Final Pass Through of the PreStudy Flashcards
an individual is required to file if net earnings from self employment are at least ______
$400
taxation of punitive damages and compensatory damages
punitive damages are generally INCLUDED for gross income (unless for wrongful death)
Compensatory damages are excluded
taxation of scholarship
scholarships for tuition and books are excluded
portions for room and board are taxable income
student loan interest deduction max
2500
deductible on the schedule 1
when does medicare tax rate increase and to what amount
wages >$200k or $250k MFJ
increases to 2.35% (1.45% +.9%)
self employment income includes
net schedule C income
general partnership income (K1)
board of directors fees
part time earnings (1099)
calculate gain on an installment sale
divide the gain realized on the sale by the total contract price
C corporations and dividend received deductions
only for C corps
50% of dividends received from qualifying corps may be excluded from income
requires less than 20% ownership in the distributing corporation
20-80% ownership - 65% exclusion
>80% - 100 excluded
Section 1244
Qualified small business stock
C or S corp
initially capitalized with no more than $1M
Loss of $100k/year on a joint return is considered to be an ORDINARY rather than a capital loss
If a business is profitable it should be:
C corporation
Personal Service Corporation
if a business has loss and is risk free, it should be
sole prop
partnership
if a business has losses and is risky it should b
S corporation
LLC
LLP
conduit entities
S corporations
llcs
sole proprietors
avoid double taxation
tax year for trusts
all trusts must use a calendar year EXCEPT 501(a) or charitable trusts
all income earned by a revocable trust is taxed to whom?
the grantor because the transfer of property is not complete
definition of cost basis
the original investment plus improvements
if the FMV on the date of the gift is greater than the donor’s adjusted basis…..
then use the donor’s adjusted basis
gifts of appreciated property have what basis?
the donor’s basis goes over to the donee
loss gift basis
if the FMV on the date of the gift is less than the donor’s adjusted basis in the gift, then:
1. a loss is measured using the FMV on the date of the gift
2. a gain is measured using the donor’s basis
3. if the sale price of the gift is between the donor’s basis and the FMV on the date of the gift, no gain or loss is recognized
basis of inherited property
FMV on the date of the decedent’s death
MACRS 5 year property recovery year 1 and 2
20 %
32%
MACRS 7 year property recovery year 1 and 2
14.29%
24.49%
179 deduction
expense (rather than capatilize) a limited dollar amount of tangible property
$1,220,000
generally 1245 property
cannot create a loss
what is realized gain in a like-kind exchange
gain at the time of the transaction
what is recognized gain in a like-kind exchange
the part of the realized gain that is immediately taxable
time limit on like kind exchanges
identified in 45
transfer complete in 180 days
publicly traded partnership losses
can not be netted against gains of another publicly traded MLP
can only be used against the future income from that same partnership
unused charitable deduction
can be carried forward for the next 5 years (additional) or until the taxpayer’s death
by matching the duration of a bond or bond portfolio to the time horizon for a client’s financial goals you can offset what risks?
reinvestment rate risk
interest rate risk
if interest rates are expected to rise (what bonds to buy)
buy higher coupon bonds with short marturities to shorten duration
if interest rates are expected to fall (what bonds should you buy)
buy low coupon bonds with long maturities to lengthen duration
Bond Price Volatility
When the coupon is smaller the price fluctuation is ______
When the term to maturity is longer, the relative price fluctuation is _____
When the market interest rate is lower, the relative price fluctuation is ______
greater
greater
greater
convexity is largest for
low coupon bonds
long maturity bonds
low yield to maturity bonds
nominal yield
the stated rate of interest on the bond (the coupon rate)
taxation of GNMA interest
taxable at the federal, state, and local level
