 and a full-time student for a degree at State University, qualifies as a dependent on her parents’ return. During the summer, she earned $5,500 from a part-time job. Her only other income consisted of $950 interest on a savings account. What is Ginger’s taxable income for the current year?
The standard deduction for Ginger is the greater of $1,100 or $350 plus earned income but not to exceed the normal standard deduction. Therefore $350 + $5,500 = $5,850 so it is not limited in 2020. The total income is $5,500 + $950 = $6,450. Taxable income is $6,450 - $5,850 = $600.
insured
被保险人
Lifetime Learning credit
In order to qualify for the Lifetime Learning credit, you must have made tuition and fee payments to a post-secondary school (after high school) during the year.
The maximum credit you can claim is 20% of up to $10,000 in eligible costs or $2,000.
You can include the cost of tuition, fees and any books or supplies you are required to purchase directly from the school, so long as it's a condition of enrollment. For example, if your professor recommends that you purchase a textbook but you can still enroll in the class without one, then you cannot include the cost of the textbook in the credit.
American Opportunity Tax Credit
The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student.
deficiency
n. 缺乏；不足；缺陷；缺点
Which age is the cut-off age for child credit?
Under 17; not including 17 year old
reckless
adj. 鲁莽的；不计后果的；大意的
willful
adj. 任性的；故意的；有意的
eviction
n. 逐出；赶出；收回（租房或租地等）eviction process 驱逐过程
What’s the additional standard deduction for senior or blindness people?
Taxpayers who are at least 65 years old or blind can claim an additional 2020 standard deduction of $1,300 (joined filling).
$1,650 if using the single or head of household filing status.
For anyone who is both 65 and blind, the additional deduction amount is doubled.
what’s the rule of the deductions for the night entertainment?
The cab fair is deductible as a transportation expense at the full cost. The business meal and tip are subject to a 50% limitation. The entertainment expenses are not allowed deductions.
For purposes of determining taxable income, what rule should follow?
A person who rents their home for less than 15 days is not required to include the income as it is considered personal property, not rental or mixed use. However, no deducations related to the expense of renting out the home are allowed other than taxes and interest associated with the property that would normally be deductible as an itemized deduction.
AGI for this tax year is
Child support payments are neither deductible from nor includible in income. Note: alimony received from a contract dated prior to 12/31/18 remains includible income.
Which of the following is incorrect?
A)All business deductions are classified as deductions FOR AGI.
B)Some personal deductions are classified as deductions FROM AGI.
C)Some business and some personal deductions are classified as deductions FOR AGI.
D)Some business and some personal deductions are classified as deductions FROM AGI.
Rationale
The correct answer is “D.” Deductions occur above the line (for) AGI and below the line (from) AGI. All business deductions are for AGI (above the line).
All business expenses (taken by their owners, i.e. sole proprietor or partner) are taken above the line or FOR AGI.
A “business deduction” is tied to the business or owners. These are reported on the sole proprietor’s schedule C, or a partner’s K-1 (which flows onto the Schedule E of Form 1040), for example. Business deductions are all above the line (FOR AGI).
“Personal deductions” are not tied to a business. For example, mortgage interest is a personal deduction below the line (FROM AGI). An HSA contribution is a personal deduction above the line (FOR AGI).
“Job-related employee expenses” used to be deductible as a miscellaneous itemized deductions subject to the 2% floor, a below the line deduction (FROM AGI). Those are no longer available for tax years 2018-2025.
Capital recoveries include:
Amortization of bond premium.
Capital recovery is the expensing of certain acquisition costs. Bonds purchased at a premium are amortized over their life to expense the premium paid. The theory is that when they mature, their basis will be equal to their face value and not the face plus premium. Bond expenditures are, therefore, a recovery of capital.
business expenditures for the tax purpose:
The cab fair is deductible as a transportation expense at the full cost. The business meal and tip are subject to a 50% limitation. The entertainment expenses are not allowed deductions.
A person who rents their home for less than 15 days is not required to include the income as it is considered personal property, not rental or mixed use.
However, no deducations related to the expense of renting out the home are allowed other than taxes and interest associated with the property that would normally be deductible as an itemized deduction.
Child support payments are neither deductible from nor includible in income. Note: alimony received from a contract dated prior to 12/31/18 remains includible income.
C)
Deductions occur above the line (for) AGI and below the line (from) AGI. All business deductions are for AGI (above the line).
All business expenses (taken by their owners, i.e. sole proprietor or partner) are taken above the line or FOR AGI.
A “business deduction” is tied to the business or owners. These are reported on the sole proprietor’s schedule C, or a partner’s K-1 (which flows onto the Schedule E of Form 1040), for example. Business deductions are all above the line (FOR AGI).
“Personal deductions” are not tied to a business. For example, mortgage interest is a personal deduction below the line (FROM AGI). An HSA contribution is a personal deduction above the line (FOR AGI).
“Job-related employee expenses” used to be deductible as a miscellaneous itemized deductions subject to the 2% floor, a below the line deduction (FROM AGI). Those are no longer available for tax years 2018-2025.
4051-RQuestion 8 of 50Tax 3/28/21
In which of the following situations, if any, may the individual NOT be deemed a dependent of the taxpayer:
A)A cousin who does not live with the taxpayer.
B)A former brother-in-law who does not live with the taxpayer. The taxpayer is divorced.
C)A nephew who does not live with the taxpayer.
D)A legally adopted child who does not live with taxpayer.
Rationale
The correct answer is “A.” All other parties either satisfy the relationship or member of the household test.
IRS Publication 501: Relatives who don’t have to live with you. A person related to you in any of the following ways doesn’t have to live with you all year as a member of your household to meet this test.
Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). (A legally adopted child is considered your child.)
Your brother, sister, half brother, half sister, stepbrother, or stepsister.
Your father, mother, grandparent, or other direct ancestor, but not foster parent. Your stepfather or stepmother.
A son or daughter of your brother or sister. A son or daughter of your half brother or half sister.
A brother or sister of your father or mother.
Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
Any of these relationships that were established by marriage aren’t ended by death or divorce.
4063-RQuestion 11 of 50Tax 3/28/21
Saul was divorced in 1996 and is now single, age 63. He has gross income of $50,000. His bona fide deductible expenses are as follows:
Alimony = $8,000;
Charitable contributions = $2,000;
Contribution to an IRA = $2,000;
Net expenses paid on rental property = $5,000;
Interest and taxes on personal residence = $7,000;
State income tax = $1,200.
What is Saul’s AGI?
A)$28,000
B)$33,000
C)$35,000
D)$40,000
Rationale
The correct answer is “C.”
Saul’s AGI is calculated as follows:
Gross income of $50,000
minus deductions for AGI (above the line) of $15,000 (Alimony* of $8,000, IRA of $2,000, and expenses on rental of $5,000)
= $35,000.
The others are deductions from AGI or below-the-line deductions.
*Alimony due to a divorce finalized by 12/31/18 will remain under the old rules, deductible to payor and included in income for the recipient. Divorces finalized after 12/31/18 will follow the new rules; not deductible and not includable in income.
I. ($1,000) loss from a 30% interest in Laminate Partnership in which she does NOT materially participate.
II. ($1,500) loss from a 2% limited partnership interest in Venture, a limited partnership.
III. ($3,000) loss from a 12% interest in an S corporation in which she manages one of the departments.
IV. $40,000 salary as manager with an S corporation.
Option “I” - A loss from a limited partnership in which there is no material participation is governed under the passive activity loss rules. Since there is no other passive activity income to offset the loss, the loss is not currently deductible. Option “II” - The same passive activity loss rules apply, and therefore, the loss is not currently deductible. Option “III” - Because she is a material participant in managing the S corporation, the losses are deductible. Option “IV” - Wages are always included in AGI. Option “V” - Dividend income unless excluded is included in AGI. $40,000 (wages) minus $3,000 (S corp loss) plus $1,200 (dividends) = $38,200.
Section 179 deduction carryover
Section 179 carryover to subsequent years will be limited by the business income before the deduction and the year’s Section 179 limitation. In 2020, the limit for Section 179 is $1,050,000. Therefore, the entire amount of $17,800 ($7,800 carryover + $10,000 current year’s deduction) is allowable.
Lauren has purchased a home worth $1.5 million with an interest-only mortgage of $1.2 million on 12/20/17. She is currently only paying interest on the mortgage in the amount of $60,000 per year. What amount may she deduct as home mortgage interest on Schedule A of her individual income tax return?
The calculation is calculated by dividing the qualified mortgage over the total mortgage times the interest paid.
(750,000/1,200,000) X 60,000 = 37,500
Per TCJA, home mortgages are limited to qualified residential interest and a maximum indebtedness of $750,000 if financed after 12/15/17. (For debt prior to 12/15/17, the $1 million limit applies.)
C)
Student loan interest
Student loan interest is an “above-the-line” deduction. The amount that can be taken is limited to $2,500 of interest paid.
When reviewing a client’s income tax return from the prior year you notice that they had adjusted gross income of $175,000 and paid federal income tax of $31,500. Assuming that the client’s income for this year will closely approximate that of last year, what is the minimum amount to pay in estimates to meet safe harbor?
Your primary choices are (A) = 90% of current year, (B) = 100% of prior year, and (C) = 110% of prior year. Since the client’s AGI from last year is greater than $150,000 the safe harbor is 90% of current year tax or 110% of prior year tax. Since the client’s income “closely approximates that of last year” we can utilize the 90% of current year amount. If the client’s income varies widely then we would use 110% of prior year.
$31,500*0.9 =28,350
Dakota qualifies as a dependent of his parents. This year, he earned $500 from a part-time job and $1,500 in interest from a savings account. Dakota’s taxable income for this year is:
The calculation is as follows: $1,500 (interest) + $500 (wage) = $2,000 (gross income) - $1,100 (greater of standard deduction of $1,100 or $350 plus earned income) = $900 of taxable income, taxed at Dakota’s tax rate.
at-risk-rule
In other words, you may deduct the loss up to amount you actually stand to lose.
Passive Activity Rules
In other words, passive activity losses may only be deducted from passive activity income.
Sarah is a 10 percent owner in Canine Connection, LLC, a day-care center for dogs. She is also a 15 percent owner in Little Laughter, LLC, a successful children’s clothing store. She does not materially participate in either business. Her at-risk and loss/income for the current year is as follows:
Canine Connection-At-risk = $175,000; Loss of $275,000
Little Laughter-At-risk = $25,000; Income of $125,000
She also has wage income of $80,000 and capital gain income of $30,000. Which of the following statements is true?
Loss suspended because of the at risk rules: $275,000 loss - $175,000 at risk = $100,000 suspended.
We can net the $125,000 of income against the loss of $275,000, which equals $150,000, minus $100,000 suspended because of the at risk rules, which leaves $50,000 suspended because of the passive activity rules.
thus: The loss suspended because of the at-risk rules is $100,000 and the loss suspended because of the passive activity loss rules is $50,000.
Time Worked: materially participate in the business
Time Worked. You can be considered to materially participate in the business if you work on a regular, continuous, and substantial basis during the year, at least 100 hours in the activity, if no one else works more hours than the taxpayer in the activity, and no one else receives compensation for managing the activity.
The replacement property must meet the taxpayer use test, not the functional use test, since Britney did not use the property directly. (fired destroyed her rented out building)
The taxpayer use test requires replacement property to be used by the taxpayer in an activity which is treated the same for tax purposes in order to qualify for nontaxable exchange treatment. All of the other statements regarding the nontaxable exchange treatment of Britney’s transaction are correct.
B)Britney must invest the proceeds in a replacement property that has a similar use to the property that was destroyed in the fire.
C)Britney must reinvest the insurance proceeds within two years from the end of the year in which she received the insurance proceeds.
D)Since Britney received cash as a result of the involuntary conversion, nonrecognition treatment is not mandatory even if she meets all of the requirements.
Donee’s gifted basis:
if the sale price is greater than the original price, then use the gain basis;
if the sale price is less than the FMV price, then use the loss basis;
if the sale price is between the original price and FMV, then use 0 basis.
a taxpayer be subject to an accuracy-related penalty?
A taxpayer will be subject to an accuracy-related penalty if he makes a substantial understatement of his tax liability, generally more than 10 percent of the correct tax liability and at least a $5,000 tax deficiency.
a taxpayer may use a fiscal year tax period and have a tax year of less than 12 months in the first year.
If the taxpayer does not keep books or accounting records. taxpayer required to use a calendar year tax period
Which of the following tests must be satisfied by a qualifying child?
I. Relationship Test.
II. Gross Income Test.
III. Abode Test.
IV. Citizenship Test.
A)I and II only.
B)III and IV only.
C)I, II and III only.
D)I, III, and IV only.
Rationale
The correct answer is “D”. The Gross Income Test is a requirement for a qualifying relative, not a qualifying child. All of the other tests must be satisfied by a qualifying child.
A taxpayer will be subject to an accuracy-related penalty
- if he makes a substantial understatement of his tax liability,
- generally more than 10 percent of the correct tax liability and at least a $5,000 tax deficiency.
Treasury regulation includes:
There are three types of tax regulations—legislative, interpretive and procedural. Details on each type of regulation are discussed below.
Treasury regulation classified by the function of the regulation:
There are three types of tax regulations—legislative, interpretive and procedural. Details on each type of regulation are discussed below.
Treasury regulations classified by stage of adoption include:
- Proposed Regulations.
- Temporary Regulations.
- Final Regulations.
Does the blind people have to report the tax?
They may benefit from an additional $1,300 additional standard deduction for blindness upon filing. A return must be filed to claim the ASD for blindness.
Which of the following statements regarding the deduction of costs associated with investigating the purchase of a new line of business is not correct?
A)If the new line of business is not purchased, no deduction is permissible.
B)If the new line of business is purchased and it is in the same line of business as the current trade or business operation, the cost of investigating the new business is fully deductible.
C)The ability to deduct the cost of investigating a new line of business is often overlooked by taxpayers.
D)If the new line of business is purchased and it is in a different line of business as the current trade or business operation, there is no way to recoup the costs of investigation.
Rationale
The correct answer is “D”. If the new line of business is purchased and it is in a different line of business as the current trade or business operation, the costs of investigation are recouped by capitalizing the expenses and amortizing it ratably over a 60-month period.
Eric's daughter Emilie is attending a local university. Listed below are the items that Eric has paid for this year related to Emilie's education. What are Eric's total qualified tuition and related expenses for the purpose of claiming the American Opportunity credit? $12,000 tuition paid directly to the university. $400 student activity fee which is required by the university for enrollment. $600 in textbooks purchased from an off-campus bookstore. $100 lab fee for a required science course. A)$12,000. B)$12,500. C)$12,700. D)$13,100.
Rationale The correct answer is "D". Item "I" is a qualified tuition and related expense. Item "II" is a qualified tuition and related expense because it is required by the university for enrollment. Item "III" is a qualified tuition and related expense because textbooks can be purchased directly from the school or another off campus source and still qualify as a qualified education expense. Item "IV" is a qualified tuition and related expense because the class is required as part of Emilie's degree program.
embezzle
vt. 盗用；挪用
