Exam Questions I F'd Up

Question 1

For Section 179 pieces of property was is the max deduction you can take? and what is the phase out amount

Answer 1

there is a 1,020,000 deduction, MAX….BUT if you put into service stuff over 2,550,000 the amount over is a dollar for dollar phase out of the 1,020,000 deduction.

Question 2

How does the 15,000 deduction work for gifts?

Answer 2

so each person you give shit too, you report anything over 15,000…if the gift is less than 15,000 you dont report it

Question 3

So talking about contracts, what is the accronym for contracts that can be enforced WITHOUT writing

Answer 3

SWAP
Specifically Manufactured Goods
Written contract by ONE party (assumed to be agreed to)
Admitted contract into court
Performance of contract

Question 4

are non reimbursed business meals/expenses deductible

Answer 4

no

Question 5

What is the distributions character out of current and accumulated E+P, and then what is the character for anything over?

Answer 5

out of current and accumulated it is a dividend and is income

Anything distributed over is a return of capital which is not taxed but reduces basis.

Question 6

what is the % that corporations can deduct from charitable contributions

Answer 6

10% of taxable income

Question 7

So for an estate..the person dies…what happens to their medical expenses?

Answer 7

if incurred 12 months or less after death, it goes on personal return…if after 12 months it goes out of their estate.

Question 8

So you sell you interest in a partnership…whATs the equation to find the total realized or ordinary gain

Answer 8

Amount sold for
LESS: Basis of capital
LESS: Basis of liability
=Total realized ord. gain

HOWEVER it is only ordinary to the extent of hot assets (usually just AR, maybe they throw in inventory) anything over there share of hot assets is a CAPITAL GAIN!

Question 9

So you sue because of your reputation getting hurt…is anything you get either punative or compensatory taxable?

Answer 9

Yes they are fully taxable

Question 10

So you are paying moms medical expenses, and she is over the income requirement for a dependent….can you still claim the medical expenses

Answer 10

YES for medical expenses, the income requirement is not taken into account.

Question 11

What schedule for Rent expenses show up on and are they For or From AGI

Answer 11

Show up on Schedule E and are For AGI

Question 12

Who can take NOL’s?

Answer 12

Individuals, C Corps, and Trusts/Estates

Question 13

When distributions to shareholders are occuring, do you include tax-exempt income (like muni bonds) being distributed just as you would the ordinary business income?

Answer 13

YESSSS it increases basis just like income

Question 14

For fraud penalties how much evidence must the court have?

Answer 14

beyond a reasonable doubt

Question 15

What is the election of tax year for trusts and estates?

Answer 15

Estates may elect to adopt either a calendar or fiscal tax year…Trusts have to adopt a calendar year

Question 16

So you have organizaitonal start up expenses…what is NOT included when you are doing the write off?

Answer 16

anything having to do with the stock issuance or printing…

add up all the costs..subtract the 5000 and then amortize over 180 months..

Question 17

Do you recognize income for a qualified stock option

Answer 17

noooo

Question 18

what does the mailbox rule applies to?

Answer 18

for acceptances only!!

Question 19

So you give land to a corporation and then they sell it for a gain along with reporting regular income during the year what do you do

Answer 19

your basis increases as you recognize your % of income like usual…but the land has to do with a built in gain…so you take the FMV at contribution and subtract the basis at contribution…you take 1005 of that gain PLUS your share of the increase in FMV from contribution to selling date.

Question 20

For multiple suppport agreement what are the rules with %

Answer 20

all must be relatives who provide more than 50%, but to claim you must provide MORE THAN 10%

Question 21

Like kind exchange: how do you find gain/loss realized, recognized, and new basis

Answer 21

realized: Amount realized - Adjusted basis of property given up…Where amount realized is the FMV of new property + boot received - boot given up..and Adjusted basis is the cost less accumulated depreciation.

Recognized: Lesser of realized gain or boot received…iif realized gain more than the recognized then there is a deferred gain. You can never recognize a loss

Basis: FMV of new prop - Deferred Gain + Deferred Loss

Question 22

Looking at schedule M-1 which is essentially difference between book and tax, what are general items added back and subtracted

Answer 22

Added: Federal income tax, capital losses over gains, book depreciation, meals over 50%, warranty, Bad Debt expense
Subtracted: tax-exempt interest, life insurance proceeds, section 179,

Question 23

Partnership K-1 and seperately stated items…lists some seperately stated items

Answer 23

Active or passive real estate income/loss, interest income, dividend income, cap G/L, charitable contribution, section 179

Question 24

Partnership K-1 and seperately stated items…lists some items on form 1065, or the oridnary business incoem

Answer 24

Basically this formula:
Business income
LESS: business expenses (includes health ins. and keogh)
LESS: Guarenteed payments
=Net business income or loss.

Question 25

What is the DNI formula for estates and trusts

Answer 25

Estate (trust) gross income (includes all capital gains)
LESS: Estate (trust) deductions
=Adj. Total Income
\+Adjusted Tax Exempt Interest
LESS: Capital Gains for corpus
=DNI

Question 26

For an estate or trust there is a Income distribution deduction, whats that entail

Answer 26

lesser of actual distribution to beneficiary (less tax exempt income) OR DNI (less adjusted tax-exempt interest)

Question 27

For an individual what are the itemized deductions

TICC MMD

Answer 27

Taxes
Interest
Charitable
Casualty loss

Misc. Deduction
Medical
Dental

Question 28

So look at the “Child Tax Credit”…what is the amount of credit per child and what is the refund limit the lesser of…

Answer 28

May calim $2,000 for each qualfiying child (under 17) starts to phase out when AGI is over 400 MFJ or 200 S… fund is the lesser of: excess child tax credit over tax liability, Earned income less 2,500 multiplied by 15% OR 1400 per qualifying child

Question 29

QBI…first bucket threshold rule

Answer 29

Single under 160,700 or MFJ 321,400

is full 20% QBI deduction for both SSTB and QTB

Question 30

QBI Second and third bucket for QTB

Answer 30

between 160,700-210,700 S or 321,400 - 421,400 (MFJ)

QTB: GREATER of 50% W-2 wages OR 25% W-2 wages plus 2.5% qualified property

Question 31

QBI for third bucket for SSTB

Answer 31

no deduction

Question 32

What is the mom and pop excemption from passive activity losses

Answer 32

deduct up to 25k from net passive losses annually if they actively manage and own at least 10%…if they have an AGI over 100k they lose 50% of the 25k and lose it completely if over 150k AGI

Question 33

Deminimus rule

Answer 33

has to do with expensing items you buy as a business…company can set their expense threshold if they have a written statement and financial statement for the year.

If only have financial statement max is 5,000 deduction per asset

if dont have financial statement, max deduction is 2500 for each piece

Question 34

Theres an S corporation and ownership changes throughout the year, how often is ownership allocation calculated

Answer 34

one a per-days, per-share basis

Question 35

If more than this % of property is placed into service I nthe last quarter of the year this method is used…what is the percent and the method

Answer 35

40% of assets placed into service in the last quarter of theyear means using mid-quarter convention

Question 36

What is the depreciable life for residential rental property vs. non residential property

Answer 36

residential rental property has a 27.5 year straighline life

Nonresidential rental property has a 39 year straightline life

Question 37

What is included in 5 year depreciable property

Answer 37

automobiles, light trucks, computers and copiers

Question 38

what is included in 7 year depreciable property

Answer 38

office furniture and equipment

Question 39

your company is going public and is having an offering, at what date can you start offering to sell your shares

Answer 39

you can start to sell them at the EFFECTIVE DATE

Question 40

You have an S corp that is teerminated, how long must you wait before you can Re-elect S corp status

Answer 40

5 fucking years brad

Question 41

Can you name the 5 elements needed to prove constructive fraud (literally the worst kind of fraud)

Answer 41

misrepresentation of material fact
acts of gross negligence/recklessness
intent to induce the plaintiffs reliance 
actual reliance by the plaintiff
damages

Question 42

So theres this thing called accuracy related penalties…talk me through the difference between a substancial one or not and what it looks like for an individual and corporation

Answer 42

1. Is the understatement less than the greater of 10% of the correct tax or $5,000? If YES than it is not substanicial and is just 20% of the understatement
2. If it is GREATER than either listed in #1 than it 20% penatly but is considered Substantial!
3. If it is a CORPORATION it is substancial if it exceeds the LESSER of 10,000,000 or the greater of 10,000 or 10% of the correct tax

Question 43

So theres a Wash Sale, aka sold and bought within 30 days, what do you do with losses or gains associated with it

Answer 43

losses are ADDED to the basis…gains are capital gains and new price is the basis

Question 44

in complete liquidation waht does the corporaition do? what about the shareholders? in terms of recognition

Answer 44

corporation must recognize a gain/loss as if sold the assets for FMV (so FMV-basis)

Then the shhareholders recognize a gain or loss by doing the FMV less their adjusted basis in the stock

Question 45

what is one thing that makes aperson a tax preparor

Answer 45

THEY IS PAID

Question 46

how are distributions made with the year allocated between the current and allocated E&P areas

Answer 46

you allocate proportionately by % of distriutions

like april was 60% of the total distirubtions so multiply current E&P by that and then find accumulated

Question 47

you have excess FICA (social security) withheld during the year…what do you do if you have more than 2 employers? what about only one employer

Answer 47

two employers than you can file a claim for the xcess to be used as a credit

if you only have one employer the employer must give you a refund

Question 48

What is the MAXIMUM American Oppurtunity Credit, can part of it be refunded?

Answer 48

Students first 4 years of college…
100% of the first 2,000 in qualified expenses (tuition, fees and course materials)
25% of the next 2,000 xpenses paid during the year

40% of the credit is refundable!!! who knew?

Question 49

What is the MAXIMUM Lifetime learning credit?

Answer 49

used for unlimited years after the first 4 years of college
max is 20% of qualified expenses NOT GOING OVER 10,000 meaning a max credit of 2,000 for JUST TUITION AND FEES

Only used per TAXPAYER…so if you have MULTIPLE People in school that wana claim it, TOUGH SHIT ONLY CAN DO IT PER TAXPAYER.

Question 50

You are given an income statement, bunch of accounts which I will list…please break them out into what would be used to calculate ordinary income and what would be seperately stated on K-1

Sales
COGS
Charitable Contributions
Rent Expense
Interest Expense 
Officer Compensation
MACR Depreciation 
Section 179 Depreciation
LTCG
Dividends
Section 1231 & 1245 Gains

Answer 50

Ordinary Income:
Sales, COGS, Rent Expense, Interest Expense, Officer Compensation, MACR Depreciation, Section 1245 Gain (because its considered ordinary income)

Sep. Stated: Charitable Contributions, Sect. 179, LTCG, Dividends, Section 1231

NOTE: seperately stated items include interest income, rental income, dividend income, INVESTMENT interest expense

Question 51

Explain how a stock split happens bro?

Answer 51

you have an original amount of stock….multiply the basis times the amount of stock to get the total basis amount….go through the stock split…you now have these new shares…take that total basis and allocate it over the new amount of shares to get the new basis

Question 52

stock option is qualified if it follows what 3 rules…Who can be granted employee stock purchase plan…Who can be granded incentive stock option?

Answer 52

plan was approved by shareholders, granted and excersised within 10 years, at the end of it the employee does not own more tahn 10%

Employees can be granted an ESPP if they own more than 5%

ISO is granted if the option price is greater than/equal to the FMV