Key Points & Discussion Topics Flashcards
Computing AMTI
Add or Subtract (AMT Adjustment Items):
- Standard deduction
- Dependency exemption
- Itemized deductions
- Depreciation
- At risk and other loss limitations
- ISO
- Long-term contracts
Add (Tax Preference Items):
- Depletion
- Tax-exempt bond interest from certain private activity bonds.
- Accelerated depreciation of property (before 1987)
- Excluded gain on sale of qualified small business stock.
When is a prenup valid?
Upon Marriage
Entity vs cross-purchase buy-sell differences - who owns insurance policies in such agreements and who is the beneficiary?
Entity = Owned by the business entity / Outline how the business will buy or redeem an owners interest.
Cross purchase = Owned by individuals / Outlines how the remaining owners will buy the departing owner’s interest.
Mortgage payments that provide options for a jumbo rate mortgage rate vs. a traditional mortgage rate
Jumbo mortgages are considered $726,200 as of 2023.
- Typically carry a higher interest rate and require higher down payments.
83b election was tested more than 3x from what I remember
- Exercise stock options prior to vesting.
- Must be elected within 30 days of grant.
- Big risk if the stock declines.
NUA election questions that test on satisfying qualifying events
- Must elect lump sum distribution from plan.
- Original basis immediately taxable as ordinary income.
Many questions on aspects of Charitable Lead Trusts
- An answer to the disciplianary petition shall be filed wit the Institute staff no later than 30 days later.
- Member must notify institute of a conviction of serious crime within 60 days.
- An appeal from a final order must be filed within 60 days.
- For reinstatement. must file petition to institute within 30 days of expiration of suspension term.
Question on the best target for creditors (similar to what was in the study program)
- Most stated exempt life insurance and annuities from the reach of creditors.
- Almost all state offer homestead protection.
- Qualified plans are generally protected.
- IRAs typically protected up to $1.5M
- Inherited IRAs are at risk from creditor claims.
- TIC / JTWROS / Second home / vacation home are at greater risk to creditors.
ISO stock
- Can only be given to employees
- Not transferable except in event of death
- Annual $100k limit.
- Long term if sold more than 1 year after exercise and if sold more than 2 years after grant,
Section 303
- Value of stock must > 35% of the adjusted gross estate.
- For qualified transactions, distributions in redemption of a deceased shareholder’s stock may be treated at ordinary income tax rates.
72(t) election if first after age 55
- Provides access to qualified accounts prior to age 59.5.
- Distributions must be taken for the longer of 5 years or until age 59.5.
- 3 ways to calculate payments: Annuitization / Amortization / Life Expectancy
IRD
- Allows for estate tax paid on IRA and Qualified Plan assets.
- Applies to income the decedent had the right to, but never received.
- Subject to income and estate tax.
- IRD deduction is taken as the income is received by the bene’s.
Disqualifying dispositions
- Results when one does not adhere to the “2-year from grant” and “1-year from exercise”.
- Potential taxation includes ordinary income tax treatment as compensation and possible capital gains tax on the transaction.
457 plan funding
- Must be govt org or 501(c) tax-exempt org.
- Contribution limit $22,500 (2023).
- Tax on contributions and tax on account earnings are tax-deferred.
- Can Allow for roth contributions and in-plan rollovers to designated Roth accounts.
ESOP question and is it covered by ERISA”
- Qualified securities
- ESOP owns at least 30% of the total value of all outstanding stock.
- Qualified replacement securities are purchased by the seller within a 15 month period beginning three months before the sale date.
