Deck 39

Question 1

How will book income be affected by “interest income from municipal bonds”?

Answer 1

Subtracted from book income

Question 2

How will book income be affected by “excess capital losses over capital gains”?

Answer 2

Add back to book income

Question 3

Unlimited exclusion from gift tax includes:

Answer 3

1) payments made directly to an educational institution for a donee’s tuition, (2) payments made directly to a health care provider for medical care, (3) charitable gifts, and (4) marital transfers

Question 4

Capital assets generate either:

Answer 4

Long-term capital gains or long term capital asset

Question 5

What limitations exist that won’t allow an item to qualify for the 179 deduction?

Answer 5

1) When there is a loss or 2) when the purchases exceed $2 million or 3) when it is land 4) can’t exceed $500,000; if none of these limitations apply then the amount of the deduction is equal to lessor of the amount purchased or the taxable income amount

Question 6

Maximum cap on 179 deduction?

Answer 6

$500,000

Question 7

When a partnership purchases an asset, does this affect a partner’s basis?

Answer 7

NO

Question 8

How does the dividends received deduction affect book income?

Answer 8

Add back to book income to get taxable income

Question 9

When you sell an item that you normally sell within your business, you treat the gain as…

Answer 9

Ordinary income

Question 10

When you sell a random item that is not in your ordinary course of business, the gain is treated as….

Answer 10

Short-term or long-term capital gain

Question 11

What transactions are subject to a securities exemption?

Answer 11

Securities of charitable organizations, municipal bonds, and stock splits

Question 12

When a seller notifies the buyer, before acceptance, that the seller is shipping nonconforming goods; what results?

Answer 12

This is considered a counteroffer (If there was no notification, then it would be acceptance and breach of contract)

Question 13

Two have an enforceable option contract, two things must happen:

Answer 13

Must be for the sale of goods and there must be consideration exchanged (writing is not required, can be oral)

Question 14

Priority rules for Bankruptcy (SAG WEG CTI)

Answer 14

S: support to spouse, children; A: Administration expenses (fees); G: gap claims; W: wage claims up to $12,475; E: employee benefit plans up to $12,475; G: grain farmers; C: consumer deposits; T: Tax claims; I: injury claims from intoxication

Question 15

In calculating the tax of a corporation for a short period, what process is used?

Answer 15

Annualize income and calculate the tax on annualized income, then multiply by the number of months divided by 12

Question 16

Taxable gross profit =

Answer 16

amount collected x gross profit percentage

Question 17

When a corporation distributes assets to a shareholder, the corporation must:

Answer 17

Recognize a gain as if it sold the asset; FMV or liabilities (whatever is higher) minus the adjusted basis of the asset

Question 18

An investment in a capital asset (stock) results in the income being:

Answer 18

Capital; capital loss or capital gain

Question 19

A partner will recognize a gain only when:

Answer 19

Money received exceeds the partners basis

Question 20

Form 1065 reports:

Answer 20

Reports ordinary business income for partnership (interest income not included)

Question 21

Schedule K-1 reports:

Answer 21

Separately stated items for each partner