Pink- Tax Flashcards by Amy Schneider

Can LTCG earnings offset margin interest paid?

Yes

How well did you know this?

Not at all

Perfectly

What accounting method must a company with sales over $29 million use?

Accrual method

How well did you know this?

Not at all

Perfectly

How is income from a grantor trust that is used to pay life insurance premiums taxed?

The premium paid is taxed to the grantor; the income paid to the beneficiary is taxed to them

How well did you know this?

Not at all

Perfectly

How is a gain on the sale of small business stock treated?

As a capital gain

How well did you know this?

Not at all

Perfectly

What is the capital loss deduction on small business stock?

$3,000, unless indicated to be 1244 stock

How well did you know this?

Not at all

Perfectly

What is the new basis in an equipment exhange?

Old basis + cash

How well did you know this?

Not at all

Perfectly

What can Schedule E income from active participation in rental actvities offset?

Can be used to offset passive losses

How well did you know this?

Not at all

Perfectly

What is the taxation of a MEC?

FMV less basis x tax rate (plus 10% penalty of FMV- basis)

How well did you know this?

Not at all

Perfectly

MACRS table

MACRS Straight-line
5 year 7 year 5 year 7 year
Y1 20% 14.29% 10% 7.14%
Y2 32% 24.49% 20% 14.29%

How well did you know this?

Not at all

Perfectly

How do you calculate the taxable portion of an annuity payment?

Lifetime payment

How well did you know this?

Not at all

Perfectly

What is included in the Section 179 earned (taxable) income limit?

1099 Income and business (earned) income

How well did you know this?

Not at all

Perfectly

Where is LTC insurance deducted for self-employed individuals?

Schedule 1

How well did you know this?

Not at all

Perfectly

What is the calculation for a casualty loss?

Lesser of basis or FMV
- insurance
-$100
-10% AGI

How well did you know this?

Not at all

Perfectly

What is the AGI limit of the active participation Real Estate deduction?

$150,000 AGI

How well did you know this?

Not at all

Perfectly

Are the following deductions for AGI? - Net Business Losses -Net Capital Losses

Yes

How well did you know this?

Not at all

Perfectly

Does EE Bond interest create phantom income?

Not unless the owner elects to have the interest taxed each year

How well did you know this?

Not at all

Perfectly

What is the difference between a Section 1245 and a Section 1231 gain?

1245- the lesser of the gain or CRD
1231 is the excess gain after the 1245 gain is reported

How well did you know this?

Not at all

Perfectly

What amount of student loan interest is deductible, and where is it deducted?

$2500/ Schedule 1

How well did you know this?

Not at all

Perfectly

How is the taxable income for kiddie tax calculated?

Earned income
+ Unearned income
Less Standard Deduction

How well did you know this?

Not at all

Perfectly

What is the standard deduction when calculating kiddie tax?

Higher of investment income or earned income
+400
Not to exceed SD of $13,850

How well did you know this?

Not at all

Perfectly

What is S-Corp Distribution income considered?

Salary or investment income | Not self-employed income

How well did you know this?

Not at all

Perfectly

How is self-employment tax paid?

Added to tax liability
-1/2 is deducted on the front of the 1040

How well did you know this?

Not at all

Perfectly

Which benefits are taxable to an employee?

-Group life insurance over $50k (or discriminatory)
-162 Disability
-Paid to IRA by employer
-Paid to Annuity by employer

How well did you know this?

Not at all

Perfectly

What is the medical expense deduction for taxpayers under age 65?

-Not deductible if reimbursed
-7.5% AGI Floor
-Not deductible if not itemizing
-Includes Medical Insurance premiums

How well did you know this?

Not at all

Perfectly

Can interest received on a personal loan & mortgage offset margin interest?

Yes

What is the formula to get taxable income if not itemizing?

Income less standard deductions

How are HALE corporations taxed?

The are PSC's and taxed at a flat 21% rate If they have accumulated earnings exceeding $150,000, they can be exposed to a 20% accumulated earnings penalty

Does a PSC qualify for a dividend exclusion?

yes

What is the considered holding period for property acquired from a decedent?

Always considered Long-term (regardless of actual holding period)

Can a carryforward loss be claimed after death?

yes, $3,000 can be claimed on the 1041 (estate return) in the year of death. -Additional losses are lost going forward

What is the calculation for profits in installment sales?

Profit x installment payment ___________ Contract price

What is the substitute basis for a property acquired in a 1031 exchange?

FMV- Property acquired -realized gain -recognized gain

Where is the $25,000 loss from Real Estate participation deducted?

FROM AGI (to arrive at AGI)

How long can you use a vacation rental you own without it losing its rental characteristics?

lesser of 14 days or 10% of the rental period

Which schedule is the sale of stock reported?

Schedule D

what are losses against pubicaly traded partnerships deductible against?

Only the same partnership

What is the AGI limit for donations to charity of STCG property?

50%

If a business charitable contribution is made by a sole proprietor, where is it deductible?

Schedule A of the 1040. The IRS considers it to be made by the individual

How is STCG art valued for charitable contributions?

At basis

How much is Section 1245 recapture?

Amount of CRD

Are losses deductible for: 1. Equipment leasing limited partnerships 2. Oil & Gas Limited partnerships

they are passive losses and not deductible

What is the AGI Phaseout for historic rehab tax credits?

$250,000 AGI

What is the maximum deduction under Section 179 Expenses?

-over $1 million -Limited to business income -cannot create a loss

What is the estimated tax payment to avoid the underpayment penalty?

1. 90% of current year liability 2. 100% of last year's liability 3. 110% of last year's liability if income is over $150,000

How is the annuitization of a life insurance contract taxed?

Ordinary income, no penalty if annuitized

Is a salay paid by an S-Corp subject to self-employment tax?

No, only subject to FICA

How and where is hobby expense reported?

Misc Taxable income on front of 1040

How are S-Corp pass through earnings taxed?

K-1's- investment income Not subject to self-employment tax

Is a buy-sell agreement funded by the business by life insurance deductible by the business?

Is unfunded deferred comp (Life insurance) on an employee deductible by the business?

Is split dollar life insurance on the employee deductible by the business?

Is key person life deductible by the business?

How are gifts of inventory from a business to a charity valued?

based on what it can be sold for, not FMV. Similar to a car

How to increase basis in S-Corp?

Direct loans (not bank loans)

What is the deduction for entertainment expenses?

not deductible

Is alimony a deduction for or from AGI

FOR AGI

Are itemized deductions for or from AGI

From AGI

In a wash sale, what is the basis of the new security?

increased by the amount of the disallowed loss

Are oil and gas general partnerships deductible?

yes, general partnership losses are deductible in full

Which business entity can participate in an equipment leasing partership?

Only effective for C-Corps

Is income from an S-Corp considered Self-employment income?

Are entertainment costs for prospective clients deductible expenses?

Do STRIPS generate phantom income?

Yes, they are Zero Coupon Bonds. Interest is not received until maturity

Can a working interest in an oil and gas program offset earned income?

yes

Does a taxpayer who was recently divorced qualify for the $500,000 home sale exclusion?

yes, under unforseen circumstances. the ex-spouse's interest counts

When does life insurance qualify as alimony?

On life of payor, owned by payee (and by court decree)

Can rental property income offset losses from non-pubically traded partnership?

Yes

Does a Limited Partnership debt restructure create taxable income?

yes

How much in losses can be taken in a non-pubically traded partnership?

Only up to the income of other non-public limited partnership income

Is increasing taxable income a strategy to reduce AMT payables?

Yes, taxpayer will pay more regular taxes

AMT Preference & Add back Items

Qualified private activity on Muni Bonds; property tax itemization; excess % depletion over cost basis

Can a standard deduction be used in AMT?

Are the following AMT preference items? -Private Activity Bond Interest -Interest on public purpose muni bonds

Private Activity Muni bond interest- yes Public purpose Muni bonds- no

Are the following AMT preference items? -% Depletion -Cost Depletion

% depletion -yes Cost depletion- no

Is MACRS depreciation an AMT preference item?

What is the new basis in an equipment exchange?

Old basis + Cash

What amount is recognized (taxable) in a 1031 exchange?

Lesser of boot or realized gain

Formula for realized gain in a 1031 exchange

New value received (FMV of new property + boot received) less adjusted basis for current property

How is a section 1245 loss taxed?

As an ordinary loss

What is CRD?

Cost recovery deduction- depreciation deduction on equipment

What is the step up in basis of a home at the death of a spouse in a Non community property state

1. 1/2 step up in basis

Which items are generally deducible when selling a home?

Commission, title search, doc stamps

What is the basis of inherited property?

FMV at death

Is section 1245 equipment expensed immediately?

No, but if requirements are satisfied, it could be expensed immediately under Section 179

Does 1245 or 1250 business property qualify for a section 179 deduction?

1245- yes 1250- no

What timeframe (annual) is used in straight-line depreciation?

Half year convention

What is the MACRS depreciation for office furniture?

7 years

When selling gifted stock above donor basis, what must be reported?

A gain

At what rate is income retained by PSC's taxed?

If over $150,000, 20% penalty

How long can a NOL be carried forward?

Indefinitely

Can an S-Corp utilize a NOL?

no, it already passes through losses

Which tax forms does the owner of a C-Corp receive for distributions?

W-2 and 1099

Which business entities are conduit entities for tax purposes?

Sole proprietorship; S-Corp; LLC NOT a c-corp

Are loans included in basis for an LLC? C-Corp?

LLC- yes S-Corp- no

Can C-Corps pass losses to owners?

Can S-Corps shift income?

Yes, can shift income to family members

Does a limited partnership limit liability for a general partner?

Will the specific identification inventory method create a gain or loss?

Creates more control and could create either. May be used to neutralize a gain or loss

What is the phaseout of itemized deductions?

$0- it was eliminated from 208-2025

Is the $100 casualty loss floor aggregate or per each loss?

it applies to each loss

If a taxpayer sustains more than 1 casualty loss in a year, how much must the aggregate loss be reduced to?

10% AGI (aggregate)

On which schedule is a personal casualty loss deductible?

Schedule A

Are general & limited partnership distributions subject to self employment tax?

General- yes; limited- no

For a 1099 consultant, does an employer withhold taxes? Who pays self employment tax?

Company does not withhold FICA or income tax; employee pays self employment tax

What is the asset value when calculating casualty losses?

Lesser of basis or FMV

How much of a scholarship is taxable to a student?

Tuition/ books- excluded: room & board- taxable

What is the taxation of private purpose Muni Bonds

Excluded from income, but may be subject to AMT

What is the penalty for reporting self-employment income as divident income?

Frivolous and Fraudulent

What is the penalty for fraud (tax deficiency and interest deficiency?)

Tax deficiency- 75%; interest deficiency $0

What form is the estate/ trust return?

1041

At which income level must a self-employed person file a tax return?

$400