Income Tax Planning (2024) Flashcards
Fiscal year
And on the last day of the month, other than December
Partial year (accounting period)
Accounting period for a time span less than one year
52-53 week (accounting period)
Fiscal tax year that varies from 52 to 53 weeks, but does not have to end on the last day of the month
Accrual accounting method
Recognizes income when the taxpayer has the right to collect. This occurs usually after the completion of a job and a no case later than when the invoice is prepared and sent. Recognize expenses when the legal liability to pay arises. This usually occurs when the invoice is received.
Income is reported as it is earned, and expenses are reported as they are incurred .
Reporting of income and expenses is subject to the all events test. The requirement that all the events must occur before the taxpayer can report an item of income or expense 
Qualifying small business taxpayers with average grocery seats above around $27 million need to use the accrual method
Accrual taxpayers who receive prepaid revenues, do not recognize taxable income until the revenues actually earned.
Doctrine of constructive receipt
When income is readily available to the taxpayer, and the income is not subject to substantial limitations or restrictions, that income should be to tax
Child Tax Credit
$2,000 for each dependent child under age 17 for 2024.
Includes stepchildren and foster children
Married taxpayers must file jointly to be eligible for the credit.
Eligible children are:
Under age 17, a US citizen, and claimed as dependent on taxpayer’s tax return.
Credit is reduced by $50 for each $1,000 of AGI above specified levels (2024):
$400,000 for joint filers
$200,000 for married filing separately
$200,000 for single
Up to $1,700 (2024) is refundable per child subject to limitations.
Taxation or Dividends
Cash dividends: recognized income in the year they are received
Stock dividends: not taxed upon receipt and will appreciate in value until the stock is sold
Capital Loss
Up to $3000 of capital losses may be recognized against ordinary income in any one tax period. access are carried for indefinitely to future tax years. 
Capital loss is netted against capital gain before the $3000 limitation kicks in .
Involuntary conversion
The date of realization, not the payment date, determines the date of recognition
Like kind exchange requirements
Our replacement property must be identified within 45 days of the sale the original property
The replacement property must be like property with respect to the original propertym
The proceeds from the sale of the original property must be held by an escrow agent
The closing on the replacement property must take place by the earlier 180 days from the sale of the original property or the due date (including extensions)) of the tax return for the year the original property was sold
US real estate and foreign real estate are not like kind of assets for income tax purposes
Losses in like-kind exchanges are NOT recognized
Amount realized is all things received including FMV of property and boot. Does NOT take basis into account
Only applies to real property NOT equipment due to TCJA 2017
What is the maximum loss that commit deducted per year from a  rental property?
$25,000
Deduction phase out for individuals earning between $100,000-$150,000 .
Deduction is only available to non-real estate professionals who own at least 10% interest in a rental property they actively manage
