Flashcards from CPAExcel

Question 1

elements of the net capital loss deduction for individuals.

Answer 1

Deductible up to $3,000 per year;
For AGI;
Also limited to taxable income;
Excess loss carries forward; no limit on carryforward period.

Question 2

How can corporations use their capital loss deduction?

Answer 2

• Can only use capital losses to offset capital gain net income; no deduction for net capital losses;
• Unused losses are carried back three years and forward five years.

Question 3

What are the key differences between like-kind exchange and involuntary conversion rules?

Answer 3

Like-kind exchange rules are mandatory but involuntary conversion rules are elective. Like-kind exchange rules apply to gains and losses but involuntary conversion rules apply only to gains. Type of replacement property under involuntary conversion rules is narrower than like-kind property.

Question 4

List the requirements for deferral due to involuntary conversion.

Answer 4

Disposition qualifies as involuntary conversion;
Must replace property with property similar or related in service or use;
Must be made within two years from end of tax year of conversion (three years in the case of condemnation or threat of condemnation of real property held for productive use in a trade or business or for investment);
Boot causes recognition of realized gain.

Question 5

What are the requirements to qualify for alimony?

Answer 5

Payment must be in cash or via expense payment;
Must be contingent on recipient still being alive;
Required by a written agreement or decree;
Not identified as “non-alimony

Question 6

What is the tax treatment of child support?

Answer 6

Never taxable to the recipient, no deduction to payor.

Question 7

What types of fringe benefits are excluded from an employee’s income?

Answer 7

Meals and lodging for convenience of employer;
Working condition expenses;
De minimus fringes;
No additional cost fringes;
Employee discounts;
Employee gifts (under $25) and safety/achievement awards.