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Self made flashcards (CFP review) > Pink- Tax > Flashcards

Pink- Tax Flashcards

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1
Q

Can LTCG earnings offset margin interest paid?

A

Yes

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2
Q

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

A

Accrual method

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3
Q

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

A

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

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4
Q

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

A

As a capital gain

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5
Q

What is the capital loss deduction on small business stock?

A

$3,000, unless indicated to be 1244 stock

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6
Q

What is the new basis in an equipment exhange?

A

Old basis + cash

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7
Q

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

A

Can be used to offset passive losses

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8
Q

What is the taxation of a MEC?

A

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

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9
Q

MACRS table

A

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%

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10
Q

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

A

Lifetime payment

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11
Q

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

A

1099 Income and business (earned) income

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12
Q

Where is LTC insurance deducted for self-employed individuals?

A

Schedule 1

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13
Q

What is the calculation for a casualty loss?

A

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

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14
Q

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

A

$150,000 AGI

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15
Q

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

A

Yes

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16
Q

Does EE Bond interest create phantom income?

A

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

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17
Q

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

A

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

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18
Q

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

A

$2500/ Schedule 1

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19
Q

How is the taxable income for kiddie tax calculated?

A

Earned income
+ Unearned income
Less Standard Deduction

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20
Q

What is the standard deduction when calculating kiddie tax?

A

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

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21
Q

What is S-Corp Distribution income considered?

A

Salary or investment income | Not self-employed income

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22
Q

How is self-employment tax paid?

A

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

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23
Q

Which benefits are taxable to an employee?

A

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

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24
Q

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

A

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

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25
Q

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

A

Yes

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26
Q

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

A

Income less standard deductions

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27
Q

How are HALE corporations taxed?

A

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

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28
Q

Does a PSC qualify for a dividend exclusion?

A

yes

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29
Q

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

A

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

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30
Q

Can a carryforward loss be claimed after death?

A

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

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31
Q

What is the calculation for profits in installment sales?

A

Profit x installment payment
___________
Contract price

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32
Q

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

A

FMV- Property acquired
-realized gain
-recognized gain

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33
Q

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

A

FROM AGI (to arrive at AGI)

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34
Q

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

A

lesser of 14 days or 10% of the rental period

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35
Q

Which schedule is the sale of stock reported?

A

Schedule D

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36
Q

what are losses against pubicaly traded partnerships deductible against?

A

Only the same partnership

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37
Q

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

A

50%

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38
Q

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

A

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

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39
Q

How is STCG art valued for charitable contributions?

A

At basis

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40
Q

How much is Section 1245 recapture?

A

Amount of CRD

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41
Q

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

A

they are passive losses and not deductible

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42
Q

What is the AGI Phaseout for historic rehab tax credits?

A

$250,000 AGI

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43
Q

What is the maximum deduction under Section 179 Expenses?

A

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

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44
Q

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

A
  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
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45
Q

How is the annuitization of a life insurance contract taxed?

A

Ordinary income, no penalty if annuitized

46
Q

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

A

No, only subject to FICA

47
Q

How and where is hobby expense reported?

A

Misc Taxable income on front of 1040

48
Q

How are S-Corp pass through earnings taxed?

A

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

49
Q

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

A

no

50
Q

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

A

no

51
Q

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

A

No

52
Q

Is key person life deductible by the business?

A

no

53
Q

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

A

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

54
Q

How to increase basis in S-Corp?

A

Direct loans (not bank loans)

55
Q

What is the deduction for entertainment expenses?

A

not deductible

56
Q

Is alimony a deduction for or from AGI

A

FOR AGI

57
Q

Are itemized deductions for or from AGI

A

From AGI

58
Q

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

A

increased by the amount of the disallowed loss

59
Q

Are oil and gas general partnerships deductible?

A

yes, general partnership losses are deductible in full

60
Q

Which business entity can participate in an equipment leasing partership?

A

Only effective for C-Corps

61
Q

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

A

No

62
Q

Are entertainment costs for prospective clients deductible expenses?

A

No

63
Q

Do STRIPS generate phantom income?

A

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

64
Q

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

A

yes

65
Q

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

A

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

66
Q

When does life insurance qualify as alimony?

A

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

67
Q

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

A

Yes

68
Q

Does a Limited Partnership debt restructure create taxable income?

A

yes

69
Q

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

A

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

70
Q

Is increasing taxable income a strategy to reduce AMT payables?

A

Yes, taxpayer will pay more regular taxes

71
Q

AMT Preference & Add back Items

A

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

72
Q

Can a standard deduction be used in AMT?

A

No

73
Q

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

A

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

74
Q

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

A

% depletion -yes
Cost depletion- no

75
Q

Is MACRS depreciation an AMT preference item?

A

No

76
Q

What is the new basis in an equipment exchange?

A

Old basis + Cash

77
Q

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

A

Lesser of boot or realized gain

78
Q

Formula for realized gain in a 1031 exchange

A

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

79
Q

How is a section 1245 loss taxed?

A

As an ordinary loss

80
Q

What is CRD?

A

Cost recovery deduction- depreciation deduction on equipment

81
Q

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

A
  1. 1/2 step up in basis
82
Q

Which items are generally deducible when selling a home?

A

Commission, title search, doc stamps

83
Q

What is the basis of inherited property?

A

FMV at death

84
Q

Is section 1245 equipment expensed immediately?

A

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

85
Q

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

A

1245- yes
1250- no

86
Q

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

A

Half year convention

87
Q

What is the MACRS depreciation for office furniture?

A

7 years

88
Q

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

A

A gain

89
Q

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

A

If over $150,000, 20% penalty

90
Q

How long can a NOL be carried forward?

A

Indefinitely

91
Q

Can an S-Corp utilize a NOL?

A

no, it already passes through losses

92
Q

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

A

W-2 and 1099

93
Q

Which business entities are conduit entities for tax purposes?

A

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

94
Q

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

A

LLC- yes S-Corp- no

95
Q

Can C-Corps pass losses to owners?

A

no

96
Q

Can S-Corps shift income?

A

Yes, can shift income to family members

97
Q

Does a limited partnership limit liability for a general partner?

A

No

98
Q

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

A

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

99
Q

What is the phaseout of itemized deductions?

A

$0- it was eliminated from 208-2025

100
Q

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

A

it applies to each loss

101
Q

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

A

10% AGI (aggregate)

102
Q

On which schedule is a personal casualty loss deductible?

A

Schedule A

103
Q

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

A

General- yes; limited- no

104
Q

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

A

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

105
Q

What is the asset value when calculating casualty losses?

A

Lesser of basis or FMV

106
Q

How much of a scholarship is taxable to a student?

A

Tuition/ books- excluded: room & board- taxable

107
Q

What is the taxation of private purpose Muni Bonds

A

Excluded from income, but may be subject to AMT

108
Q

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

A

Frivolous and Fraudulent

109
Q

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

A

Tax deficiency- 75%; interest deficiency $0

110
Q

What form is the estate/ trust return?

A

1041

111
Q

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

A

$400

Self made flashcards (CFP review) (2 decks)

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