Income Tax Flashcards
Section 1244 qualified small business stock
Only applies to the first million of stock initially issued. Loss of 100k per year joint 50k otherwise is ordinary loss no capital loss
Calculation of gain on installment sale
Profit or the gain realized on the sale/
Total contract price = gross profit.
Them you take GP and multiply it by the first years income to see what is taxable at LTCG
ex 900/1m= 90% GP
.90x 100k = 90,000 LTCG
Refundable credit
Child tax credit and earned income credit both refundable up to 1700
Section 197 intangible
Can be amortized over a 15 year period with straight line deprecation
179 deduction
Up to 1,220,000 or tangible personal property 1245 property. Can’t create a loss
Active participants for real estate activity
Can deduct your to 25k per year of net losses from their active or portfolio income. The deduction is phased out for people between 100k and 150k agi on a $2 for $1 basis
Rental of principal residence, not normally a business
Fewer than 15days (so 14) during the taxable year rental income is excludable from income
No deductions to the rental use are allowed
Renting your vacation home (normally a business)
You can stay in your vacation rental but it cannot exceed the longer of 14 days or 10% of the rental use.
Low income housing credit
Credit is allowed annually over a 10 year credit period
Deprecation is straight line over 27.5 years
Charity bargain sale
Sold to charity for less than FMV
Sale/ FMV then multiply this figure by basis. This gives you adjusted basis then you subtract the sale from adjusted basis to get the taxable gain.
No alimony paid in third year
Add together the first two years and subtract 37,500. This is what has to be recaptured
Foreign tax credit
You can choose yearly between doing a credit or deduction
Hobby loss rules
Income is reportable, have to have generated net income three out of 5 years to be a business not hobby
For horses profit is necessary in only 2 out of 7 consecutive years
Divorced on December 31?
Can’t file MFJ
December 31st tells you what to file as
Deduction vs credit
Credit worth more to lower income
Deduction worth more to higher income
Qualified business income
Got to be a pass through income so no c corp
Deduct 20% on their pass through income
Corporate accumulated earnings tax
Regular corporation can accumulate 250 PSC is 150 without establishing a business need. This is intended to make corporations pay out dividends 20% tax.
Simple vs complex trust
Simple kicks out all income, benes pay taxes on the income at their rates, no distribution of corpus, no charitable gift
Complex trust may kick out the income (taxed to bene)or may be accumulated (taxed to trust) corpus can be distributed, may make charitable gifts
Distributable net income (dni)
Limits what the trust or benes have to report for income tax purposes. Can either claim a deduction for amount distributed or limit the portion of the distribution that is taxable to benes or ensure distributions remain the same for bene as it was for trust.
The deduction is equal to the lesser of the amount distributed to the benes or the dni
Complex trust has 300 exemption if it is required to kick out income 100 if not.
Macrs and straight line
5year 7 year 5year 7 year
1 20%. 14.29%. 10%. 7.14%
2 32%. 24.49%. 20%. 14.29%
Macrs. Straight line
Deprecation recapture CRDs
1245 property recaptured at ordinary income rates
Any excess over that is 1231 capital gain
1250 property deduct at ordinary rates and recapture at 25%
