Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CPA Self-Made > R4 > Flashcards

R4 Flashcards

1
Q

Real Property includes…

A

land and building

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Personal Property includes…

A

machinery, equipment, automobiles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

When are copyrights considered capital assets?

A

Only when they have been purchased

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Non-Capital assets include…

A

inventory, depreciable personal property and real estate used in the business, accounts and notes receievable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is a section 1231 asset?

A

.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

The amount realized is…

A
  1. cash received
  2. assumption of debt by buyer
  3. property received at FMV
  4. services received at FMV
  5. amount realized reduced by any selling expenses
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the basis for a purchased asset?

A

Cost + other expenses associated with putting it to use. Increases with improvements. Reduce by accumulated depreciation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the basis for gifted property?

A

Generally the Rollover Basis (NBV). However, when FMV is lower, it will depend upon the selling price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the basis for inherited property?

A

Step-up to FMV. GR: Date of Death FMV becomes basis. However, there is an alternative valuation date, which is earlier of date of distribution of the asset or 6 months after death (max). ALWAYS considered long-term property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

For which gains are you exempt from paying a tax? (HIDE IT)

A 
Homeowner's exclusion
Involuntary Conversion
Divorce Property Settlement
Exchange of Like-Kind (Business)
Installment Sale
Treasury and Capital Stock
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Which losses are you unable to deduct? (WRAP)

A

Wash Sale Losses
Related Party Losses
And
Personal Losses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Homeowners Exclusion?

A

250 or 500k. 1st principal residence. Must own AND use for 2 of 5 years (if only one spouse uses, then can take half)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Involuntary Conversion (theft, etc.). Insurance proceeds.

A

gain will still be recognized to the extent of the unreinvested amount. unreinvested amount = taxable boot. Reinvestment for personal property must occur within 2 years of YE. For Business property, 3 years. Losses are recognized.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Calculate Basis in Property Received in a Like-Kind Exchange of Business Assets:

A

Basis = FMV of Property Received - Deferred Gain + Deferred Loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How do you calculate gain on an installment sale?

A
  1. Gross Profit = Sale - COGS
  2. Gross Profit % = Gross Profit / Sales Price
  3. Earned Revenue (taxable income) = Cash Collections * Gross Profit %
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

When is a wash sale in effect?

A

When a security is sold for a loss and re-purchased within 30 days BEFORE or after the sales date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

When are capital gains not counted on related party transactions? Only on husbands and wives and 50% owned corps.

A

Only on husbands and wives and 50% owned corps. Capital losses always are disallowed of course.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the difference between gift and related party transactions?

A

Gift, you also get the holding period. Buyer in a related party has to use their purchase date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How much is the deduction for personal loss?

A

No loss allowed except for casualty/theft itemized deduction.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the difference between the classification of short-term individual capital gains and long-term individual capital gains?

A

short term = ordinary income.

long term = 0/15/20% capital gains

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Net Capital Loss for individuals?

A

$3,000, excess is carried forward indefinitely (Capital mistake…you can’t go back and change it, it will haunt you the rest of your life)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Net capital gains for corporations?

A

ORDINARY.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is a section 1231 capital gain, what is its taxation?

A

Section 1231 Capital gains are capital assets used in the business. They are taxed at special capital gains rate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Net capital losses for corporations?

A

3 year carryback, 5 year carryforward. Only used against capital gains.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Explain MACRS treatment of machinery and equipment (aka personal property)

A

Ignore salvage value.
Half year convention applies to personal property EXCEPT when more than 40% of the property was placed into service in the 4th quarter…then we use mid-quarter convention.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Explain MACRS treatment for residential real estate property.

A

Ignore Salvage value, subtract land cost, depreciate over 27.5 years.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Explain MACRS treatment for non-residential real property.

A

Depreciate straight line over 39 years. Mid-month convention applies–one half month in year of purchase and disposition.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Depreciation for MACRS for Buildings?

A

c. Building
i. 27.5 year SL for residential real property
ii. 39-year SSL for non-residential real property
iii. mid-month convention—for buildings, base SL on months that the building was in service. One half-month taken for both the year it was placed into service and the year in which it was disposed of.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What is the basic idea of section 179?

A

Each year, instead of depreciating, you may expense a depreciable amount of machinery, equipment, and computer software. $25,000 limit. (reduced dollar for dollar over $200,000). Not permitted when there is a net loss.

30
Q

Depletion on natural resources?

A

deduction limited to 50% of taxable income. 5-22%. Preference item for AMT.

31
Q

Amortization of intangibles?

A

Tax = 15 year SL

32
Q

Business and organization expenses?

A

5K expense + amortize over 180 months. (60 months for research expenses)

33
Q

Explain the situation regarding section 1231 capital assets.

A

Section 1231 capital assets are depreciable personal and real property used in the trade or business and held over 12 months. They are treated as Long Term Capital Gains and as Ordinary Losses.

34
Q

Section 1245 Personal Property

A

d. Section 1245 Personal Property (I think…)
i. Loss = Ordinary income
ii. Gain to extent of NBV→No g/l. basis/cost recovery
iii. Gain to extent of accum depreciations→ordinary income (depr. Recapture)
iv. Excess gain over original cost→Capital 1231 gain.
v. See page R-35

35
Q

Capital assets are defined as all assets owned by a taxpayer, except:

A

Property normally included in inventory or held for sale to customers in the ordinary course of business.
Depreciable property and real estate used in business.
Accounts and notes receivable arising from sales or services in the taxpayer’s business.
Copyrights, literary, musical, or artistic compositions held by the original artist. (Exception: Sales of musical compositions held by the original artist receive capital gain treatment.)
Treasury stock.

36
Q

Real property can be defined as

A

land and everything permanently attached to it (buildings, etc.)

37
Q

How do you calculate amount realized in a like-kind business exchange of property?

A

(FMV of equipment received - boot paid) - adjusted basis of property given up

38
Q

How do you calculate gain recognized in like-kind business exchange or property?

A

lesser of boot received or gain realized.

39
Q

How do you calculate basis in like-kind exchange of business property?

A

Basis = FMV of new property - gain deferred + loss deferred

OR

Basis = Adjusted Basis of property given up + gain recognized - boot receieved

40
Q

How do you calculate a realized loss in a like-kind exchange?

A

You don’t. realized losses aren’t allowed in like-kind exchange.

41
Q

MACRS 5 year property includes…?

A

computers and copiers and whatnot, as well as cars and light trucks

42
Q

When does the formation of a partnership create a taxable event? Explain

A
  1. Capital interest acquired for services rendered (FMV)

2. Property Subject to excess liabilities.

43
Q

What is the difference between C corps and partnerships regarding the differing treatment of excess liabilities assumed by the entity?

A

Corp–Subtract 100% of excess put in

Parntership–Only Subtract liabilities that are taken on by OTHER partners

44
Q

Partnership’s basis for contributed property =..

A

NBV or debt assumed if greater

45
Q

Bank accounts are most similar to what type of corporation?

A

Partnerships. (withdrawal = nontaxable)

46
Q

In a partnership, what is the difference between a capital account and a tax basis?

A

Basis = Capital Account + Partner’s share of liabilities

47
Q

When is a partnership information return due?

A

April 15th

48
Q

Name 3 conditions under which a partnership terminates?

A
  1. operations cease
  2. 50% or more of the total partnership interest in both capital and profits is sold.
  3. there are less than 2 partners.
49
Q

Describe the situation regarding related party transactions as they related to partnerships.

A

controlling partners’ (50%+ interest in capital or profits) losses are disallowed. Related party gain, of course, is ordinary income.

50
Q

Explain the timing of income recognition for partners in a partnership.

A

Income is taxed when earned, and basis increases. Income is not taxable when withdrawn, but basis decreases.

51
Q

Explain the tax consequences of guaranteed payments.

A

Salary and interest expense are allowed tax deductions to the partnership and ordinary income to the partner.

52
Q

Who gets a schedule K-1? (see pg. 53)

A

Each partner–each partner reports their share of net income/loss on Schedule E of the US 1040.

53
Q

What is reported on form 1065? (see pg. 53)

A

details of the partnership’s business income and expenses.

54
Q

Which items are displayed on the K, K-1, AND form 1065?

A

Net business income or loss
Guaranteed payments to partners
Partner’s health insurance premiums
Retirement plan contributions

55
Q

Carryforward for partnership losses?

A

Indefinite Carryforward (in excess of THAT PARTNER’S BASIS)

56
Q

In what 3 ways may a partner liquidate a partnership interest?

A
  1. complete withdrawal
  2. sale of partnership interest
  3. retirement or death
57
Q

Liquidating a partnership, when does the partner recognize a gain?

A

When the money received exceeds the partner’s basis in the partnership.

58
Q

What are “hot assets” What is their significance?

A
  • receivables
  • inventory
  • “recapture income”
  • —-The sale of Hot Assets results in ordinary income NOT capital gain.
59
Q

What is the effect of a long-term capital gain on a partners basis in a partnership?

A

Adds to basis.

60
Q

How do you calculate a property-contributing partner’s basis in a partnership?

A

adjusted basis of asset MINUS the partner’s share of the liability

61
Q

In a liquidating distribution, the partner’s basis for the distributed property is…

A

the same as the adjusted basis of his partnership interest less money received (as the partner is simply exchanging his partnership interest for the distributed assets). IGNORE THE PARTNER’S ACTUAL BASIS IN THE PROPERTY.

62
Q

The sale of a partnership interest will generate what type of gain?

A

Capital gain, unless hot assets are sold. In that case, we have a capital gain.

63
Q

How is gain calculated in the liquidating distribution of a partnership interest?

A

Only to the extent of MONEY recieved in excess of basis. (EVEN if you receive an asset whose basis is in excess)

64
Q

Sec. 444 of the IRC permits a partnership to elect a tax year different from the required tax year if…

A

the deferral period is less than 3 months.

65
Q

How do you account for the income earned by a partner who acquires his partnership interest by contributing services to a partnership?

A

ORDINARY income at FMV

66
Q

How do you calculate gain or loss recognized when a partner contributes property to a partnership in exchange for ownership of the partnership?

A

no gain or loss.

67
Q

The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date:

A

The partner’s holding period of the capital asset began.

68
Q

Name 2 circumstances in which a partnership that is not an electing large partnership considered terminated for income tax purposes?

A
  1. 55% of the partnership’s interest in capital and profits is sold within a 12-month period
  2. Partnership’s business and financial operations are discontinued.
69
Q

In the absence of an election to adopt an annual accounting period, the required tax year for a partnership is:

A

A tax year of one or more partners with a more than 50% interest in profits and capital.

70
Q

Brown, a 50% partner in Brown & White, received a distribution of $12,500 in the current year. The partnership’s income for the year was $25,000. What is the character of the payment that Brown received?

A

Current Distribution

71
Q

What is the limit on the ordinary loss deduction on the individual 1040 for a partnership?

A

Ordinary loss may not exceed basis.

CPA Self-Made (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions