Exam 1 Review Flashcards
What is the accumulated earnings tax?
A 20% tax that is assessed on the excess accumulated earnings and profits of a C Corporation
To what entities do accumulated earnings tax apply?
Only C corporations
If a taxpayer exchanges a property for control of a company (351 exchange) what is the holding period for the business that receives the property?
The holding period of the taxpayer
Are livestock held for draft, breeding, sporting, or dairy purposes considered inventory for a farming business?
No, only livestock held for sale to customers which is typically called “Market livestock” would be treated as inventory
Is “Market Livestock” considered inventory for a marketing business?
Yes
The test rate used to determine if a loan is a below-market loan is the:
Long-term applicable Federal rate as of the day the loan is made
The rules for below-market loans apply to:
- Gift loans
- Compensation-related loans
- Corporation-shareholder loans
- Tax avoidance loans
- Other below-market loans
What is the tax rate applicable to built-in gains for an S corporation?
21%
To which entities do “Built-In” gains apply?
Only to S corporations that were previously C corporations
Does a partnership or S corporation my Federal Income Tax?
No, because they are pass-through entities the taxpayer would pay Federal Income Tax on their own
What business entities can claim QBI?
- Individual owners of sole proprietorships, rental properties, S corporations, or partnerships
- Trusts and estates that own an interest in the businesses listed above
The following business formed after 1996 are automatically taxed as corporations:
- A business formed under a federal or state law that refers to it as a corporation
- A joint-stock company or joint-stock association
- Insurance companies and certain banks
- A business owned by a state or local government
- A business specifically required to be taxed as a corporation by the IRC
- Certain foreign businesses
- Any other business that elects to be taxed as a corporation and files From 8832
What is the normal due date for Form 1041?
15th day of the 4th month following the end of the entity’s tax year (unless it falls on a weekend or holiday)
In what situations does a 351 exchange not apply?
- The corporation is an investment company
- The transferor transfers property during a bankruptcy in exchange for stock used to pay creditors
A 3115 is used by a business to:
Apply for a change in accounting method
What does an S corporation’s accumulated adjustments account (AAA) include?
All items of income and expenses of the S corporation, with the exception of tax-exempt income (and expenses related to tax-exempt income)
The fiduciary must file Form 1041 for a domestic trust that has:
- Any taxable income for the tax year
- Gross income of $600 or more (regardless of whether the income is taxable or not)
- A beneficiary who is a nonresident alien
What is the normal (unextended) due date of a 501(c)(3) tax return that operates on a calendar year?
They must file their 990 by May 15
What form is used by a 501(c)(3) to request a filing extension?
8868 and the extension is 6 months
Who cannot own stock in an S corporation?
C or other S corporations
What is a 1041 used for?
Report any income that an estate or trust earns that is over $600
Can corporate net capital losses be carried back?
Yes, up to a maximum of the years
In general, which entities do not require any type of written document or state filing in order to be established?
A general partnership and a sole proprietorship
If a partnership earns income and only distributes part of the income to a partner how is each part taxed?
The partner will pay tax on the full amount but then the undistributed amount will added to their basis
A corporation whose S election is revoked or terminated by generally waits how long before making an S corporation election again?
60 months
A C corporation can carry over any unused charitable contributions for:
5 years
Distributions of stock dividends are generally made tax-free to shareholders except when:
Some shareholders can receive cash or other property, and other shareholders receive stock
If an election is made to forego bonus depreciation deduction, then a business can choose to:
use Section 179
Fiscal-year estates and trusts must file a 1041 by:
the 15th day of the 4th month following the close of the entity’s tax year
What best describes a controlled group?
A group of corporations that are related through common ownership and are subject to rules regarding related party transactions
What is a 4868 used for?
To report casualty loss and theft
What amount can a business deduct for Snacks and beverages for an employee breakroom?
50% of the expense
Can a business add the cost of shipping fees and installation costs to the basis of an asset?
Yes
Dividend deduction: Less than 20% ownership
50%
Dividend deduction: 20-80% ownership
65%
Dividend deduction: greater than 80% ownership
100%
When is a C corporation’s final return due after it dissolves?
On the 15th day of the 4th month after the corporation has disolved
Under the Affordable Care Act, employers with at least 50 full-time employees are required to offer what type of insurance coverage?
Health insurance that provides minimum value
Mileage Rate: 1/1 - 6-30
58.5 cents per mile
Mileage Rate: 7/1 - 12/31
62.5 cents per mile
An activity is presumed to be engaged in for profit, rather than a hobby, if:
The activity show a profit for three out of the last 5 years, including the current year
What special form must a taxpayer use to report their interest in a foreign partnership?
8865
If a partnership is subject to a CPAR and must designate a representative, where would this be reported on the partnership return?
On the Schedule B of the partnership return
When is a partnership 1065 due?
On the 15h day of the 3rd month following the close of their tax year
How are Unreimbursed Partnership Expenses deducted by a partner?
If a partner has unreimbursed Partnership Expenses, they can deduct those expenses on their Schedule E and label them as “UPE”
What form is used to request an extension on a partnership return?
7004
What form can a partnership use to request a change to their tax year?
1128
Guaranteed payments are included in income in the partner’s tax year in which:
The partnership’s tax year ends
A partner’s tax basis capital account (sometimes referred to simply as “tax capital” represents:
The entity’s equity as calculated using tax principles, (not based on GAAP, or other accounting principles)
Individual shareholders of an S corporation generally have to make estimated tax payments if they expect to owe tax of:
$1,000 or more when their return is filed
An estate is allowed the income distribution deduction (IDD) for the tax year for any:
Income that must be distributed currently and for other amounts that are property paid, credited, or required to be distributed to beneficiaries. This deduction is limited to the distributable net income of the estate.
Where would a farmer report the sale of old dairy cows and the sale of used machinery?
These would be report on Form 4797 (not Scheule F)
