I'm smiling from the stage while you clapping from the nose bleeds Flashcards
what are the major types of misc deductions subject to the 2% floor?
- EE business expenses not reimbursed under an accountable plan. (if reimbursed then deducted for AGI)
this includes job hunting in same trade/biz, specialized clothing if not suitable for normal wear - investment expenses (not royalty or rental expenses)
- tax return preparation fees
-home office expenses
-hobby expenses
-appraisal fees to determine casualty loss - legal fees to procure alimony
LTCG is donated, how much is deductible? to what limit?
the FMV is deductible, limited to 30% of AGI
property that is donated to charity, deduction?
FMV of the property less any STCG or ordinary income that would be recognized if the property had sold.
Public A charities
gov subdivisions, hospitals, churches, schools, and similar institutions operated for religious, scientific, educational or charitable purposes
are union dues deductible?
yes, subject to 2% floor
what are the requirements for deducting nonbusiness bad debts?
loan to someone
deductible as short term capital losses in the year they are completely worthless
if a company has 90% stock ownership of another company, and the stock is deemed worthless, how is the loss treated?
as an ordinary loss. (worthless securities generally receive capital loss treatment)
if someone has a salary of $30k and a personal casualty loss of $45k, how much of a NOL will they have?
$15k. 45 is subtracted from 30 to arrive at 15.
What kind of people/orgs do passive activity losses apply to?
individuals estates trusts personal service corporations closely held C corps
if passive activity losses are not used up within one year, how long can they be carried back/forward?
forward indefinitely, or until the property that caused the passive losses is disposed of in a taxable transaction
how is the standard deduction of a child that has earned and unearned income determined?
the standard deduction is the greater of $1,050 or earned income plus $350.
Can a husband and wife have different accounting methods and still file jointly?
yes
what are examples of preferences when calc the AMT?
tax-exempt interest (it must be added to regular taxable income in arriving at AMTI)
what are examples of adjustments when calc the AMT?
personal exemption
state income taxes (itemized deductions)
home equity interest expense where loan proceeds are not used to buy, build, or improve home
what is excluded from self employment income?
estimated income taxes
charitable contributions
investment income
gains/losses on disposition of property
what is included in self empmloyment income?
an individual’s net earnings from a trade or business carried on as sole proprietor or as an independent contractor. The term also includes a partner’s distributive share of partnership ordinary income or loss from trade or business activities, as well as guaranteed payments received by a partner for services rendered to a partnership. Self‐employment income excludes gains and losses from the disposition of property used in a trade or business, as well as a shareholder’s share of ordinary income from an S corporation.
AMT carryover info
The amount of alternative minimum tax paid by an individual that is attributable to timing preferences and adjustments is allowed as a tax credit (i.e., minimum tax credit) that can be applied against regular tax liability in future years. The minimum tax credit is computed as the excess of the AMT actually paid over the AMT that would have been paid if AMTI included only exclusion preferences and adjustments (e.g., disallowed itemized deductions, excess percentage depletion, tax‐exempt private activity bond interest). Since the minimum tax credit can only be used to reduce future regular tax liability, the credit can only reduce regular tax liability to the point at which it equals the taxpayer’s tentative minimum tax. In this case, Karen’s payment of $20,000 of alternative minimum tax in 2016 generates a minimum tax credit of $20,000 − $9,000 = $11,000 which is carried forward to 2017. Since Karen’s 2017 regular tax liability of $50,000 exceeded her tentative minimum tax of $45,000, $5,000 of Karen’s minimum tax credit would be used to reduce her 2017 tax liability to $45,000. Therefore, $11,000 − $5,000 = $6,000 of unused minimum tax credit would carry over to 2018.
if a charitable contribution is made of inventory or a STC asset, what amoutn can be deducted?
the charitable deduction is FV on the contribution date reduced by any ordinary income or short‐term capital gain that would be recognized if the asset was sold.
American Opp Credit. for what? How much? how many? phase out?
First 4 years of degree program - college
up to $2,500 (100% of the first $2k, then 25% of the next $2k).
EACH ELIGIBLE STUDENT
phased out starting at $80k ($160k for joint) and completely gone at $90 (180k)
Lifetime learning credit. For what? how much? how many? phase out?
post secondary (doesnt have to be degree seeking)
allowed up to max of $2k (20% of up to $10k)
1 credit per taxpayer
phased out at $56k (112k)
how much is the dependent care credit
expenses limited to $3k ($250 per month for one child) or $6k ($500 for more than one). 20% of $3k expenses if AGI over $43k.
What is the phase out for dependent care credit
phased down to the min of 20% for AGI of $43k. of expenses of $3k (or $6k if more than one)
how much is the adoption credit? phase out? is it refundable?
$13,570.
phased out between $203,540 and $243,540
nonrefundable
what credit can result in a refund?
the earned income credit
how is the credit for the elderly or disabled calc?
15% of an initial amount:
-$5k when only 1 spouse is 65 or older
-$7,500 when both are 65 or older
-$3,750 married filing separately
-Limited to disability income for those under 65
reduced by SS, annuities, pensions, or disability income excluded from gross income.
Also reduced by 50% of the excess of AGI over:
$7,500 if single
$10k joint
when must an estate tax return be filed? when?
for any gross estate that exceeds $5,490,000
9 months after death.
what is not included in section 1231 assets?
inventory, property held for sale, AR
what are capital assets?
assets held for personal use and investment property
how long can a capital loss be carried forward/back
back 3 and forward 5
can a capital loss offset ordinary income?
no only capital gains
is a loss on a personal use item deductible?
no
what is the max a married joint person can elect as an ordinary loss?
$100,000 ($50k single)
do corporations classify their capital losses as ST or LT?
ST
does an individual have to recognize gain if the sale of a personal asset results in a gain?
yes - capital
are married joint couples allowed a deduction on losses?
capital losses first offset capital gains, and then are allowed as a deduction of up to $3,000 against ordinary income, with any unused portion carried forward indefinitely.
what is section 1245 property?
all property other than land and buildings
realty definition
land and other assets affixed thereto (buildings)
Personalty
any tangible asset that can be moved (not fixed to land)
what kind of depr does realty use
straight line
what kind of depr does personalty use
200% declining balance or 150% declining balance
are losses generated from like-kind exchanges
no
are gains recognized from like kind exchanges?
yes:
the lesser of:
- realized gain
- boot received
how do you calc the adj basis of replacement property in an involuntary conversion
by subtracting the deferred gain from the cost of the replacement property
what is someone basis in new property acquired after having a like kind exchange?
the same as their basis in the property given up - increased by the amt of gain recognized and decreased by the amt of boot received (could net to 0)
what is the last date for someone whos real property used in a business/inv was condemned for them to replace their property without having to recognize a gain for the involuntary conversion
the replacement period ends three years after the close of the taxable year in which the gain is first realized.
if there is no boot received, is there gain recognized in a like kind exchange?
no
when calc the recongized gain, what is considered boot?
boot includes cash received and the other person assuming your mortgage
what is a wash sale?
losses from the sale of securities are not recognized if similar securities are purchased 30 days before or after the sale
what is the gain on the sale of personal residence exclusion rule?
a TP may exclude gains of up to $250,000 ($500k joint) on the sale of a residence
Are losses from sales and exchanges between family members recognized for tax purposes?
no loss deductions are allowed
if the TP purchases replacement stock after a wash sale occurs, what is the basis of the replacement stock?
the cost of the new stock + the disallowed wash sale loss.
