Random Flashcards
Capital Assets
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
Collectible
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
Normal LTCG rate
15%
Rate on net capital gain on real estate/straight line depreciation
25%
Rate on collectables
28%
Form 8929
Gains or losses on sale of capital assets (ST & LT)
Schedule D
Where capital G/L summaries from 8949 are carried to
Form 4562
Depreciation and Amortization
Section 179 election
election to expense a limited amount of tangible personalty if used in a trade activity (cannot be for investment)
MACRS 7 yrs property
office furniture and fixtures
MACRS 5 yrs property
automobiles, trucks, computers, equip
Section 1250 Recapture vs Section 1245 Recapture
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)
Section 1231 Assets
Assets that are used in trade or business and have been owned for more than a year
List the qualifying property for like-kind exchanges.
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
Form 1040
Interest (lines 1-4) and dividends (lines 5-6)
Gross Income
Amount of realized income after eliminating deferred and excluded income
Form 8606
Conversions of 401k plans into Roth plans
Schedule C
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.
Schedule E—Supplemental Income and Loss.
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.
What to deduct when donating stock
the lower of FMV or 30% of AGI
Limit for deducting losses from rental
$25,000 - Excess of AGI over $100k * .5
If shares are gifted and you sell - how to report G/L
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
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 ____
2 percent of adjusted gross income floor
taxpayer who has elected to amortize the premium on a bond
The bond’s basis is reduced by the amortization.
Are alimony, child support, or property settlements included in income?
only alimony is for the person receiving it and is deductible to payee
ordinary assets
AR, NR, inventory, trade and business assets owned for less than a year or a year
§1231 assets
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
Ordinary losses vs capital losses
Capital losses have a $3,000 limit and excess cap loss is carried foward
Gift basis rule of gain vs loss
Gain = adj basis of donor Loss = lower of fmv @ date of gift or adj. basis of the donor
net capital loss and corporations
can’t deduct net capital loss but can use to offset capital gain 3 years back, and 5 years forward
§1245 depreciation recapture
the realized gain is §1245 OI to the extent of straightline depreciation and remaining is §1231
constructive receipt
cash basis TP has to include value of prop in income in the period they have the right to or control of property
assignment of income
income is taxed to the ind. who earns it
tax benefit rule
requires TP to include prop in income in the period in which an apparent claim to the property materializes
buying bond at premium vs discount
discount: the amtz. increases interest income (effective interest rate)
premium: the atmz. offsets the interest rate (constant yield to maturity)
taxation of life ins. due to death
proceeds of life ins. due to death of insure excluded from income bc life ins proceeds are subject to estate taxes
Formula for provisional income
AGI + Tax exempt interest + 50% SSB
generally ssb not included in income unless TP’s PI exceeds 85% of benefits
ded of life insurance
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.
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.
Fact: All inheritances are LTCG no matter how long prop is held for
time frame for the carryback/carryforward of the foreign tax credit
1 year/10 years.
primary Securities and Exchange Commission transactions that are exempt.
Small Offerings;
Private Placements;
Intrastate transactions.
What are the duties of a fiduciary?
Act with reasonable care and discharge duties solely in interests of plan’s participants.
What is the purpose of the Employee Retirement Income Security Act of 1974 (ERISA)?
Protect employee rights in existing pension plans;
Offer tax incentives to employers and employees to fund employee benefit plans.
