R5R6 Flashcards
How much passive investment income can an S corporation realize without termination their S election?
up to 25% of gross receipts.. if over 25% for 3 consecutive years then the election is terminated
Is an LLC subject to double taxation?
No
What is the gross income requirement in order for a fiduciary to file a for 1041?
$600
What impacts the AAA account?
The Accumulated adjustments account is increased by separately stated and non sep stated income and income/gains
ex. Interest and dividends
Which are included in calculating ordinary income?
COGS Interest expense CC Admin expenses LTCG
COGS, Int expense and admin expense
What increases/decreases the basis of stock in an S corporation?
Increases: Income items(including tax free income), additional shareholder investments
Decreases: distributions to shareholders, loss or expense items
In a nonliquidating distribution, what is the basis taken by partner for asset?
Partner takes the partnership basis for assets distributed . Ex. if basis is 50. distributions are 25 cash and 10 equip …. the basis in equip is 10
In a partnership, how are losses between a controlling partner and controlled partnership from exchange treated?
they are not allowed
What is the calculation for increase in earnings of CFC property?
Quarterly CFC income for the year/4
Define a tax return preparer
any person who prepares for compensation, or who employs one or more persons to prepare for compensation
A signing tax return preparer is a “tax return preparer” if the individual has the primary responsibility for the overall substantive accuracy of the preparation of the return. A nonsigning tax return preparer is a “tax return preparer” if the individual prepares all or a substantial portion of the return or offers advice to a taxpayer when that advice leads to a position or entry that constitutes a substantial portion of the return.
How do you calc the gain/loss distributions made to partners in a partnership?
not possible. no G/l recognized
What value of property is given in a gift?
FMV of prop
What type of gift is not eligible for the annual gift exclusion?
remainder interests and future interests
How is partnership basis calculated?
Cash contributed by partner \+NBV of property contributed - Liabilities contributed by partner and assumed by others \+FMV of services of partner for interest \+Liab contributed to other partners \+recourse liability assumed
What is an advantage of selecting a S corporation over a C corporation?
Capital losses and all other items of income/loss flow through to the tax returns of the shareholders
What type of business structures can make a distribution of appreciated property to its owners and would not be taxable to the business entity or owners?
General Partnership or LLP
what type of entity would the owners basis increase with the share of profits and decrease by share of losses but IS NOT impacted by entity’s bank loan?
S corporation
If S corp has no E&P, how is the amount distributed to a shareholder classified as?
Decreases the shareholders basis for the stock
In a nonliquidating distribution, when is income taxable?
When the income is greater than the partners basis in the partnership interest….. otherwise a prop distribution is never taxable
Can an S corporation have both common and preferred stock?
no
