MyREGNotes Flashcards
Surviving Parent can be taken as personal exemption even if living out of house but
subject to exemption minimum income
Although refunds may not be taxable in CY bz of PY 1040EZ, will int. received count as taxable?
Yes. the sole refund will be excluded but the int. on refund included
Is ordinary income included as self employment income?
No. only income from services rendered. although will be regular income in individual taxpayer
Are int. from municipal bonds included as income?
No. gvt wants you investing in their bonds
Are security deposits income for the receiver?
If kept in a separate acct or refundable, not income. if included as part of rent and not refundable, then is income.
Rental activity income exception
if own 10% or more of activity and AGI
When are passive loss fully deductible?
Only if sold or got rid off, then loss if fully deductible and mix passive w/ active participation. also might mix using $25k max deduct if active participates
What is the max nontaxable allowed for life insurance?
$50k, excess ins included as income
Solvency is based on
FMV of all assets - all liab’s
Annuities
Amount paid allocated over the time not taxable (since is recoverable), the gain is taxable.
Unqualified stk option
classified as ordinary income @ amt if traded on establish mkt rate. option price should not be less than 85% of FMV
Are personal int. expenses deductible?
No. ex: auto loans
Medical expenses and casualty losses relation w/ insurances
Expenses should be netted w/ reimbursement received by insurances. Moving exp. should also be offset w/ reimbursements b4 deduction
What amount is deducted for the purchase of an item for donation to an org?
Dif. of FMV of item and actual amt paid. (excess of FMV is the amt being donated)
Can IRA’s be deductible and credit in the same yr?
True
What amt of state tax refund is included in CY income?
Amt refund up to itemized deduct on PY return
Self EE tax deduction b4 the line or after?
All self EE goes b4 the line
Casualty loss
only includes non controllable/unavoidable to be deducted
Deduction on investment int. exp.
Excess of 2% of AGI up to net investment income (investment income - all investment exp other than inv int exp)
Hobbies not for profit (profit for last 3 of 5 yrs) are
sales included as income and exp (up to income) miscellaneous subject to excess 2% of AGI
Sale, exchange or transfer of worthless stk is treated as
as ordinary loss to the original owners up to $50k
Dividend income recognize for
shareholders when received up to earning, excess is lowering its investment
No G/L are recognize in the exchange of Ccorp stk for which tranx?
formation, reorg (t stk) and resale (t stk)
After a underpymt of a good faith estimate, what actions should be taken
exact amt should be included in the yr known or received
What deductions should be made by personal holding co’s (PHC) before determining amt available for distribution?
Fed taxes and net LT capital G/ less fed taxes. Must include dividends from unrelated as income. Taxes for PHC are added to regular and AMT tax for a total tax
Who may be liable for acc earning tax?
Ccorps regardless of # of stkholders, not for passtrhroughs
dividend paid in pty= income @ FMV up to
CY earning + PY earning + gain on pty
Tax free reorgs
Types A to F
Does Corps needs to file consolidated FS to file consolidated returns?
No need to file cons FS to be able for cons ITax. G/L can offset each other
Does the rules for statute of limitation applies for estimates dif’s?
No. dif. can be included in ITax return when known or received. Rules are for errors or unintentional exclusions.
Can EIC be claim by Ccorps
No. only by individuals w/ dependent
Which entities are subject to NOL’s?
Individual, C corp and estate/trusts
What orgs cannot file a consolidated return?
exempt, s corp, foreign, real estate, insurance
When can LIFO method be used for tax purposes?
only if also used for FS
Amt contributed for formation by shareholder w/ liab higher than basis should be?
recognize as a gain for the excess of liab of basis
Who pays for FUTA taxes?
ER pays for such tax, not withheld from EE wages
Can G/L be recognized for tranx of pty b/w related parties?
No. if related sales to 3rd party then his gain on sale can be deducted up to the parent loss. not for a loss thus parent might kept the initial loss if not sold for better price
Llike kind exchange does not recognized G/L on what type of assets?
tangible assets are not recognized G/L
When gift is sold at a loss from basis and gain from FMV, what should be recorded?
no g/l since is middle ground. always compare gifts w/ basis to move on to second step
On like kind if pay cash what are the realized, recognize and basis of pty?
realized same as when cash received (AJE w/ FMV), recognize same situation as cash received (lesser of realized or cash received + net liab) which is zero since you are paying it), basis changes bz instead of AJE + gain recog + cash paid - cash received + net liab
MACRS method of depreciation
salvage value is ignore, calculates recovery deduction on used tangible pty, must use 27.5 for residential and 39 for commercial
How is treated when a partnership pays for services to a partner?
For partnership as deductible exp render for services received and for partner receiving the $ as ordinary income @ the FMV
What are types of income for partnerships that are separately stated (no included as taxable income)?
charitable cont. (up to $5K) / dividend income / capital loss
When is a retired partner being liquidates terminated as a member of partnership?
Once all amt being paid. (still part of partnership during the time)
If partnership distributes liquidating pty, how affects the basis?
partner basis % - $ - amt left is the basis for pty received being liquidated
What limitations on losses are the partners liable to?
at risk and passive loss
Current distributions vs. liquidating distributions
current up to %, liquidating above %
What amt is taxable on trusts?
the distribution over the income is not taxable. only tax to extent of income distributable
Who controls what can be obtained for paymts of federal debts?
only by court on a plan, not federal nor state law
If changes of terms b/w creditor and principal debtor, what causes to surety(co-debtor)?
If not compensated, release from liab. if compensated, only release if increases the co debtor risk.
What are official bonds?
bonds paid by surety to cover for officials in case something goes wrong
When dismissing an agent, to whom must be informed?
it should be informed to clients plus nonclients by newspapers or tv etc
Who must be notify in order to merge
merger plans must be notified to shareholders and BOD’s and approve by majority of BOD and majority of voting stk from each corp
Can a company buy its shares from shareholders?
Yes, instead of having the shareholders sell it to an outside party
Stk dividend
not income nor affects acc earnings
Shareholders appraisal right
right for shareholders that are not happy w/ merge or sell of assets can buy their stk at FMV
When can a prtner leave in a silent duration contract?
In a silent contract a partner may leave at any time
general partners distributes based on what if silent contract?
equally for general partners, and losses based on profits %. if interest is acquired w/o consent of other partners, will only be liable for profits
OSHA
developed for supervision not develop safe equipment
Equal pay and civil rights
based on sex and all types except age
Social sec payments don’t include?
Medicaid
warehouse held liable under which minimum circumstances?
by ordinary negligence
What counts as definite time?
payable after sight, not at a date w/ unlimited extended time available
What is a draft and a CD?
negotiable instruments. draft order to pay at some specific date (involves 3 parties/ cks are on demand thus no 2 dif dates) and CD promise to pay (involves 2 parties)
What is the only method of payment for a note?
only in money, no services etc..
Dif b/w contract lib and warranty laib?
contract liab. promise to pay upon dishonor (if endorsed) . warranty all signatures are genuine and instrument not altered w/ (works for immediate transferees if not endorsed)
Special endorsement
specifies to whom will be payable
Is consideration needed for an instrument to be negotiable?
no. gift can be made in ck and the ck be negotiable
Can ratification be done prior to minor reaching the adult age?
No. since minor still under the age, can revoke the ratification
What types or contracts are assignable?
all contracts assignable except involving personal pty or increases the risk of the principal
when can a seller be excused from a contract?
if the performance is impossible (destroyed b4 transfer)
To who applies the penalty for aiding and abetting understatements applies?
to both either w/ knowledge or not, though must be proven by the IRS
disciplinary power by the board of accountancy if?
misconduct while performing acct services or outside of the scope of the acct services and criminal conviction
Are emails consider written advices?
No. writing communication should be done for sophisticated clients
If tax preparer fails to disclose a conflict of interest, would it be subject to penalty?
No. penalties are for not signing, providing copy to client and keeping records of returns prepared
Can a tax preparer inform the IRS of the persons who may have the returns records?
Yes, they can provide such info w/o any penalty
Exempt from registration:
non-profit, gov, loans, individuals, intrastate
Exempt from full registration
offerings under Regulation A up to $5M but circular offering
