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CFP - Review Cards > Income Tax Live Review > Flashcards

Income Tax Live Review Flashcards

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CFP® flashcards
1
Q

can be cited as precedent

A

revenue ruling and revenue procedures

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2
Q

primary source of all tax law

A

IRC - internal revenue code

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3
Q

Dates for paying estimated taxes

A

April 15th
June 15th (+2)
September 15th (+3)
January 15th (+4)

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4
Q

extension for taxes

A

to file, but not to pay

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5
Q

if you need to share information what type of person should you look for?

A

a privileged person like an attorney or doctor

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6
Q

frivolous return

A

$5k penalty

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7
Q

Negligence

A

penalty is 20% of the UNDERPAYMENT

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8
Q

Civil fraud

A

penalty is 75% of the UNDERPAYMENT

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9
Q

failure to file

A

5%/month - 25% max

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10
Q

failure to pay

A

.5%/month - 25% max

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11
Q

estimated tax penalty avoidance

A

lessor of
90% of the current year’s tax liability
100% of the prior year’s tax liability (110% if AGI>$150k)

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12
Q

schedule for real estate

A

schedule E

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13
Q

main adjustments FOR AGI

A

IRAs
KEogh or SEP
1/2 self employment tax
alimony (pre 2019)
self employment health insurance
2500 student loan interest
HSA

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14
Q

investment interest deduction

A

max deduction allowed is limited to the taxpayer’s net investment income

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15
Q

what qualifies as “investment income”

A

income from property held for investment
interest
dividends
royalties
short term gains

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16
Q

are dividends included in investment income

A

ONLY if the taxpayer elects not to use th reduced rates

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17
Q

Deductible loss

A

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

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18
Q

itemized miscellaneous deductions

A

repealed

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19
Q

home office

A

for SELF EMPLOYED persons only
deduction limited to income derived from the activity
essentially, can’t create a loss

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20
Q

home office deduction requirements

A

Exclusively and regularly used for business
no other fixed location

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21
Q

entertainment expenses

A

non deductible

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22
Q

what meals are deductible

A

for the convenience of the employer and employee meals while traveling
50% deductible

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23
Q

personal and dependency exemption

A

SUBSPENDED

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24
Q

kiddie tax applies when?

A

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

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25
Q

standard deduction kiddie tax unearned and earned income

A

The greater of $1,300 unearned income or earned income plus $450
NEVER more than a single persons standard deduction

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26
Q

self employment includes

A

net schedule C income
genearl partnership income
board of directors fees
part time earnings (1099)

27
Q

taxable wage base given in test questions shouldn’t exceed….

A

$168,600

28
Q

credit for child and dependent care expense

A

UNTIL AGE 13
Non refundable
$3k for one dependent or $6k for two or more
multiply by 20% on the exam

29
Q

child tax credit

A

child under age 17
$1,600 per child is refundable
$2k/child

30
Q

what is the “family credit”

A

nonrefundable credit
dependents in your household that do not meet the definition of qualifying child

31
Q

earned income credit

A

refundable

32
Q

calculation of gain on an installment sale

A

cash received multiplied by gross profit percentage

33
Q

gross profit percentage calc for an installment sale

A

profit/total contract price

34
Q

related party tax trap for installment sales

A

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

35
Q

net operating losses

A

NOL can be sued to reduce the taxable income in future years
CANNOT be carried back to prior years
can be carried forward indefinitely

36
Q

if a business is profitable it should be?

A

C corporation
personal service corporation

37
Q

if a business has losses and is risk free it should be?

A

sole prop
partnership

38
Q

if a business has losses and is risky

A

S corporation
LLC
LLP

39
Q

C corporation tax rates

A

flat 21%

40
Q

taxation of a PSC

A

personal service corporation
21% flat tax

41
Q

what types of businesses are PSC?

A

Health
Accounting, Architectural, Arts,
Law
Engineering

42
Q

Section 1244

A

qualified small business stock
only applies to the first million dollars of stock
loss of $100k/year is ordinary (not capital)

43
Q

Sole prop and interest paid

A

if money is borrowed for business purposes the interest paid (without limit) is deductible on Schedule C

44
Q

General partnership filing

A

conduit entity
file a 1065, but it’s for informational purposes only
partners get a K1

45
Q

losses and partnerships

A

losses up to basis

46
Q

Subchapter S corporations

A

1120S
conduit entity
100 shareholder limit

47
Q

basis for S corporation

A

conduit of income/loss to owner
losses are deductible up to basis
NO BANK LOANS

48
Q

QBI

A

deduction of up to 20% of QUB from pass through entities
service related businesses have a QBI phaseout

49
Q

QBI for nonservice businesses

A

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

50
Q

limited partnership

A

must have one general partner

51
Q

5 year property

A

computers
autos
light duty trucks

52
Q

7 year property

A

office equipment except computer

53
Q

179 deduciton

A

election to expense up to $1,220,000 of qualifying property in the year of acquisition
CANNOT create a loss

54
Q

What numbers to use with 1031 exchanges

A

FMV of property received
Adjusted basis of property given up
Boot

55
Q

gains and losses on the schedule D

A

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

56
Q

long term capital gains of collectibles

A

28%

57
Q

Section 121 exclusion

A

principal residence for an aggregate time period of 2 years out of the 5 year period immediately preceding the home’s date of sale

58
Q

preference items for AMT

A

Excess INTANGIBLE drilling costs
Private activity muni bond
Oil and gas PERCENTAGE depletion
Depreciation (not straight lien)

59
Q

AMT add back items

A

ISO bargin element
property, state, and city/income taxes

60
Q

how can we avoid or postpone AMT?

A
  • 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
61
Q

passive activities

A

trade or business in which the taxpayer does not “materially participate”

62
Q

rental of the principal residence

A

<15 days
rental income is excludible from the taxpayer’s gross income
NO deductions allowed

63
Q

Renting your vacation home (normally a business)

A

personal use cannot exceed the longer of
14 days or
10% of the rental use

CFP - Review Cards (17 decks)

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