Final Review Flashcards
What is the basis in stock repurchased resulting from a wash sales?
cost of replacement + disallowed loss
Is a bank liable to the drawer if failure to obey a stop pay did not cause a loss?
No
What is the basis in a new building that was destroyed and insurance was received for the loss?
Cost to rebuild
Equation for Like-Kind Exchange
(+) Basis Given Up
(–) Boot Received
(+) Gain Recognized
What is the distribution amount to a shareholder for property received with a liability to be assumed?
FMV of property - Liability assumed = Distribution
Sec 1231 gain recapture as ordinary income is for how many preceding years?
5 years
“Fit for all of the purposes for which the buyer intends to use the goods” is what type of warranty?
Merchantability
Term used to avoid liability under SEC 1933
Due Diligence
Does “Composition of Creditors” release the debtor from debt?
Yes
Can a charitable contribution increase or create a NOL?
No, charitable contributions are not part of a NOL
If it’s not clear if a property is joint tenancy or tenancy in common what is the default?
Tenancy in Common
Lessee purchasing the leased property does what to the lease?
Terminates it
Basis in partnership for a partner contributing services and property
FMV of Partnership interest - PMV Property Given = Income
BASIS = Income + Property AB
Does a buyer in the ordinary course of business take free of any security interest, even if perfected?
Yes
Are limited partners liable for who’s negligence?
Their own and who they supervise
What must be proven to claim fraud in the inducement?
The defendant made a false statement with intent to deceive
For a service contract where additional work is requested for additional pay, and the contract is over $500, is this binding?
Yes, additional pay is additional consideration
Can a consumer recover from a manufacture even if they can not prove negligence?
Yes
Shareholder’s basis in corporation when transferring property, equation
(+) Adjusted Basis (+) Gain Recognized (--) Boot Received (--) Liabilities Assumed (=) Basis in Corporation
Corporation’s basis in property contributed by Shareholder, equation
(+) Shareholder’s Adjusted Basis
(+) Gain recognized by the Shareholder
Holding period for Shareholder in property contributed to corporation
- Capital or Sec 1231 - tack on
2. All of property - day of contribution
Holding period for Corporation of property contributed
Tack-On Shareholder’s
Realized Gain or Loss Equation
(+) Amount Realized
(–) Adjusted Basis
(=) Realized Gain/Loss
Amounts Realized include what 4 items?
- Cash
- FMV of Property
- Liabilities Assumed
- Less: Selling Expense
Are losses on personal assets deductible?
No
Contributing Inventory to a corporation is what type of asset and what holding period will it take
Ordinary, Tack-On holding period
No gain or loss recognized to the Shareholder in a corporate formation when what occurs?
- **80% rule is first test
a. Stock is the only property received
b. Stock is received in exchange for cash or property only, no services
If boot is received in a corporate formation what is the amount of boot?
Lower of:
a. Realized Gain
b. FMV of Boot
When can you not compute realized gain?
You can always compute realized gain, but it’s not always recognized (ex. 80% test)
If debt assumed by a corporation is greater than the AB of property contributed by the shareholder what is the gain amount?
Gain = Debt Assumed – Adjusted Basis of Property
How are Guaranteed Payments accounted for in Partnerships?
Deducted from Ordinary Income
When are “Hot Assets” accounted for?
Only on Sale or Termination of Partnership Interest, not non liquidating distribution
Can basis in a Partnership go below Zero?
NO
What triggers an accrual basis tax payer?
Average over $5mill for 3 years
What is the tax return form for a S-Corp
1120-S
What or the Ordering Rules
- Net Income
- Distributions
- Losses
TRP Penalty (not client penalty) for taking an “unreasonable position”, not willfuly
Greater of:
a. $1,000
b. 50% of income received from client
TRP Penalty (not client penalty) for taking an “unreasonable position”, WILLFULLY
Greater of:
a. $5,000
b. 50% of income received from client
How are medical expenses paid for a dependent deducted (For AGI or Misc Itemized Deduction)
For AGI
How are expenses related to passive rental income deducted?
Schedule E, above the line
Are gambling losses an itemized deduction subject to the 2% floor?
No, not subject to the 10% floor
Child tax credit per child
$1,000
How is the child tax credit phased out?
$50 for every $1,000 over, rounded up to the next $1,000
Is a scholarship that goes directly to tuition and fees taxable?
No
Fraud in the inducement is what type of defense?
Personal Defense
Tax Payer penalty for Under Reporting Income - Negligently
20% of tax due
Tax Payer penalty for Under Reporting Income - Fraud
75% of tax due
Tax Payer Failure to File Penalty
5% a month, not to exceed 25% of tax due
Tax Payer Failure to Pay Penalty
0.5% a month, not to exceed 25% of tax due
Is the appreciation of property since the time a debtor filed bankruptcy part of the estate?
Yes
3 items included in Bankruptcy estate if received after 180 of filing
- Inheritance or Gift
- Divorce, Separation, or Property Settlement
- Beneficiary Proceeds from Life Insurance
Interest Income received on a mortgage loan is recorded on what schedule?
B
Computation of Self-Employment tax is based on what?
Net Earnings from Self-Employment
How is a net loss in an Asset Group applied to other asset groups?
Starting with the highest tax rate and moving down
When is the only time that the 60% rule of a secured party reposes collateral and having to sale it apply?
Consumer Goods
If a party take a note in “good-faith” they probably are what?
Holder in Due Course
If a negotiable instrument does not have a stated time that it pays when is it payable?
On demand
Official Bonds are the obligation of who?
The surety
When and how much can a noncorporate shareholder exclude gains from the sale of Qualified Small Business Stock?
Held after 5 years, 50% of the gain
Does a general partner in a limited partnership have the same rights as a general partner in a general partnership?
Yes
Past and Present owners of Environmentally Damaged property have what type of liability?
Joint & Several, all can be held liable for the whole thing
If a partner sales property to a partnership, not acting as a partner, they can recognize a gain or loss unless what situation?
They own 50% or more of the partnership
If an issuer has less than 35 unaccredited investors they qualify for which Reg D section
All 3; 504, 505, 506
When would a limited partner have a liability to a limited partnership on dissolution?
If the limited partnership as a receivable from the limited partner
Can a loss be recognized by a corporation for a non-liquidating distribution?
No, no loss on non-liqudating
When would a shareholder on a corporate formation defer a gain vs. recognize a gain?
Defer if part of the 80% “Control Club”
Recognize if not part of 80% or boot is received
Who is a “Tax Delinquency” penalty imposed on?
Someone who owes taxes but does not file a return
AMT Exemption amount equation
$40,000 - (25% over $150,000 AGI)
What is the standard deduction for Trust/Estates?
ZERO
Debt acquire by a corporation that is greater than the AB of property contributed results in what?
Gain to shareholder
“Hot Assets” result in what type of income?
Ordinary
Can a partner take a partnership loss that exceeds their basis?
No, it’s carried forward
When is a S-Corp shareholder’s basis increased for debt and when is it not?
Shareholder contributes debt - Increase
S-Corp gets own debt - Does NOT Increase
What is the tax treatment of Education IRA for contributions and withdrawals?
Contributions - NOT deductible
Withdrawals - Tax FREE for qualified education expense
Credit for AMT can be carried back/forward how long and can offset what?
Forward only, indefinitely
Only Offsets Regular Tax
Can Self-Employed individuals deduct their own salary as a business expense?
No
What tax form does a partnership file?
Form 1065
Limited Partners basis increase for what type of debt?
Non-recourse only
No change for Recourse debt
What are the 4 criteria for “Small Business Stock”
- Held for 5 years
- Corporation less than $50 million capital
- 50% gain excluded
- 28% tax rate on gain
Section 1244 gain and loss treatment
Gain - Capital Gain
Loss - Ordinary loss
When a shareholder buys property from a corporation for less than FMV what did the shareholder receive?
Constructive Dividend
What is the difference between a check and a negotiable time draft?
Negotiable time draft is payable at a definite time in the future, but is a 3 party instrument like a check
Does a buyer in the Ordinary Course of Business take free of any perfect security interest?
Yes
What amount of loss is allowed if partnership property is sold to an individual partner that owns more than 50% of the partnership?
Zero
If a merchant contracts to buy 100 lbs of gold over 6 months and circumstances change do they have to buy all 100 lbs?
Yes
Loss related to the sale of a subsidiary (80% ownership) is what type of loss to a corporation?
Ordinary
Do Limited Partners owe a fiduciary duty to the partnership?
No
What is the automatic start up and/or organizational cost deduction before amortization? What is it’s limit?
$5,000
Anything amount over $50,000 if phased out dollar for dollar
How is investment interest expense that does not exceed net investment income deducted?
Fully deductibe
What is the max amount that can be raised through crowd funding for a EGC?
$1 million
How is Interest on Tax-Exempt income treated for Personal Holding Tax?
Excluded
The term for basis used to determine gain on sale of property that was received as a gift
Transferred Basis
What is the only way that a Firm Offer is created?
MERCHANT makes a offer by SIGNED writing
For federal estate tax is a created allowed for state death taxes paid?
No
What is the term for the maximum amount of income taxable to beneficiaries of a trust?
DNI
Do trust or estate received a standard deduction?
NO
How is all depreciation on Section 1245 property recaptured?
Ordinary Income, even if over straight-line
Uniform Capitalization applies to who?
3 years averaging over $10 million gross receipts
Do you use a partner’s outside or capital basis in the partnership to calculate gain or loss on termination?
Outside Basis
S-Corp Eligibility rules for entities
- No Foreign corporations
- Members of consolidated group aren’t eligible
- Can own 80% or more of a C-Corp
- My own a S-Corp
Shareholder Requirements of an S-Corp
- Nonresident aliens, C-Corps, and Partnerships are not eligible
- Estates can be shareholders
- Trust can be shareholders
How many corporate shareholders have to vote for an S-Corp to be effective? How many to terminate?
Unanimous consent - Effective
Majority - Terminate
Can an S-Corp have a tax year other than a calendar tax year?
Yes
Are shareholder’s of a s-corp liable for an S-Corps debt?
No
Do S-Corps pay AMT, Personal Holding Tax, or Accumulated earnings tax?
No
Are S-Corps entitled to normal C-Corp deductions, such as the DRD?
No
