Final REG Review Flashcards
Individual Taxation – Individual AMT Formula
REGULAR TAXABLE INCOME
± Adjustements
\+ Preferences
= ALTERNATIVE MINIMUM TAX INCOME
– Exemption
= ALTERNATIVE MINIMUM TAX BASE
x Tax Rate
= TENTATIVE AMT TAX
– Tax Credits
= TENTATIVE MINIMUM TAX
– Regular Income Tax
= ALTERNATIVE MINIMUM TAXIndividual Taxation – Income Tax Formula
GROSS INCOME
– Adjustments
= ADJUSTED GROSS INCOME
– Exemptions
– Standard or Itemized Deductions
= TAXABLE INCOME
x Tax Rate
= FEDERAL INCOME TAX
– Tax Credits
\+ Other Taxes
– Payments
= TAX DUE/REFUNDIndividual Taxation – Individual AMT Formula: Adjustments
a) Increase of Decrease = PANIC
P = Passive activity losses
A = Accelerate depreciation
N = NOL of individual taxpayer
I = Installment income of a dealer
C = Contracts – % completion vs competed contract
b) Increase only
– Add back personal exemptions
– Add back standard deduction
– If itemize
– No phaseouts
– Medical < 10% AGI allowed
– No miscellaneous deductions
– Interest deduction on home equity loan not allowed
– No deduction for taxes
Individual Taxation – Individual AMT Formula: Preferences
Always add back = PPP
P = Private activity bonds interest income P = Percentage depletion over adjusted basis P = Pre-1987 accelerated depletion
Individual Taxation – Individual AMT Formula: Exemptions
Exemption = $40,000
Phase out = 25% of AMTI over $150,000
Individual Taxation – Individual AMT: Credits
- Foreign Tax Credit
- Adoption Credit
- Child Tax Credit
- Retirement Contributions Credit
- Earned Income Credit
Individual Taxation – Carrybacks/Forwards
Net operating loss (sole proprietor)
– 2 year back
– 20 years forward
Passive activity loss
– No carryback
– Indefinite carryforward
Excess chartiable deduction
– No carryback
– 5 years carryforward
Foreign tax credit
– 1 year carry back
– 10 years carry forward
General business credit
– 1 year carry back
– 20 year carry forward
AMT credit
– No carryback
– Indefinite carryforward
Individual Taxation – Phaseouts, I
– Mom & Pop Exception to PAL Rules
– Personal Exemptions
– Deductible IRA
Mom & Pop exception to PAL rules
– Can deduct upt to $25,000 PAL/yr
– Phaseout 50% of AGI over $100,000
– Phaseout complete by $150,000 AGI
Personal Exemption
– 2% per $2,500 over AGI
Deductible IRA
– Contributions are deductible
– Phaseout at high AGI and active participation in another qualified plan
Individual Taxation – Phaseouts, II
– Coverdell Education Savings Account
– Child and Dependent Care Credit
– Lifetime Learning Credit
Coverdell Education Savings Account
– Contribute up to $2,000 per beneficiary per year
– Phaseout at high AGI
Child and Dependent Care Credit
– 20 - 35% of eligible expenses
– Max expenses = $3,000 for 1 child, $6000 for multiple children
– Phaseout = 1% per $2,000 above $15,000 AGI
Lifetime Learning Credit
– Up to 20% of $10,000 tertiary education expenses
– $2,000 maximum credit
– Phaseout at higher AGI
Individual Taxation – Phaseouts, III
– Retirement Savings Contributions Credit
–Adoption Credit
– Child Tax Credit
Retirement Savings Contributions Credit
– up to 50% of $2,000 contribution
– $1,000 maximum credit
– Phaseout at high AGI
Adoption Credit
– $12,970 per child
– Phaseout at high AGI
Child Tax Credit
– $1,000 per child
– Phaseout = $50 per $1,000 excess AGI
Individual Taxation – Phaseouts, IV
– American Opportunity Credit
– Exemption for AMT
American Opportunity Credit
– $2,500 maximum credit
– Phaseout at high AGI
Exemption for AMT
= $40,000
– Phaseout = 25% of AMTI above $150,000
Individual Taxation – Itemized Deductions: Pease Limitation
Pease limitation = lesser of:
1) 3% excess AGI
or 2) 80% otherwise allowable itemized deduction
Pease limitation doesn’t apply to
– Medical expense (10% AGI floor)
– Investment interest expense (limited to net investment income)
– Casualty and theft ($100/event + 10% AGI floor)
– Gambling losses (limited to gambling wins)
Individual Taxation – Itemized Deductions that Pease Limitation applies to
Pease limitation applies to – State, local, foreign taxes – Interest expense for 1st or 2nd home – Charitable contributions – Miscellaneous itemized deductions (2% AGI floor)
Itemized Taxation – Tax Credits: Refundable Credits
- Child Tax Credit
- Earned Income Credit
- Withholding Tax
- Excess Social Security Tax Withheld
- American Opportunity Act
Individual Taxation – Tax Credits: Nonrefundable Credits
- Child and Dependent Care Crdit
- Elderly and Permanently Disabled Credit
- Lifetime Learning Credit
- Retirement Savings Contribution Credit
- Foreign Tax Credit
- Residential Energy Efficient Property Credit
- General Business Credit
Individual Taxation – Statute of limitations
Assessment of additional tax
– 3 years from later of return due date or filing date
– 6 years if 25%+ income understatement
– No limit if fraud
Filing to claim refund
– 3 years from return due date or 2 years from when tax paid
– Bad debt/worthless stock = 7 years from later or due date or filing date.
Individual Taxation – Tax Payments
Prepayments during tax year
– Withholding
– Social Security withholding
– Estimated tax payments
Make quarterly payments if
1) tax liability exceeds withholding by $1,000+
or
2) withholding is the lesser of a) 90% current year’s tax or b) 100% last year’s tax (110% if high AGI)
C Corprations –Formation: Shareholders
No gain or loss recognized unless
- Boot received
- Liabilities assumed > adjusted basis
Boot received
– Gain is lesser of 1) gain realized, or 2) FMV boot received
Liabilities assumed > adjusted basis
– Gain = liabilities assume – adjusted basis
Adjusted basis in stock = Adjusted bass of property transferred \+ Gain recognized – Boot received – Liabilities assumed by corporation
C Corporations – Formation: Corporation
No gain or loss recognized
Basis in property received is greater of
1) Shareholder’s basis in property,
2) Liability assumed by corporation
C Corporation – Book Income
INCOME
– Expenses
= NET INCOME BEFORE TAXES
– Tax
= NET INCOME AFTER TAXES
± Income/loss from discontinued operations, net of tax
± Extraordinary gain/loss, net of tax
± Accounting adjustments and changes, net of tax
= NET INCOME
C Corporation –Taxable Income
GROSS INCOME – Deductions = INCOME BEFORE SPECIAL DEDUCTIONS – Charity – Dividends Received Deduction = TAXABLE INCOME
C Corporation – Income Tax Formula
GROSS INCOME
– Deductions
= INCOME BEFORE SPECIAL DEDUCTIONS
– Charity
– Dividends Received Deduction
= TAXABLE INCOME BEFORE CARRYBACKS/FORWARDS
– NOL & Net Capital Carryback/forwards
= TAXABLE INCOME
x Tax Rate
= TAX LIABILITY
– Tax Credits
\+ Other Taxes
= TAXES DUEC Corporation – Special Deductions
Charitable Deductions limited to 10% of Income before Special Deductions
– Excess carried forward
Dividends received deduction
– 70% for 0 - 20% ownership
– 80% for 20 - 80% ownership
- 100$ for 80%+ ownership
C Corporations – Carryforwards/backs
NOL carried back 2 years, forward 20 years
Net Capital Loss carried back 3 years, forward 5 years
C Corporations - Filing
15th day of 3rd month after year-end
Accrual accounting for - Inventory – Tax Shelters – Certain farming corporations – C corps/trusts with UBI/partnerships that have C corp partners with $5 million receipts for last 3 years
C Corporations - Statute of Limitations
Assessment of additional tax: 3 years
– 6 years for 25% misstatement
C Corporation – Estminated Payments
15th day of 4th, 6th, 9th, and 12th month
Underpayment if don’t makes estimated payment and owe $500+
Small/medium corporations pay lesser of
1) 100% current year tax, or
2) 100% of last year tax
Large corporations pay 100% current year tax
C Corporation – Corporate AMT Formula
REGULAR TAXABLE INCOME
± Adjustment
\+ Preferences
= UNADJUSTED ALTERNATIVE MINIMUM TAXABLE INCOME
± ACE Adjustment
– AMT NOL Deduction
= ALTERNATIVE MINIMUM TAXABLE INCOME
– AMT Exception
= AMT BASED
x 20%
= GROSS AMT
– Foreign Tax Credit
= TENTATIVE MINIMUM TAX
– Regular Tax Liability
= ALTERNATIVE MINIMUM TAX
