Exam Tip - Tax

Question 1

Treatment of gains

Answer 1

Question 2

Preference Items

Answer 2

Question 3

Ownership Percentages

Answer 3

Question 4

Tax Filing

Answer 4

Question 5

Tax Filing

Answer 5

Question 6

Capital Assets

Answer 6

“Remember, all assets are capital assets except ACID (Accounts/notes receivable, Copyrights and creative works, Inventory, and Depreciable property used in a trade or business).”

Question 7

Wash Sales & Losses

Answer 7

“Index fund for Index fund - Wash sale rule applies.
Index fund for Managed large cap fund - Wash sale rules do not apply.”

Question 8

Related Parties

Answer 8

“Never gift or sell an asset to a related party when the donor’s basis is greater than the FMV of the asset.”

Question 9

Section 1231 and Section 1245 Gains

Answer 9

“The only way to have a Section 1231 gain on a Section 1245 property is to sell it for more than it was originally purchased for.”

Question 10

Sections 1245/1231 Gain

Answer 10

“Note: Any sale amount in excess of the original purchase price of a Section 1245 asset is a Section 1231 gain.”

Question 11

Child Tax Credit

Answer 11

“Exam does not generally test phaseout levels; however, the exam has tested who are eligible children. Be sure to know that stepchildren and foster children are eligible children.”

Question 12

Eligible Care Costs

Answer 12

“Most likely to be tested is 20% x eligible costs ($3,000 for one child or $6,000 for two children).”

Question 13

Kiddie Tax

Answer 13

“The Kiddie Tax only applies to ‘unearned income’ in excess of $2,600 (2024).”

Question 14

Penalties for Failure to File and Pay

Answer 14

“Failure to File = Five %
Failure to Pay = Point five %”

Question 15

Underpayment of Estimated Tax

Answer 15

“You are very unlikely to have to calculate the exact underpayment penalty due to the complexity of the calculation, but you do need to know when a taxpayer would be subject to the penalty.”

Question 16

Property Classifications

Answer 16

3 year: Tractors, rent-to-own property
5 year: Autos, computers, office equipment
7 year: Office furniture and fixtures
27.5 year: Rental home
39 year: Office building
These two categories (27.5 year and 39 year) are most likely to be tested.”

Question 17

Real Property Depreciation Conventions

Answer 17

“Just know that nonresidential real property and residential rental property use the mid-month convention.”

Question 18

S Corporation Requirements

Answer 18

“Make a flashcard of the S corporation requirements. You need to know whether you can recommend an S corporation or not.”