Other Taxation Topics Flashcards
Tax based on property transferred uring an individual’s lifetime
gift tax
Tax based on property transferred at an individual’s death
Estate tax
Tax taht ensures that proepty does not skip a generation without a transfer tax being assessed
Generation-skipping transfer tax
Act that reinstated the federal estate tax and generation-skipping transfer taxes to the estates of decedents dying and GSTs made after December 31 2009, and before Jan 1, 2013
-Higher applicable exclusion amt of $5 M and lower max tax rate of 35%
Tax Relief Act of 2010
A transfer for less than adequate consideration in money or money’s worth–occurs when the transfer is complete and is measured at FMV on that date
Gift
An interest in a gift that is an unrestricted right to the immediate use, possession, or enjoyment of property or the income from property; annual exclusion of $13,000 allowed
Present interest
An interest in property that includes reversions, remainders, and other interests that are limited to commence in use, possession, or enjoyment at some future date or time; annual exclusion NOT available for these interests
Future interest
A gift by either spouse to a third party may be treated as made one-half by each, if both spouses consent to election; has hthe advantage of using hte other spouse’s annual exclusion and unified transfer tax credit
Gift-splitting
Deduction allowed without limitation for gifts to a donor’s spouse if gift is not terminable (i.e. doesn’t end with spouse’s life) or the donor elects a Qualified Terminable Interest Property (QTIP)
Marital deduction
Property placed in trust with income to donee spouse for life and remainder to someone else at donee spouse’s death–will qualify for the marital deduction if the income is paid at least annually to spouse and the property is not subject to transfer during donee spouse’s lifetime
Qualified terminable interst property (QTIP)
The FMV of all property in which the decdent had an interest at the time of death
Gross estate
United States Estate (and Generation Skipping Transfer) Tax Return that must be filed if hte decedent’s gross estate exceeds $5 M in 2011 ($5.12 M for 2012)
–must be filedw/in 9 months of death unless an extention is tranted
Form 706
Must be filed by an estate if it has gross income of $600 or more, or has a beneficiary who is anonresident alien
-Must be filed for a trust if gross income of $600+, ANY taxable income, or a nonresident alien beneficiary
US Income Tax return for Estate or Trust (Form 1041)
A trust that is required to distriute all of its income to beneficiaries each year, cannot make charitable contributions, and makes no distribution of trust corpus (pricnipal) during the year
simple trust
Trust other than a simple trust
complex trust
The maximum amount of deduction for distriubtions to beneficiaries in any taxable year and also determines the amounts and character of hte income reported by the beneficiaries
Destributable net income (DNI)
Trusts over which the grantor (or grantor’s spouse) retain substantial control–income is generally taxed to the grantor, not to the trust or beneficiaries)
Grantor (revocable) trust
Organizations that generally serves some common good, is operated as a not-for-profit, has net earnings that do not inure for hte benefit of specified individuals, and does not exert undue political influence; to achieve this status must be an org specfically identified in the code and generally must apply for an exemption
Tax-exempt organization (IRC Sec. 501)
Test under IRC 501 to determine if an entity qualifies as a tax-exempt organization that requires the articles of organization to limit the organization’s purposes to one or more exempt purposes
Organizational test
Test under IRC 501 to determine if an entity qualifies as a tax-exempt org that requires hte org to be operated exclusively for an exempt purpose
Operational test
Private benefit provided to insiders who have the institutional opportunity to direct the organizaiton’s resources to themselves, to entties in which they have an interest, or to family members
Inurement–if occurs cannot be a tax-exempt organzation
An organization is said to be this if it normally receives at least 1/3 of its total support from governmental units and the general public
Publicly supported
Organizations (other than churches, educationaorganizations, hopsitasl, etc) that operate for the benefit of certain state and municipal colleges and universities, governmental units, and publicly supported organizations
Private foundations
An organization that carries on a trade or business for the benefit of an exempt organzation and remits its profits to the exemp org–does NOT qualify for tax-exempt status
Feeder organization
Most tax exempt organzations must file this (except churchases, federal agencies, or orgs whose gross receives do not exceed $50,000, and private foundations)
Form 990 (Return of Organization Exempt from Income Tax)
- -due by 15th day of 5th month (May 15)
- if fails to file 3 consecutive years, will lose its tax exempt status
Income from a business that is (1) regularly carried on and (2) is unrelated to the organizations’ exempt purose
–taxed to the extent in excess of $1,000 and must be filed on Form 990-T
Unrelated Business Income (UBI)
The presence or activity required within a state before hte state may tax a nonresident
nexus
Provides rules for allocating and apportioning a multistate or multinational enterprise’s nonbusiness and business income among states and foreign countries
Uniform Division of Income for TAx Purposes Act (UDITPA)
A factor some states use in apportioning business income that is the ratio of total sales to in-state customers divided by total sales from all sales made by the taxpayer
Sales factor
A factor some staes use to apporiton business income that is the ratio of compensation paid to employees owrking in a state divided by the toal compensation paid by the taxpayer
Payroll factor
A factor soem states use in apportioning business incoem taht is the ratio of average cost of real and tangible personal property owned or rented and located in a state divided by total average cost of all such property owned/rente dby the taxpayer
Property factor
Section of IRS that allows the IRS to allocate income from a US Corp that the corp has distributed to its foreign subsidiary to evade US income tax back to US corp to more accurately reflect income
Sec 482
The basic foundation of ofederal tax law and represents a codification of the federal tax laws of hte United States
Internal Revenue Code (IRC) –not written by IRS
The IRC gives this the department the authority to issue Regulations to provide administrative interpretation of hte tax law, which may be separated into legislative and interpretive categoreis
Treasury Department
Regulations issued by the IRS under a specfic grant of authoirty to prescribe the operating rules for a statute and have hte force and effect of law
Legislative regulations
Regulations issued persuant to the general ruel-making authoirty granted to the IRS and provides guidance regarding the IRS’s interpretaiton of a statute–do nto have effect of law
Interpretive regulations
Regulations allowing interested parties a period of time of at least 30 days to comment and suggest changes
Proposed regulations
Regulations generally issued following recent tax legislation to provide interim guidance until final regulations are adopted
Temporary regulations
Regulations issued after public comments on proposed regulations are evaluated
Final regulations
Guidance on tax issues that have less force and effect than regulations, but are second to regulations as important administrative sources of federal tax law
Revenue rulings
Announce administrative practices followed by the IRS and are published in the Internal Revenue Bulletin that provide guidelines that taxpayers must meet in order to obtain a revenue ruling
Revenue procedures
A written statement issued to the taxpayer who requested advice conerning a specific transaction
Private letter ruling
