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Income Tax V2 > Income Tax V2 > Flashcards

Income Tax V2 Flashcards

1
Q

Penalty for Paying Income Taxes Late?

A

0.5% Per a Month up to 25%

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2
Q

Children with Earned and Unearned Income

A

The deduction is greater of the $1,250 unearned credit or earned income +$400 up to $13,850

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3
Q

Material Participation

A

Taxpayer’s work in her principal trade or business (Tax payer is involved in the operation if the activity on a regular, continuous, and substantial basis)

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4
Q

How many days can an owner utilize a vacation home without losing rental characteristics?

A

The longer of 14 Days or 10% of the rental period

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5
Q

Phaseout for active real estate losses?

A

2:1 between $100,000 - $150,000 AGI ($25,000 Max)

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6
Q

Casualty Losses

A

Must be federally declared natural disaster, lower of cost basis or FMV, minus $100 per claim, minus insurance, minus 10% of AGI

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7
Q

“Adjustments” to AGI”

A

IRA Contributions, Student Loan, Keogh or Sep, Self-Employment Tax, Alimony Paid (Pre-2019), 100% of Self-Employed Insurance, Penalty for early withdrawal or savings, $4,000 Educational Expense

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8
Q

Group Life Insurance Policy

A

Premiums paid by employer of up to $50,000 on an employee’s life

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9
Q

Margin Interest Offset

A

Short-Term Gains, Non-Qualified Dividends, Royalties, NOT LT GAIN unless electing out of LT Rates - Any left over balance can be carried forward

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10
Q

Personal Service Corporation

A

H - Health Doctors and Dentist
A - Accounting, Architectural, Actors
L - Law
E - Engineering

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11
Q

Self-Employment Income Includes

A

Net Schedule C, Board of Director’s Fees, General Partnership Income K1, Part-Time Earnings 1099 (Contractor)

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12
Q

Deductible Gifts

A

Gifts directly to an educational institution, directly to a medical care provider, gifts to a qualified charity, gifts to political organization

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13
Q

Crummey Trust Withdrawal

A

The right of the withdrawal amount is equal to the LESSOR of the amount of the annual exclusion or the value of the current year contribution

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14
Q

Trust created through a person’s will

A

Testamentary trusts

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15
Q

Penalty for not Filing

A

5% monthly up to 25%

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16
Q

Penalty for Fraud

A

75% of the portion of the tax underpayment attributable to the fraud

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17
Q

Frivolous Return

A

Omits necessary information to determine liability $5,000 fine

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18
Q

Negligence

A

Failure to make any attempt to comply with the law or exercise reasonable care. The penalty is 20% of the tax attributed to negligence.

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19
Q

Child Tax Credit

A

$2,000 per a child, $50 phased out for every $1,000 MFJ ($400,000) and $200,000 Single. $1,600 is a refundable credit. Also a $500 credit for a dependant who is not a child same phase-out

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20
Q

Child Care Credit

A

$3,000 per eligible child, max $6,000, MULTIPLY BY 20% for Test

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21
Q

Adoption Credit

A

$15,950 Max for eligible expenses, FULL amount for special needs child, can be claimed in year adoption finalized for special needs. Expenses do not qualify for adopting spouse’s child.

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22
Q

QBI Limits

A

Pass-Through Entities can deduct up to 20% Single ($182,100), ($364,200) Jointly If PSC Corporation No Deduction if Single ($232,100) Joint $464,200 - May still be eligible if not PSC

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23
Q

Corporation Dividend Treatment

A

50% of dividends excluded, 65% exlsuion if ownership between 20-80%, 100% exclusion if ownership is greater than 80%

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24
Q

Accumulated Earnings Tax (Penalty)

A

20% of Earnings ($250k, for C Corps, $150k for PSCs) deducted for calculation

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25
Are direct loans to S Corps included in the cost basis for partners?
Yes
26
Are third-party loans included in the basis for S-Corps?
No, but they are for partnerships and LLCs.
27
Form 1041 (Fiduciary Tax Form)
Tax Form for Estates and Trusts
28
K-1 (Form 1041)
Beneficiary share of Income
29
Deadline for 1041
15th day of the fourth month after the entity ends. Must file a return on income $600 or more
30
179 Deduction
Available for 1245 property (Office Furniture) can expense up to $1.16mm, can be carried over, CANNOT create a loss, can be applied to any active income. Dollar for Dollar reduction for property placed into service over $2,890,000. SMALL BUSINESS
31
Preference Items AMT IPOD
Intangible Drilling Costs, Private-Activity Municipal Bonds, Oil and Gas Depletion, Depreciation ACRS/MACRs NOT STRAIGHT LINE
32
Qualification for Surviving Spouse
Can file married filing jointly if maintaining a home for dependants for 2-years following spouses death. Child must be under 16
33
Phase Out for Active Real Estate Deduction
$1 for every $2 over $100,000 (Capped at $150,000 AGI)
34
Violation of Installment Sale
Sale to a family member who sells within 2 years. Full sale must be recognized.
35
Charitable Contribution Max to Public Charity
Public Charity Max is 50% of AGI, Appreciated Property Max is 30% of AGI using FMV, and 50% using Cost Basis
36
What is maximum donation amount for a property with STCGs ?
The cost basis of the property
37
What has an unlimited reduction of active income with no phase-out?
Oil and Gas interest
38
Low-Income Housing Credit
Low-income housing programs that are held as a passive activity may generate a deduction-equivalent tax credit up to $25,000.
39
Equipment leasing
Equipment leasing A closely held C corporation that is not a personal service corporation may use passive losses to offset active, but not portfolio, income.
40
Individuals Need to Send a 1099 for Income over how much?
$400, For a business they need to send a 1099 for $600
41
Can margin interest be carried forward?
Yes, after offset against income (interest, non-qualified dividends, note interest, mortgage interest received)
42
Capital Gains Kiddie Tax
First $1,250 Tax Free, Next $1,250 Tax Free, Remaining Tax at Parents CAPITAL GAINS TAX RATE
43
Are Corporations Allowed to deduct dividends?
No
44
S Corp Share Classes?
Only common, voting and non-voting allowed
45
When is trust defective for both estate and income tax purposes?
A reversionary interest that exceeds 5% and a right to use or enjoy trust property “beneficial enjoyment”
46
Does a loan from a bank personally guaranteed by a partners count as cost basis in an S Corp?
No this would not count toward basis (Difference between LLC and S Corp)
47
Are insurance contracts bilateral?
No insurance contracts are unilateral. The insurance contract (the insurer) makes a binding promise that if broken breaches contract
48
A.M. Best Rating
A++ to F
49
MACRS
(5-Year) Year 1 (20%), Year 2 (32%) (7-Year) Year 1 (14.29%), Year 2 (24.49%) First Year (Straight Line Second Year) Second Year (First Year +12)
50
Straight Line Under MACRS (Mid- Year Convention)
(5-Year) Year 1 (10%), Year 2 (20%) (7-Year) Year 1 (7.14%), Year 2 (14.29%)
51
Charitable Gifts when only cost basis can be used?
Short-term gains and use-unrelated property can only use cost basis as a deduction
52
AMT Preference Items (IPOD)
Intangible Drilling Costs, Private Activity Bonds, Oil and Gas Percentage Depletion, Depreciation (ACRS and MACRs)
53
Add- Back Items AMT
State, Property, City Taxes and "Bargain Element" from ISOs
54
Are Charitable and Medical Expenses added back to AMT?
No
55
Corporate Accumulated Earnings Tax
20% on top of 21% of the accumulated earnings above $250,000 for a Corporation and $150,000 for a PSC
56
Section 144 Qualified Stock
1244 business is (C or S) capitalized with no more than $1mm. A loss of $100,000 on a joint return ($50,000 individual) is considered ordinary rather than a capital loss. Anything above is a capital loss.
57
What gets applied first Section 121 or 1031?
Section 121 and the remaining gain is tax-deferred with the 1031
58
Look back on 1031 Exchange
Lessor of CRD taken or realized Gain
59
An owner rents a property for 10 years and then utilizes it as primary residence for 2, what is the exclusion amount?
2/10 = 20% Lived/Owned multiplied by exclusion $500,00 MFJ = $100k
60
Recapture on 1245 Property
Lesser of the realized gain or the CRD
61
Calculating AMT- Where do you start?
Post Deduction for itemized or AGI if taking standard deduction
62
Add back Items
SALT + Sales Tax, and Bargain Element
63
Are travel expenses deductible?
100%, Meals only 50%
64
FICA tax
6.2% + 1.45% TOTAL 15.3% FOR W2 Workers. 6.2% stops at $160,200 1.45% Medicare UNLIMITED
65
Are "S" Corporations subject to FICA and FUTA?
The distributions are considered return of capital
66
Oil and Gas Working Interest
Losses are deductible against active or portfolio interest without limits to AGI. Ownership MAY NOT limit the taxpayer's personal liability
67
Under Section 199 where is the deduction taken?
QBI is based upon taxable income is a below the line item.
68
179 Deduction
$1,160,00 Per a 1245 Property "Tangible Property" purchased for use in trade or business $2,890,000 Total **CANNOT CREATE A LOSS**
69
Ordinary Income Charitable Deductions
Cost Basis must be used: A work of art created by a taxpayer Inventory A copyright Short-term Capital Gains **Use Unrelated Property**
70
Active Participation
Bone fide involvement in management decisions MUST own 10%, Less stringent than material
71
Material Participation
Taxpayer is involved in operation of activity on a regular continuous and substantial basis. Generally not a limited partner
72

Income Tax V2 (1 decks)

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