REG 2 Flashcards
Calculate QBI
Taxable income: $192,550
Net Capital Gain: $0
Qualified Business Income (QBI): $80,000
QTB’s W-2 Wages: $20,000
1) Tentative QBI Deduction = (QBI) $80,000 * 20% = 16,000
2) W-2 Wage Limitation = (W-2 Wages) 20,000 * 50% = $10,000
3) Excess Amount = 16,000 - 10,000 = $6,000
4) Calculation of Phase in % = 192,550 (Taxable Income) - $170,050 (Floor) = $22,500
5) 22,500 / 50,000 (Phase in range) always the same = 45%
6) 6,000 (Excess Amount) * 45% (Phase-In %) = 2,700 Reduction amount
7) 16,000 (Tentative QBI deduction) - 2,700 (Reduction Amount) = $ 13,300 (Reduced QBI Deduction)
What tax credit cannot be claimed by corporations?
Earned income credit - only individuals can claim this
What needs to Exist in order to form a contract?
- offer
- Acceptance
- Consideration
Unilateral Contract
Only one promised is made (by the offeror)
Only one party makes a promise
Offeree accepts only by performing the act requested in the offer - cannot be accepted by making a counter offer
Examples of consideration
- Money
- A promise
- Acting
- Not acting
Fraud in the inducement
means that the victim was deceived as to the reason for the transaction
What does fraud require?
Misrepresentation of material fact by an expert
What makes a contract void?
Duress through physical harm or the threat of physical harm
What makes a contract voidable?
Mutual mistakes
Use of undue influence by a dominant party in a confidential relationship
Undue Influence
when a person in a position of trust or confidence takes advantage of the relationship such that th other party’s free will to contract is overcome
Parol Evidence Rule
Prohibits evidence of prior oral or written agreements that seek to contradict the terms of a fully integrated contract
ex: One intended as the complete agreement
Does not prohibit introduction of subsequent agreements
Novation
Substitution of parties
Agreement is unchanged but one of the original parties is released and a NEW substituted into their place
Substituted Contract
Original parties are both released from the original agreement but BOTH bound by a NEW AGREEMENT
Liquidated Damage Clause
What damages will be if there is a breach
Enforceable:
- Reasonable in relation to the actual harm done
- Not A Penalty
What is the basis for property received as a gift?
The same basis in the hands of the donor before the gift
Holding period of gift rolls over into the hands of the donee
Statue of Frauds - what are the special requirements for an oral contract to be enforceable?
SWAP
S - Specially manufactured (custom) goods
W - Written confirmation between merchants
A - Admission in court
P - Performance
Chapter 9 Bankruptcy
Municipal debt adjustment
Chapter 13 Bankruptcy
adjustment of debts of individuals with regular income
Chapter 7 bankruptcy
Provides for liquidation of a debtor’s estate
Chapter 11 Bankruptcy
debt reorganization
Social Security Benefits - Four major benefit programs
- (OASI) Old age & Survivors Insurance
- (DI) Disability Insurance
- Medicare
- (SSI) Supplemental Security Income
LLCs
No Taxes Paid on earnings
P&L flow through to the partners just like a general partnership
a Partner may be another entity
Apparent Agency
Authority that a 3rd party reasonably believes an agent has
Formula for selling Real Property - How much is realized
FMV of new property + (Net Debt, Debt Relief) - Adjusted basis of old real property
Ordering rules in a liquidating partnership distribution
- Cash
- Inventory
- Land or assets - taken on the remaing basis
C - Corp Distributions - ORder
- Current E&P - Dividend (Taxed at Ordinary income rate)
- Accumulated E & P - (Taxed at Ordinary income rate)
- Shareholder Basis - Nontaxable return of capital
- Remaining is treated as a capital gain
Self Employment Tax
- All seelf-employment tax income is hit with a 2.9% Medicare Tax
- Self-Employed income tax is hit with a 12.4% Social Security Tax (Subject to threshold limitation) - $147,000
Self Employment Tax Calculation
Self Employment Tax:
Step 1) Calculate 92.35% of Self Employment Income
SE Income X 92.35% = SE Tax Basis
Step 2) Calculate 15.3% of Step 1
.029 X SE Tax Basis = Medicare Tax
.124 X SE Tax Basis = Social Security Tax
What is non taxable interest
Interest from state & local bonds
Interest from bonds of U.S. possession (Guam & Puerto Rico)
Interest from Series EE Savings bonds
What is Taxable to an individual?
Wages, Interest/Dividend income, rental income, royalty income, distributive share of partnership gross income, gross income derived from business, Cancellation of debt, unemployment compensation, income from pensions
