learn the 2%

Question 1

what does it mean when a couple participates in gift splitting?

Answer 1

the couple can gift a recipient $32,000 tax free

Question 2

how are liquidation costs accounted for on a tax return when a corporation decides to dissolve?

Answer 2

deducted in full

Question 3

how many years must an ex-S corp wait before electing to S status again?

Answer 3

5 years

Question 4

what type of agency contracts must be in writing?

Answer 4

when real estate is involved
when it’s impossible for an agent to perform their duties within 1 year

Question 5

who can and cannot consolidate tax returns?

Answer 5

those with 80% or more interest
S corps cannot consolidate

Question 6

in year 1, a corp properly accrued $10,000 for an income item on the basis of a reasonable estimate. in year 2, the corp determined that the exact amount was $12,000. how should the corp account for this?

Answer 6

include $2,000 in year 2’s tax return

Question 7

what filing status could disqualify a taxpayer to claim the earned income credit?

Answer 7

married filing jointly

Question 8

a building was purchased for $300,000 on May 2, Year 1 for inventory storage. it was sold on Dec 1, Year 3.

MACRS for year 3: 2.564%

Answer 8

2.564% * $300,000 * (11.5/12)

Question 9

equipment was purchased for $50,000 on June 1, Year 1. it was sold on April 1, Year 3.

MACRS for Year 3: 17.49%

Answer 9

17.49% * 50% * $50,000

Question 10

computers were purchased for $20,000 on Nov 15, Year 1. they were sold on March 1, Year 3.

MACRS for year 3: 22.8%

Answer 10

22.8% * (2.5/12) * 20,000

Question 11

what does the wash sale rule prevent investors from doing?

Answer 11

recognizing a loss while maintaining ownership in a company

Question 12

$1,600 sh @ $7/sh - FMV at date of gift
$1,600 sh @$4/sh - proceeds
$1,600 sh @ $3/sh - sister’s basis

what is the gain?

Answer 12

$1,600

since proceeds are greater than sister’s basis, use sister’s basis