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Learned In Practice > Deck 1 > Flashcards

Deck 1 Flashcards

1
Q

What is the minimum amount of self-employment income that requires filing a tax return?

What is the minimum amount of W-2 income?

A

$400

In excess of the personal exemption or standard deduction.

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2
Q

If alimony, prior to 2019, is set for a period of 10 years (or any other set amount of time) is it deductible?

A

No! It’s not alimony if it can extend beyond the life of the ex.

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3
Q

What is the recognized gain in a like-kind exchange?

A

The lesser of realized gain or boot rec’d.

If you’re basis is 50k, and your FMV is 100k, and you exchange for 75k FMV + 25k in cash, your realized gain is 50k, and your boot is 25k. You have to recognize 25k.

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4
Q

What is the recognized gain/loss if you exchange basis 100k, FMV 85K for FMV 75K + $10K?

A

Zero. Losses in like-kind exchanges aren’t recognized.

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5
Q

What is ‘revaluation’ in terms of currency?

A

Appreciation or increase.

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6
Q

What does Jensen’s alpha measure?

A

How an investor performs given the level of risk they took.

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7
Q

What is the formula for alimony recapture?

A

R3 = P1 + P2 - 2P3 - 37,500

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8
Q

Are things owned JTWROS included in gross estate?

Are previous gifts?

A

JTWROS items are includable.

Gifts with no gift tax paid are not.

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9
Q

What is the max a self-employed person can contribute to a 401k (counting employer contribution)?

A

Net SE income - 1/2 SE tax x .2 = max ER contribution

Add deferral limit and 50+ catch up provision

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10
Q

What would you fund a generation skipping trust with?

A

The lifetime exemption: $11,700,000

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11
Q

What is the principle of indemnity in insurance?

What type of insurance best supports it?

A

The insured should get exactly what they lost; no more, no less.

Actual cash value best reflects this.

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12
Q

What is the penalty for an organization deemed a personal holding company?

A

20% of undistributed income.

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13
Q

How long do you have to identify and close on a new property in a 1031 exchange?

A

45 days to identify, 180 to close.

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14
Q

Can you claim your spouse as a dependent?

A

No.

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15
Q

What are the 3 requirements to file an S. Corp?

A
  • No more than 100 shareholders.
  • No more than 1 class of stock.
  • Shareholders must be citizens or resident aliens.
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16
Q

If you become disabled and are required to build an elevator in your house that costs $30k, and increases your home value by $10k, and your income is 30k, how do you calculate your medical expense deduction?

What if you have to build a ramp?

A

30k - .1(30k) = 27k

Ramp improvements to home value don’t need to be included, but ramps can be included as a medical expense.

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17
Q

If your basis in a building is 100k, FMV = 200k, it burns and you get insurance for 200k, but only spend 190k on a new building, do you have a capital gain?

A

Yes.

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18
Q

Are damages for bodily injuries excludable in gross income?

Are damages to your reputation and good name?

A

Yes—damages for bodily injuries are excludable.

No—damages to reputation are in the same category as punitive or pain and suffering damages; they must be included in gross income.

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19
Q

What is the maximum deduction for losses in active participant real estate?

Is there an AGI cap?

A

The maximum deduction in 1 year is 25k.

There is a MAGI cap of 100 to 150k. Deduct $1 from the 25K for every $2 you’re over the MAGI cap.

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20
Q

When can you not net LTCG w STCG?

A

When they’re both of the same sign; both positive or both negative.

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21
Q

If you rent your property for less than 15 days, is the income taxable?

A

No.

22
Q

If you use your rental property for more than the greater of 14 days, or 10% of rental days, how is it taxed?

A

It’s mixed use property; it’s taxed by hobby loss rules:

  • Report all income
  • You can only claim expenses to the extent of income (the property cannot generate a loss)
23
Q

What is the primary taxation difference between an S-Corp and a C-Corp?

A

S-Corps are taxed flow-thru to the owners.

C- Corps pay taxes in their own right.

24
Q

Are assets in a testamentary trust subject to probate?

A

Yes, because the trust is established through the will, the assets must go through probate to get to the trust.

25
Q

How do you do ‘which manager beat the market’ questions if you have only one of B or St. D for your portfolio options?

A

Remember the B of the market is 1, so if they give you St. D of the market you can calculate Sharpe and Trainor for the market and just calculate whichever is applicable for the given portfolios.

26
Q

Do assets need to be re-titled if they pass thru probate?

A

Yes

27
Q

When is a trip outside the US purely for business?

4

A
  • traveler is not in charge of scheduling the trip.
  • trip lasts less than 7 days.
  • trip is less than 25% vacation.
  • vacation is not the primary purpose of the trip.
28
Q

What 3 things are true of a 1031 exchange on rental property destroyed in a fire?

A
  • 1031 treatment is not mandatory.
  • Replacement property must be purchased within 2 years of EOY of year of fire.
  • Replacement property must be similar use.
29
Q

If you don’t answer a complaint, can you have your marks revoked?

A

Yes.

30
Q

Are QTIPs the same as marital trusts?

Must the spouse be the only income beneficiary?

A

Yes

Yes.

31
Q

Can you take the UMD if your will has a survivorship clause that exceeds 6 months?

A

No!

32
Q

Is there an AGI limit for rolling a 401k to a Roth?

What is there?

A

There’s no AGI limit for rolling a 401k into a Roth.

There’s a 10% penalty on withdrawals within the first 5 years.

33
Q

Can you make an FLP with rental properties even if they’re managed by a property manager?

A

Yes.

34
Q

What are “leased employees” and how do they impact QP tests?

A

Leased employees are working full time for a year. They must be counted in all plan tests, though they’re not necessarily eligible for benefits.

35
Q

Does selling a financial asset require a fiduciary duty of a CFP?

A

Yes.

36
Q

What is the tax filing difference between an LLC and an S-corp?

A

LLC’s have greater choice of which form to file.

37
Q

What are a CFP’s options if a client refuses to supply their tax returns?

A

The CFP can either limit the scope or disengage.

38
Q

What form is required to register with FINRA?

What form is required to register with the SEC?

A

U-4 for FINRA.

ADV parts 1+2 for the SEC.

39
Q

Is tangible personalty used in a trade or business depreciable? What is its depreciation schedule?

A

Yes! 7 years MACRS.

40
Q

What is the Parol Evidence Rule?

What is Estoppel?

A

Parol Evidence - a written contract supersedes all oral contracts that came before.

Estoppel - Once a right has been waived, a company cannot deny a claim.

41
Q

What is blue book? Are they a source of substantial authority regarding tax law?

A

Congressional committee reports.

Yes.

42
Q

Are private letter rulings a substantial source of tax law?

Are Treasury Regulations?

A

Yes

Yes

43
Q

What is Commerce Clearing House Federal Tax Guide?

A

The best source for plain language explanation of tax law.

44
Q

What law created the first constitutional federal income tax?

Which amendment made income tax constitutional?

A

The revenue act of 1913.

The 16th.

45
Q

What are the 3 stages of Treasury Regulations?

A

Proposed, temporary, and final.

46
Q

What are Revenue Rulings?

A

Treasury interpretations of tax law on circumstances that are common to many tax payers.

47
Q

What is the difference between Private Letter Rulings and Determination Letters?

A

Both are individual tax interpretations given by the IRS.

Determination letters are issued after a transaction is complete. Private Letter Rulings interpret what the taxes would be if the individual went forward with a certain transaction.

48
Q

How are NQSO’s taxed?

A

W-2 income on the bargain.

ST or LT CG on the sale, depending on holding.

49
Q

How long must you hold an ISO for optimal tax treatment?

Is the bargain deductible to the employer?

A

2 years from grant, 1 year from exercise.

Usually the bargain is deductible to the employer.

50
Q

What is the cap on incentive stock options?

A

When an individual has FMV of more than 100K that they can exercise.

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