Final Review Flashcards
Adjustments
When would a taxpayer’s contributions to a traditional IRA not be subject to AGI phase-out limitations?
If taxpayer and spouse do not participate in another qualified retirement plan
Adjustments
What is the maximum deduction amount for educator expenses?
$300
What is the maximum deduction amount for student loan interest?
$2,500
Which IRA contributions are not deductible? Contributions to a traditional IRA or a Roth IRA?
Roth IRA
What is the carryback and/or carryforward rules for the Foreigh tax credit?
Excess is carried back 1 year and carried forward 10 years
What is the carryback/carry forward rules for NOL happening prior to 2018? How much of the NOL is used to offset future taxable income?
Carryback 2 years, carryforward 20 years, and 100%
What is the carryback/carry forward rules for NOL happening between 2018 and 2020? How much of the NOL is used to offset future taxable income?
Carryback 5 years, carryforward indefinitely, and 100% and 80% of taxable income after 2018
What is the carryback/carry forward rules for NOL happening 2021 to the present ? How much of the NOL is used to offset future taxable income?
No Carryback, carryforward indefinitely, and 80%
What does the Lifetime Learning credit (LLC) provide?
Lifetime = unlimited number of years for qualified expenses
20% of qualified expenses up to $10,000
How many years is the American Opportunity Credit (AOC) available to taxpayers for educational costs?
The first 4 years of post-secondary education
What does the AOC provide?
100% of the first $2,000 of qualified expenses plus 25% of the next $2,000 if expenses for the year ($2,500)
What does the Lifetime Learning credit (LLC) provide?
Lifetime = unlimited number of years for qualified expenses
20% of qualified expenses up to $10,000
What do client records include?
- Materials prepared by the client or third party and provided to practitioner
- Returns, claims for refund, or other documents prepared by the practitoner
What is the key difference between actual fraud and constructive fraud?
Actual fraud is when the defendant knows and disregards the truth
Constructive fraud is when the defendant doesn’t know if true or false, but acts recklessly
What is the most common court for taxpayers to dispute an IRS deficiency notice?
Note: A taxpayer does not need to pay the disputed amount before suing
U.S. Tax Court
If a taxpayer pays the tax in question and wishes to dispute it, what court(s) are available to them?
- Federal District Court 2. U.S. Court of Federal Claims
If a taxpyaer or the IRS is dissatisifed with the decision from the U.S. Tax Court, Federal District Court, or Court of Federal Claims, what can the taxpayer do?
Appeal to the U.S. Court of Appeals through the regular U.S. Tax Court and U.S. District Court
What is the highest court in the U.S. and can choose which cases it wants to hear?
The U.S. Supreme Court
True or False
Advertisments and price quotes are offers opposed to deals
False; they are deals (i.e. an invitation to deal)
What does the statue of frauds require?
The statue of frauds requires contracts for the sale of goods of $500 or more to be in writing
Note that if contracts are below $500, writing is not required and the contract may still be binding
True or False
To ratify a contract, the principal (i.e. boss) must have knowledge of all material facts
True
When can an agent revoke his/her agency duty?
When coupled with interest
This means
This means the agent not only has a job to do, but they also will benefit from their duty such as selling stock
Is a principal liable for an agent’s torts if committed outside of the scope of employment?
No, the agent is personally held liable
How should suretyship promises be evidenced?
In writing under the Statue of Frauds
What rights does a surety have against his or her principal?
The right of exoneration (to be free from blame/guilt)
The right of reimbursement (recover)
The right of subrogation (subsitution of parties)
What does attachement require?
- An agreement between the creditor and debtor (through possession or autheticated record of agreement)
- Creditor must give value
- Debtor must have rights in the collateral
What are the five methods of perfecting under secured transaction of the UCC?
- Filing a financing statement (can be used for intangibles)
- Taking possesion of the collateral (cannot be used for intagibles)
- Automatic perfection
- Control
- Temporary
True or false
A spouse may jointly file a voluntary petition under the chapter 7 liquidation proceeding
True
How long must a debtor wait before receiving another discharge in bankruptcy
At least 8 years
Is there consideration?
A promise to pay a minor $500 to paint a garage
Yes, because there is something that is being bargained for in exchange for a value
Is there consideration?
A person’s promise to pay a real estate agent $1,000 in return for the real estate agent’s earlier act of not charging commission for selling the person’s house.
No, because it was a past act that the person was already obligated to do
Are the employer portion of self-employment taxes deductible? If so, from AGI or to arrive at AGI?
Yes, to arrive at AGI
What increases the accumulated adjustments account of an S corp?
Interest and Dividends
True or False
For income to be taxable on a tax return, it must be either realized or recognized.
False, BOTH realized and recognized
When does federal law impose an income tax on net income?
When at a minimum there is physical presence in a state, the income is taxable
When does federal law prohibit a state from imposing an income tax on net income?
If orders are taken within the state and accepted at corporate HQ outside the state and shipped from a location outside of the state
Which one(s) increase a shareholder’s basis in an S Corp and a partnership?
* Tax-exempt Interest
* Taxable Interest
* Non-deductible expenses
* Losses
- Tax-exempt interest
- Taxable interest
Which one(s) decrease a shareholder’s basis in an S Corp and partnership?
* Tax-exempt Interest
* Taxable Interest
* Non-deductible expenses
* Losses
- Non-deductible expenses
- Losses
What is the purpose of a U.S. Tax Court?
The U.S. Tax Court is a specialized trial court (bottom level) that initially hears only federal tax cases, and the trials are by judge and not by a jury
How would you calculate the depreciable basis of equipment?
Costs associated with purchase of asset - accumulated depreciation
What is the exception for a TRP to avoid a penalty for a position disclosed on the return?
Reasonable Basis standard
>20% or more chance of winning in court
What is the exception for a TRP to avoid a penalty for a position undisclosed on the return?
Substantial authority standard
40% or more chance of winning in court
What is the exception for a TRP to avoid a penalty for tax shelters and reportable transactions?
More likely than not standard
50% or more chance of winning in court
Statue of frauds requires contracts with sales of goods to evidenced in writing if the price is $500 or more unless what?
SWAP
The contract is for specially manufactured goods, written confirmation, admitted in court, or performed
What convention(s) do/ does real property use?
Mid-month
What convention(s) do/does personal property use?
Half-year (default)
or
Mid-quarter
Individual Tax Formula
Gross Income - Adjustments = AGI - Standardized Deduction or Itemized Deduction = Taxable Income before QBI Deduction - QBI Deduction = Taxable Income
Is workers’ compensation taxable or tax-exempt
Tax-exempt
Is unemployment compensation taxable or tax-exempt?
Taxable
Can a contingent fee be charged in the situation?
An IRS examination or audit
Yes
Can a contingent fee be charged in the situation?
An audit or review of financial statements
No
Can a contingent fee be charged in the situation?
Claim solely for a refund of interest and/or penalties
Yes
Can a contingent fee be charged in the situation?
A judicial proceeding arising under the IRC
Yes
True or false
Personal reputation awards and punitive damages are both excluded from taxable income
False, both are included
What organization test products for public safety?
501(c)(3) Public Charities
