Income Tax

Question 1

Which of the following would make a tax payer ineligible to claim a casualty loss deduction?
Hurricane
Sonic Boom
Vandalism
Earthquake
All of the above

Answer 1

All of the above

Question 2

Pat, 16yrs old, has earned income of $1150 from mowing lawns and interest income of $750. What is the amount of his standard 2022 deduction?

Answer 2

$1550– earned income plus $400

Question 3

Tom Slade has a current AGI of s$300k - he has itemized deductions from property taxes, mortgage interest and charitable gifts. What amount can his itemized deductions be reduced?

Answer 3

Zero— itemized deductions are not allowed

Question 3

Tom Slade has a current AGI of s$300k - he has itemized deductions from property taxes, mortgage interest and charitable gifts. What amount can his itemized deductions be reduced?

Answer 3

Zero— itemized deductions are not allowed

Question 4

Which type of business cannot adjust future yrs income due to prior yrs NOL?

Answer 4

S Corps— they already pass though annual losses

Question 5

Bob and Fred- want to open a business called Banquet on a Bun. They will materially participate. They anticipate losses the first 3yrs due to new equipment. If one brother dies, they want the survivor to continue the business. They anticipate that they may have to raise additional capital through the sale of interests or have the business borrow funds. Which business form makes the most sense?

Answer 5

An LLC — same basis as a partnership. Can take more losses than an S corp. S corp basis is limited to only cash and business direct loans, but no corp debt.

Question 6

Which of the following filing statuses could help a business owner reduce his/her taxes?
A) file self employed individual
B) S corp using 1120S
C) file as regular corporation Form 1120
D) file as an LLC

Answer 6

C- file as a regular corp- will provide the owner a separate tax entity.
Money left in a corporation is taxes at 21%

Question 7

Which forms would the owner-employee of a regular corp relieve notice of distributed taxable income?

Answer 7

W2 and 1099 (employEE)

Question 8

What do these facts summarize?
Up to $100k of loss is treated as ordinary income loss
Any loss in excess of the maximum annual ordinary loss is treated as a capital gain

Answer 8

Section 1244 stock - Qualified small business check. Corp (S or C) that was capitalized with no more than $1m- loss of $100k per yr on a joint return ($50k single) is considered to be an ordinary, rather than a capital loss.

Question 9

Mr Able owns rental property w FMV of $500k and an adjusted basis of $150k. He wants to exchange the property for one owned by Mr Pate. The Pate property has FMV of $400k and a basis of $200k. The Pate property needs a substantial upgrade. Mr Able wants $100k in cash from Mr Pate. What is the capital gain amount for Mr Able to recognize??
What is his basis?

Answer 9

$350k/ Basis $150k
FMV of property received- $400k
Boot $100k— add to it
Less the basis of property given up— $150k

Keep original basis

Question 10

Recognized gain =

Answer 10

Boot received

Question 11

Which of the following strategies should be considered to avoid or reduce exposure to AMT?
A) Exercise ISO in one yr
B) if you’re the owner of a small corp, pay yourself a large bonus
C) defer paying property taxes until next yr
D) buy private activity muni bonds rather than public purpose

Answer 11

B- this gives you higher incomes and pay more in regular taxes therefore avoid AMT

Question 12

Mrs Ball owns a stock w FMV of $100k, with original basis of $25k. She wants to give it to American Red Cross, a public charity. If her joint AGI is $250k what is the maximum charitable deduction she cant take for the stock gifts?

Answer 12

$75000– maximum of 30% of AGI
FMV-3 letters