Income Tax Live Review Flashcards
can be cited as precedent
revenue ruling and revenue procedures
primary source of all tax law
IRC - internal revenue code
Dates for paying estimated taxes
April 15th
June 15th (+2)
September 15th (+3)
January 15th (+4)
extension for taxes
to file, but not to pay
if you need to share information what type of person should you look for?
a privileged person like an attorney or doctor
frivolous return
$5k penalty
Negligence
penalty is 20% of the UNDERPAYMENT
Civil fraud
penalty is 75% of the UNDERPAYMENT
failure to file
5%/month - 25% max
failure to pay
.5%/month - 25% max
estimated tax penalty avoidance
lessor of
90% of the current year’s tax liability
100% of the prior year’s tax liability (110% if AGI>$150k)
schedule for real estate
schedule E
main adjustments FOR AGI
IRAs
KEogh or SEP
1/2 self employment tax
alimony (pre 2019)
self employment health insurance
2500 student loan interest
HSA
investment interest deduction
max deduction allowed is limited to the taxpayer’s net investment income
what qualifies as “investment income”
income from property held for investment
interest
dividends
royalties
short term gains
are dividends included in investment income
ONLY if the taxpayer elects not to use th reduced rates
Deductible loss
FEDERALLY declared disaster
1. use the lesser of basis or FMV
2. subtract any insurance coverage
3. subtract $100 (floor)
4. Subtract 10% of AGI
itemized miscellaneous deductions
repealed
home office
for SELF EMPLOYED persons only
deduction limited to income derived from the activity
essentially, can’t create a loss
home office deduction requirements
Exclusively and regularly used for business
no other fixed location
entertainment expenses
non deductible
what meals are deductible
for the convenience of the employer and employee meals while traveling
50% deductible
personal and dependency exemption
SUBSPENDED
kiddie tax applies when?
all net UNEARNED income of a child who has not attained age 24 and who has at least one parent alive is taxed at the parent’s rate
standard deduction kiddie tax unearned and earned income
The greater of $1,300 unearned income or earned income plus $450
NEVER more than a single persons standard deduction
self employment includes
net schedule C income
genearl partnership income
board of directors fees
part time earnings (1099)
taxable wage base given in test questions shouldn’t exceed….
$168,600
credit for child and dependent care expense
UNTIL AGE 13
Non refundable
$3k for one dependent or $6k for two or more
multiply by 20% on the exam
child tax credit
child under age 17
$1,600 per child is refundable
$2k/child
what is the “family credit”
nonrefundable credit
dependents in your household that do not meet the definition of qualifying child
earned income credit
refundable
calculation of gain on an installment sale
cash received multiplied by gross profit percentage
gross profit percentage calc for an installment sale
profit/total contract price
related party tax trap for installment sales
if a related party sells the property within to years of the original purchase date the installment sale collapses
all gain is taxed retroactively in the first year
net operating losses
NOL can be sued to reduce the taxable income in future years
CANNOT be carried back to prior years
can be carried forward indefinitely
if a business is profitable it should be?
C corporation
personal service corporation
if a business has losses and is risk free it should be?
sole prop
partnership
if a business has losses and is risky
S corporation
LLC
LLP
C corporation tax rates
flat 21%
taxation of a PSC
personal service corporation
21% flat tax
what types of businesses are PSC?
Health
Accounting, Architectural, Arts,
Law
Engineering
Section 1244
qualified small business stock
only applies to the first million dollars of stock
loss of $100k/year is ordinary (not capital)
Sole prop and interest paid
if money is borrowed for business purposes the interest paid (without limit) is deductible on Schedule C
General partnership filing
conduit entity
file a 1065, but it’s for informational purposes only
partners get a K1
losses and partnerships
losses up to basis
Subchapter S corporations
1120S
conduit entity
100 shareholder limit
basis for S corporation
conduit of income/loss to owner
losses are deductible up to basis
NO BANK LOANS
QBI
deduction of up to 20% of QUB from pass through entities
service related businesses have a QBI phaseout
QBI for nonservice businesses
if taxable income is over the top thresholds QBI can still be available
Reduced by one half of the amount of wages paid by the business
limited partnership
must have one general partner
5 year property
computers
autos
light duty trucks
7 year property
office equipment except computer
179 deduciton
election to expense up to $1,220,000 of qualifying property in the year of acquisition
CANNOT create a loss
What numbers to use with 1031 exchanges
FMV of property received
Adjusted basis of property given up
Boot
gains and losses on the schedule D
net short terms
net long terms
net
if a loss remains after netting capital gains and losses, only $3,000 of net losses can be used to offset ordinary in a specific tax year
long term capital gains of collectibles
28%
Section 121 exclusion
principal residence for an aggregate time period of 2 years out of the 5 year period immediately preceding the home’s date of sale
preference items for AMT
Excess INTANGIBLE drilling costs
Private activity muni bond
Oil and gas PERCENTAGE depletion
Depreciation (not straight lien)
AMT add back items
ISO bargin element
property, state, and city/income taxes
how can we avoid or postpone AMT?
- Accelerating the receipt of taxable income
-deferring payment of property taxes
-deferrign the exercise of an incentive stock option to a later date or disqualifying the ISO
-purchasing public purpose munis instead of private purpose bonds
passive activities
trade or business in which the taxpayer does not “materially participate”
rental of the principal residence
<15 days
rental income is excludible from the taxpayer’s gross income
NO deductions allowed
Renting your vacation home (normally a business)
personal use cannot exceed the longer of
14 days or
10% of the rental use
