REG 1

Question 1

Calculation when money is pulled from a Roth IRA before age 59 1/2.

Answer 1

1. Current income tax brack % Ex: ( 25% * Entire Withdrawal amounts) = IINCOME TAX PAYABLE
2. Any portion of the distribution that was not rolled over to the Roth IRA -

(10% Early Witdrawal Penlty * Portion of The Distribution that was Not Rolled Over to Roth IRA) – ($20,000 * 10%) = PENALTY AMOUNT

Question 2

What items can be included in a Shareholders of an S-CORPS Gross Income?

Answer 2

% OF OWNERSHIP * TAXABLE INCOME = CURRENT YEAR S-CORP INCOME

NOT INCLUDED: DISTRIBUTIONS THAT DO NOT EXCEED CURRENT YEAR SHAREHOLDER BASIS

Question 3

CALCULATION FOR DIVIDEND INCOME FOR STOCKHOLDER OF A C-CORP

Answer 3

3 - TREATED AS A LIQUIDATING RETURN OF CAPITAL

ORDER OF DIVDEND INCOME DISTRIBUTION:

1. CURRENT YEAR EARNINGS & PROFITS
2. ACCUMULATED (E&P)
3. ANY AMOUNT LEFT OVER AFTER CY E&P & ACCUMULATED E&p HAVE BEEN DEPLETED

1&2 TAXED AT DIV INCOME TAX RATE

Question 4

CALCULATION FOR RENT REVENUE FOR ACCRUAL TAXPAYER

Answer 4

RENT PAYMENTS + INCREASE IN RENT RECEIVABLE + NONREFUNDABLE RENT DEPOSITS

Question 5

WHEN IS THE ACCUMULATED EARNINGS TAX FOR A C-CORP BE IMPOSED?

Answer 5

If accumulated retained earnings is Greater Then $250,000

Less for pesonal service Corps

& For which no justified reason for the retention exists.

Question 6

Involuntary Conversion

Answer 6

a transaction that results from a condemnation of property or a destruction or loss from the theft or casualty

Question 7

Is QBI Deduction allowed for income above the taxable income limitations for an SSTB?

Answer 7

No - QBI deduction is allowed for an SSTB that have taxable income > Taxable income limitation amounts

Question 8

Itemized Deductions:

Qualified Medical Expenses

Answer 8

1. The Date Amounts are CHARGED TO A CC - Does not matter when actually paid
2. expenses paid for the medicate care of a decendent’s spouse - included whrn medical expenses are paid

Question 9

Section 1231 Asset

Answer 9

Asset used in a TaxPayers Trade or business

Must be held longer than a year to get Section 1231 treatment

Question 10

Inside Basis for a Partnership:

Answer 10

Basis of Assets OWNED BY THE PARTNERSHIP

Basis of assets in the hands of the partnership and is EQUAL to the BASIS of the assets in the HANDS OF THE CONTRIBUTING PARTNER

Partnership assumes the holding period of the Contributing PArtner

Question 11

Outside Basis for a partnership

Answer 11

Partner’s Basis in the partnership Interest

Increase by Liabilities assumed or Decrease by liabilities assumed by other partners

Question 12

Individual Partner Level Elections:

Answer 12

to take a deduction or a credit for taxes paid to foreign countries

Question 13

Parntership Level Elections:

Answer 13

1.Not to recognize involuntary conversion gains

2. Election to Expense Sec 179 Property
3. Election to Amortize organizational costs

Question 14

Schedule M-1 Calculation

Answer 14

+ Reported Book Income
- Muncipal Bond Interest Income
+ Federal Income Taxes
+ Interest Expense to Cary municipal bonds
= Taxable Income

Question 15

Basic Formula for Net Rental Income/Loss

Cash Basis

Answer 15

Gross Rental Income + Prepaid Rental Income + Rent Cancellation Payments + Improvements in liey of rent - Rental Expenses = Net Rental Income (Loss)

Question 16

Calculation for Liquidation of interest of a Partner

Considered a Distribution

Answer 16

(Beg Basis + Share Of Liabilities)
Minus: Monthly Payments * Months in year
Minus: Relief from share of partnership liabilities
Minus: Remaining Cash Payments * 12 months

If Negative Basis, Partner must recognize difference as a Capital Gain to iliminate Negative Basis

Question 17

What % Of business meals is deductible?

Answer 17

50%

Question 18

Does a Shareholder who is a 2% or less shareholder include health insurance paid by the company?

Answer 18

No.

Fringe Benefits is includable in gross income of S-Corp Shareholdesr who Own more than 2% of the stock

Question 19

Which of the following groups may elect to file a consolidated corporate return?

Answer 19

Members of an affiliate group

Intercompany gains and losses are eiliminated

Question 20

Willfull or Reckless Conduct

Answer 20

1. A willful attempt to understate the tax liability
2. reckless or intentional disregard of tax rules and regulations

ex: Knowingly deducting personal expenses as business expenses could constitute such “willful or reckless” conduct

Question 21

What does the due deligence requirement for the earned income credit address?

Answer 21

Addressses eligbility checklists, computation worksheets, record retention, and reasonable inquiries to the tax payer

Question 22

What re the four elments must a plaintiff make to makea course of negligence against a CPA?

Answer 22

Plaintiff must prove:
1. Defendant owed a duty of care to the plaintiff
2. The defendant breached that duty of care
3. The breach of duty was the actual and proximate cause of the Plaintiff’s Losses
4. The Plaintiff Suffered damages

Question 23

What are the 5 Common Law Frauds

Answer 23

1. Misrepresentation of material fact
2. Itent to deceive
3. Actual and justifiable reliance by the plaintiff on the misrepresentation
4. an intent (also known as scienter) by the defendant to induce the plaintiff’s reliance on the misrepresentation
5. Damages

Question 24

When an accountant acted with scienter:

Answer 24

Suit for common law may succeed only if the accountant knew that the statement was wrong or recklessly disregarded the truth

Question 25

What are the four elements of Negligence?

Answer 25

1. Duty of Care
2. Breach (Which is Lack of Due Care)
3. Casualty
4. Injury

Question 26

Actual Authority

Answer 26

Authority the agnt reasonably believes that he or she has based on communications with the Principal.

Question 27

Under Agency Law, which of the following sets of categories refer to principals?

Answer 27

Disclosed, PArtially Disclosed, and undisclosed

Question 28

Types of agency relationships

Answer 28

Formal, mutual, informal

Question 29

Types of Agent Authority to Act on Behalf of a Principal

Answer 29

Actual, Express, Implied

Question 30

Types of Agency Relationships

Answer 30

General, Special, and Gratuitous