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Question 1

Capital Assets

Answer 1

Investment assets and personal use assets - ie: stocks, bonds, real estate, and goodwill

Assets other than inventory, accounts receivable, notes receivable, assets used in a trade or business owned for more than 1 year, or creative works (in the hands of the creator), or certain misc assets (such as gov publications or obligations). Self created musical works are treated as capital assets even though these are creative works

Question 2

Collectible

Answer 2

Tangible personal property like coins, art, and antiques purchased for investment purposes. Gold and silver are also classified as collectibles subject to the 28% rate

Question 3

Normal LTCG rate

Answer 3

15%

Question 4

Rate on net capital gain on real estate/straight line depreciation

Answer 4

25%

Question 5

Rate on collectables

Answer 5

28%

Question 6

Form 8929

Answer 6

Gains or losses on sale of capital assets (ST & LT)

Question 7

Schedule D

Answer 7

Where capital G/L summaries from 8949 are carried to

Question 8

Form 4562

Answer 8

Depreciation and Amortization

Question 9

Section 179 election

Answer 9

election to expense a limited amount of tangible personalty if used in a trade activity (cannot be for investment)

Question 10

MACRS 7 yrs property

Answer 10

office furniture and fixtures

Question 11

MACRS 5 yrs property

Answer 11

automobiles, trucks, computers, equip

Question 12

Section 1250 Recapture vs Section 1245 Recapture

Answer 12

1250: Recaptures realty (land and assets permanently attached to land)
1245: Recaptures gains on personality as OI to the extent of AD (assets other than realty)

Question 13

Section 1231 Assets

Answer 13

Assets that are used in trade or business and have been owned for more than a year

Question 14

List the qualifying property for like-kind exchanges.

Answer 14

Business or investment property;
Not inventory or receivables;
Must be “like-kind;”
Cannot be across US borders;
Special rules when related taxpayers.
In these exchanges losses are never recognized and recog gain is the lesser of the realized gain or boot

Question 15

Form 1040

Answer 15

Interest (lines 1-4) and dividends (lines 5-6)

Question 16

Gross Income

Answer 16

Amount of realized income after eliminating deferred and excluded income

Question 17

Form 8606

Answer 17

Conversions of 401k plans into Roth plans

Question 18

Schedule C

Answer 18

All trade or business income and deductions of a self-employed individual are reported on Schedule C—Profit or Loss from Business. Retainer fees received from clients is reported in Schedule C as trade or business income.

Question 19

Schedule E—Supplemental Income and Loss.

Answer 19

Income derived from royalties is reported in Schedule E—Supplemental Income and Loss. Schedule E also is used to report the income or loss from rental real estate, partnerships, S corporations, estates, and trusts.

Question 20

What to deduct when donating stock

Answer 20

the lower of FMV or 30% of AGI

Question 21

Limit for deducting losses from rental

Answer 21

$25,000 - Excess of AGI over $100k * .5

Question 22

If shares are gifted and you sell - how to report G/L

Answer 22

If amount is in between FMV and original price - then zero
A donee basis in property acquired by gift usually equals the lower of the donor’s basis in the property plus the gift tax paid or the fmv

Question 23

Most legal expenses incurred in attempts to produce or collect taxable income or paid in the association with the determination, collection, or refund of any tax are usually deductible as an itemized deduction subject to the ____

Answer 23

2 percent of adjusted gross income floor

Question 24

taxpayer who has elected to amortize the premium on a bond

Answer 24

The bond’s basis is reduced by the amortization.

Question 25

Are alimony, child support, or property settlements included in income?

Answer 25

only alimony is for the person receiving it and is deductible to payee

Question 26

ordinary assets

Answer 26

AR, NR, inventory, trade and business assets owned for less than a year or a year

Question 27

§1231 assets

Answer 27

trade/bus assets owned for more than year. Assets netted to a gain are a LTCG and subject to lookback limit of 5 years for losses. Loss is deductible as an ordinary loss - best of both worlds

Question 28

Ordinary losses vs capital losses

Answer 28

Capital losses have a $3,000 limit and excess cap loss is carried foward

Question 29

Gift basis rule of gain vs loss

Answer 29

``` Gain = adj basis of donor Loss = lower of fmv @ date of gift or adj. basis of the donor ```

Question 30

net capital loss and corporations

Answer 30

can't deduct net capital loss but can use to offset capital gain 3 years back, and 5 years forward

Question 31

§1245 depreciation recapture

Answer 31

the realized gain is §1245 OI to the extent of straightline depreciation and remaining is §1231

Question 32

constructive receipt

Answer 32

cash basis TP has to include value of prop in income in the period they have the right to or control of property

Question 33

assignment of income

Answer 33

income is taxed to the ind. who earns it

Question 34

tax benefit rule

Answer 34

requires TP to include prop in income in the period in which an apparent claim to the property materializes

Question 35

buying bond at premium vs discount

Answer 35

discount: the amtz. increases interest income (effective interest rate) premium: the atmz. offsets the interest rate (constant yield to maturity)

Question 36

taxation of life ins. due to death

Answer 36

proceeds of life ins. due to death of insure excluded from income bc life ins proceeds are subject to estate taxes

Question 37

Formula for provisional income

Answer 37

AGI + Tax exempt interest + 50% SSB | generally ssb not included in income unless TP's PI exceeds 85% of benefits

Question 38

ded of life insurance

Answer 38

A taxpayer may not deduct life insurance premiums in which the taxpayer is directly or indirectly the beneficiary. However, a taxpayer may deduct the group term life insurance premiums if the insured employee or his/her beneficiaries would get the insurance proceeds.

Question 39

Fact: Jimet also donated stock, valued at $3,000, to his church. Jimet had purchased the stock four months earlier for $1,500. $1,500 is ded because The stock was purchased for $1,500 and not held for one year to be capital gain property, therefore the deduction for the stock is the lower of cost or FMV with the cost of $1,500 being the lowest.

Answer 39

Fact: All inheritances are LTCG no matter how long prop is held for

Question 40

time frame for the carryback/carryforward of the foreign tax credit

Answer 40

1 year/10 years.

Question 41

primary Securities and Exchange Commission transactions that are exempt.

Answer 41

Small Offerings; Private Placements; Intrastate transactions.

Question 42

What are the duties of a fiduciary?

Answer 42

Act with reasonable care and discharge duties solely in interests of plan's participants.

Question 43

What is the purpose of the Employee Retirement Income Security Act of 1974 (ERISA)?

Answer 43

Protect employee rights in existing pension plans; | Offer tax incentives to employers and employees to fund employee benefit plans.