R3 Flashcards
What is the de minimis rule?
Applies for companies who have a written policy to expense property
Under the De Minimis rule… what is the difference between applicable and nonapplicable F/S?
If there is an applicable F/S then the company can expense up to $5000 per asset.
If there is NO applicable F/S then the company can expense up to $2500 per asset
Define a qualifying small taxpayer
A taxpayer with avg gross receipts of $10million or less during the 3 preceding tax years
How much of costs can a qualifying small taxpayer expense of a building?
If qualified as a small taxpayer & building is under $1 mill. THEN can expense costs up to the LESSOR OF: 2% of unadjusted basis OR $10k
What is the basis of a gifted asset?
The general rule of the basis of an asset acquired by gift = carryover basis
What are the 3 types of Losses that are disallowed?
Wash Sales
Related Party transactions
and
Personal losses
How do you calculate recognized gain on LKE?
Recognized gain = lower of boot or realized gain
What happens to shares sold in a wash sale?
These shares are not counted in regular capital loss
How do you calculate the basis for an Involuntary conversion?
Carrying amount + removal cost
What is the formula for an Involuntary conversion?
Insurance proceeds - Adj basis of old \_\_\_\_\_\_\_\_\_\_\_\_\_\_ Realized Gain - Gain Recognized (Insurance - RC) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Gain no recognized \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Cost of new warehouse - Gain not recognized = basis
What are some examples of Capital Assets?
Personal automobile, Furniture and Fixtures in the home of a taxpayer, stocks and securities, personal property NOT used in trade or business, Interest in pship, Goodwill, Copyrights purchase, other assets held for investment
What are some examples of Non Capital Assets?
Property normally included in inventory or held for sale to customers in ordinary course of business, depreciable property, real estate used in Trad or biz, AR/NR, copyrights of original artist, treasury stock
How do you find the gain recognized on an Installment sale?
- Solve for Gross Profit/realized gain (SP - Adj basis)
- GP % = Realized Gain / SP
- Gain rec as income = Cash installment received * GP %
What is Net Capital Loss rules for an individual?
An individual can deduct up to $3,000 capital loss per year. Any excess Net Capital Loss is CFWD forever, no CBCK
How is Sec. 1245 Gains treated?
Section 1245 = Machine and Equipment held for more than 12 months
Recapture Upon the sale of 1245: You can recapture 1245 ord income up to the amount of A/D taken, any remaining gain is Sec. 1231 gain
How is a short sale treated?
A short sale is treated as a Capital Asset Sale, the HP is the date of the short sale
When is the mid quarter convention used?
When over 40% of the property was placed in the 4th quarter
What are some examples of 5yr property? What convention is used?
automobiles, light trucks, computers, and copiers
Half year
What are some examples of 7yr property? What convention is used?
Office furniture and fixtures and equipment.
Half year
How is land depreciated?
It’s not idiot
What is the medicare tax?
Starting 2018, 3.8% medicare tax is levied on lesser of:
- taxpayer net investment income
- excess AGI over threshold
What is the Amortization period for intangible assets?
15 years S/L
What is the basis of inherited property to the beneficiary?
Fmv at date of decedents death or alt valuation date(if elected)
In a related party transaction, what is the basis to the person receiving the stock?
at the owners original basis
How are losses treated in a related party transaction?
If there is a loss in a related party transaction, it is disallowed but can be offset from sale
Define the half year convention
Provides that 1/2 of the first year’s depreciation is allowed in the year in which property is placed in service, regardless of when the property is placed in service during the year, HY depreciation is allowed for year disposed of
What is the amortization period of intangible assets?
15 years
What are Section 1231 assets?
Comprised principally of depreciable personal and real property used in the taxpayers trade or business and held for over 12 months.
How are advertising costs amortized/deducted?
You deduct the costs currently as ordinary and necessary business expenses. NO AMORTIZATION
What is the Charitable Contributions deductions for corporations?
10% of AGI
How do corporations that are non financial institutions value bad debts?
corporation required to use the direct charge-off method
What is the general rule of who will be required to used accrual accounting?
tax shelters, large C corporations and manufacturers
What is the amount threshold for penalty of underpayment of estimated tax?
If the tax for the year is less than $500 then no underpayment of estimated tax penalty will be imposed
In what kind of LKE will no taxable gain or loss be recognized?
Only in the case of that both assets are real estate property.
How is the loss of a nonbusiness bad debt treated?
Treated as a worthless deductible. STCL in year become totally worthless
What are the conditions to qualify for section 179 expense?
Property must be tangible personal property acquired by purchase from unrelated party for use in the active conduct of trade or business
How is 1250 gain calculated?
Gain is to the extent of straight line AD on the asset… any excess is 1231 gain
