Federal Tax Flashcards
Filling late penalty
5% of unpaid tax each mth. No more that 25% of unpaid tax.
How do we response to a 30 days letter from IRS
May ignore the letter and take no action.
The taxpayer is not required to respond to a 30-day letter, although if there is no response the IRS will follow with a 90-day letter.
Failure to paid penalty
.5% of unpaid tax each mth. No more that 25% of unpaid tax.
Interest on unpaid tax
1% of unpaid tax each mth. No more that 25% of unpaid tax.
Goodwill: tax vs book
Tax: 15 yrs amortization
GAAP: impairment test
Liquidation of property - c crop shareholder gain
Gain is recognized to the extent of FMV not NBV
C crop - charitable contribution limit
10% of taxi or income after adding back DRD
Crop contribution carry forward allowed?
Yes. Forward 5 yrs and no back
Estate and trust both required to use calendar year?
Estates may use either the calendar year or a fiscal year for its tax year. Trusts, except those that are tax-exempt, are required to use the calendar year for its tax year.
Domestic holding co. Determining u distributed personal holding common income prior to DRD
Taxable income reduce federal income tax and net long term capital gain(net tax)
Life insurance of an officer. Tax on premium paid and proceeds received by the company?
Proceeds are not taxable.
Premium paid by the company is not tax deductible too.
MACRS depreciation method and percentage.
Half year or mid-quarter(if over 40%)
200% declining bal method - 3,5,7,10 yrs property
150% - 20 yr property
SL and mid-month. - 27.5 yr rental property and 39 yr office building property
Is land a capital asset?
No. Depreciable properties and real estate properties are 1231 asset.
Dif btw. Rule of
Crop NOL, Crop NCL
Personal NCL
Bus. Credit
Crop NOL: 2back 20forward
Crop NCL: 3back 5forward, always treated as short term loss
Individual NCL: 3000 per yr unlimited future yrs, but no back
Bus. Credit: 1yr back, 20yr forward
AMT rate, accumulated earning tax rate, holding company tax rate
20%
After 250,000 net taxable income 15%
15%
Which one doesn’t need to use Calendar Year as tax period?
C crop, S crop, Partnership and personal service co.
C crop only
IRC sec.1202-tax payer invested in small business
Non-corporation taxpayer can exclude from gross income 50% of any gain from sale of qualified small business stock held for more than 5 yrs.
Avantage of partnership and LLC over S crop in property distribution
LLC and partnership can distribute appreciated property without gain If it is not liquidating.
Passive activity limits are applied to the following entities:
Passive activity limits are applied to the following entities: individuals, estates, trust, personal service corporations and closely-held personal service corporations.
Limited liability or unlimited.
Owners of LLC, S crop, C crop
All owners of an S corporation and LLC have limited liability but general partners in a partnership have unlimited liability.
How to compute AMTI?
When computing alternative minimum taxable income, corporations may take an exemption of $40,000 minus 25 percent of alternative minimum taxable income exceeding $150,000.
IRC sec1202
Non-corporate taxpayer can exclude ____?___. Of any gain from the sale of qualified small business stock held for more than 5yrs
50%
Contribution properties (cash, property ) into a crop, no gain/loss recognized, only If the contributing shareholders together hold at least ___?_ of voting and non-voting shares.
80% - it means they have controlling power over the company.
When does a partnership terminate?
A partnership terminates for income tax purpose when 50% or more of its interests change hands within 12 mths.
A 25% interest in partnership profits is a guaranteed payment by a partnership to a partner?
No. Since the25% int. is calculated with respect to partnership profits.
Partnership general use calendar year end. But under section 444 IRC. A fiscal year might allowed
A tax year end which can not be deferred more than 3 mths. (Oct, Nov and Dec)
Holding period of partner contribution:
Capital asset or 1231–?
Ordinary income asset(inventory)–?
If the property was previously a capital asset or 1231 asset in the hands of the partner, the partner’s holding period for his partnership includes the period of the property contributed.
Ordinary income asset (hot assets)–the holding period begins on the day property is contributed to the partnership
Estate income tax return and estate tax return filling date?
Estate income tax 1041form: file by 15th of the 4th month of the next yr of the calendar yr end (4/15)
Estate tax filing -706 form: file by 9 mths after decedents dead
Burden of proof:
Civil Issue–?
Criminal Issue–?
Burden of proof:
Civil Issue– on taxpayer
Criminal Issue– on IRS