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Patrick CFP > More Tax > Flashcards

More Tax Flashcards

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1
Q

Section 267 Related Persons

A
  1. Spouse
  2. Child
  3. Grandchild
  4. Parent
  5. Sibling
  6. Related entities: if the taxpayer owns more than 50% of the stock (corp) or interests (LLCs/partnerships)
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2
Q

At-risk rule

A

taxpayer can only deduct losses to the extent that there is enough basis (or the amount at-risk)

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3
Q

Passive loss treatment

A

Only to the extent of passive income

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4
Q

RE Active Participation Deduction

A

Up to $25,000

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5
Q

Requirements for RE Active Participation

A
  1. 10%+ ownership AND
  2. Substantial involvement in managing the property
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6
Q

Personal use property

A

rented 14 days or less

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7
Q

Rental use property

A

Used for personal use less than (larger of):
1. 14 days OR
2. 10% of the # of days rented

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8
Q

Mixed-use property

A
  1. not able to meet the minimum personal use requirements
  2. not able to meet the maximum personal use requirements to be a rental
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9
Q

Deductions for personal use RE

A

Itemized deductions:
Mortgage interest and property taxes (Primary/secondary)

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10
Q

Deductions for rental use RE

A
  1. Trips made to property for maintenance and repair
  2. All expenses
  3. Passive losses ($25,000 limit)
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11
Q

Deductions for mixed-use RE

A
  1. Gross rental income is the limit (may be $0 but not negative)
  2. Unused losses carried forward but subject to net income rule
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12
Q

IRC Section 121

A

allows for the exclusion of gains on the sale of a personal residence for up to $250k (single) or $500k (MFJ)

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13
Q

Requirements for Section 121

A
  1. Ownership Test: owned the property 2 of the last 5 years (one owner)
  2. Usage Test: must have used the property as the personal residence for 2 of the last 5 years (both spouses/US)
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14
Q

Acceptable reasons for a reduced section 121 exclusion

A
  1. Job relocation
  2. Employment change
  3. Qualifying for unemployment
  4. Health issues
  5. Divorce or legal separation
  6. Birth of twins or other multiplies
  7. Damage to home from disaster
  8. Condemnation or seizure of the poetry
  9. Other unforeseen circumstances
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15
Q

Identify property that is not classified as a capital asset

A

Accounts or notes receivable acquired in the ordinary course of business
Copyrights: a literary, musical, or artistic composition; a letter, memo, or similar property created by the taxpayer
Inventory or property held primarily for sale to customers in the ordinary course of business
Depreciable property used in business (e.g. Section 1231)

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16
Q

Best method for determining cost basis for tax planning

A

specific identification

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17
Q

Tax rate on selling collectibles

A

28%

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18
Q

IRS default method for determining cost basis

A

FIFO

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19
Q

Short-term capital assets are taxed at

A

ordinary income rates

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20
Q

Unrecaptured 1250 gains are taxed at

A

25%

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21
Q

Capital loss limit per year

A

$3000 ($1500 for MJS), indefinite carry forward

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22
Q

Section 1231 property

A
  1. property used in business
  2. property held for the production of income
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23
Q

Benefit of Section 1231 property

A
  1. Gains are taxed as capital gains
  2. Losses are taxed as ordinary losses
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24
Q

1245 property

A

“personalty” - stuff for business (furniture, computers, carpet, lighting, etc.)

25
Q

1250 property

A

“realty” - stuff for income (commercial buildings, warehouses, barns, rentals, etc.)

26
Q

Differentiate between section 1245 and 1250 property depreciation

A

Depreciation:
1245 - ordinary income
1250 - 25%

27
Q

Section 1031: Amount Realized

A

FMV received - net boot

28
Q

Section 1031: Realized Gain

A

Amount Realized - Basis received

29
Q

Section 1031: Recognized Gain

A

The lesser of realized gain or net boot received

30
Q

Section 1031: Deferred Gain

A

Realized Gain - Recognized Gain

31
Q

Section 1031: Substituted basis

A

FMV received - Deferred Gain

32
Q

Time requirements for Section 1031 exchange

A

Date of transfer to identify potential replacement property - 45 days
Exchange completed - 180 days

33
Q

What Section 1031 does

A

Allows for deferral of gain or loss recognition on realty for realty exchanges (1231 property only)

34
Q

Boot

A

Non-qualifying property (cash, debt transfer, inventory, personalty, etc.)

35
Q

Section 1031 Property Types

A

Realty for realty

36
Q

Estimated Tax Q1

A

Jan 1 - Mar 31; Due Apr 15

37
Q

Estimated Tax Q2

A

Apr 1 - May 31; Due Jun 15

38
Q

Estimated Tax Q3

A

Jun 1 - Aug 31; Due Sep 15

39
Q

Estimated Tax Q4

A

Sep 1 - Dec 31; Due Jan 15

40
Q

Estimated Tax Formula

A

Lesser of:
1. 90% of Current Year
2. 100% of Prior Year (110% if AGI is > $150,000)

41
Q

Maximum SS taxable wage base

A

$168,600

42
Q

in a rising price environment, FIFO treatment will result in ___ profit

A

higher

43
Q

in a rising price environment, FIFO treatment will result in ___ tax liability

A

higher

44
Q

in a rising price environment, FIFO treatment will result in ___ inventory value

A

realistic

45
Q

in a rising price environment, LIFO treatment will result in ___ profit

A

lower

46
Q

in a rising price environment, LIFO treatment will result in ___ tax liability

A

lower

47
Q

in a rising price environment, LIFO treatment will result in ___ inventory value

A

understated

48
Q

in a falling price environment, LIFO treatment will result in ___ profit

A

higher

49
Q

in a falling price environment, LIFO treatment will result in ___ tax liability

A

higher

50
Q

in a falling price environment, LIFO treatment will result in ___ inventory value

A

overstated

51
Q

in a falling price environment, FIFO treatment will result in ___ profit

A

lower

52
Q

in a falling price environment, FIFO treatment will result in ___ tax liability

A

lower

53
Q

in a falling price environment, FIFO treatment will result in ___ inventory value

A

realistic

54
Q

useful life for cars

A

5 years

55
Q

useful life for computers

A

5 years

56
Q

useful life for heavy machines

A

7 years

57
Q

useful life for office furniture

A

7 years

58
Q

useful life for residential real estate

A

27.5 years

59
Q

useful life for non-residential (commercial) real estate

A

39 years

Patrick CFP (15 decks)

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