Reg 3 Flashcards
Itemized Deductioin: Casualty & Theft Loss Calculation
1) Smaller of:
A Loss Cost/adjusted basis OR
B Decrease in FMV
2) Random $100 deduction
3) 10% of AGI Test - 10% * AGI
SEP IRA Maximum Contribution Calculation
- SEP: Lesser of 20% of:
Self-Employment Income
- 50% of SE Tax deduction
= Amount applied to limitation
X 20%
= Maximum Contribution
or $61,000 or $67,500 for taxpayer 50 or older - Changes every year
Deductible Medical Expense Calculation
Qualified Medical Expenses - Insurance Reimbursement = Qualified medical expenses paid
Qualified Medical Expenses Paid - 7.5% AGI = Deductible Medical Expenses
Itemized Dedictions: Taxes
Real Estate Taxes
State & Local income taxes
Sales Taxes
Itemized Deductions: Interest
Home Mortgage interest - Limited to $750,000 (Principal)
Investment Interest - (Limited to Net Investment Income)
Prepaid Interest - Must be allocated to the Correct Period
Donation of Property Treatment: Held less than 12 months/
Ordinary Income Property
Ordinary Income Property is:
Property held less than 12 Months
Inventory
Personal-use assets that have depreciated
Depreciation Recapture on L/T, business use assets
Ordinary Income Property will be treated as the LESSER OF PROPERTY’S FMV OR ADJUSTED BASIS
aDOPTION cREDIT
All necessary expenses and required fees during the adoption process
Limitation - $ 14,080
Medical expenses for adopted child DO NOT QUALIFY as eligible adoption expenses
What are Refundable Tax Credits
W-2 (Withholding credit)
Child Tax Credit
Earned Income Credit
Excess Social Security Paid Credit
American Opportunity Credit
American Opportunity Credit
$ 2,500 Maximum Credit
40 % Refundable ($2,500*.40) =
60% Non-Refundable ($2,500 * .60)
Mom & Pop Exception Calculation
Step 1) Determine AGI Excess over $100,000
TaxPayers AGI - $100,000 (Minimum threshold)
Step 2) Determine Reduction of $25,000 Loss
Excess AGI (Step 1) X 50 % = Total Reduction to $25,000 Deduction
Step 3) Calculate Total Deduction
$25,000 - Step 2 = Total Deduction
If AGI = $100,000 or less taxpayer may take maximum $25,000 deduction
$25,000 Phases out when AGI is btw $100,001 - $150,000
AGI Greater than $150,000 cannot take this deduction
Sec 1244 Stock Loss- Deduction rules
Single: $50,000
Maried: $100,000
Treated as Ordinary Losses
ex: Startups and small businesses can be considered a risky investment
-For Orginal owners only
Costs not required to be capitalized under Sec 263A
- Selling & Admin Expenses
Distribution Costs are selling expenses
Office Maintenance is admin expense - Marketing Costs
3.Advertising
- Research Costs
- Executive Compensated
Capital Loss Deductions for individuals
- Net Capital Losses will first offset All Net Capital Gain
- Net Capital Losses in excess of Net Capital Gains will Offset Ordinary Income up to $3,000
- Net Capital Losses in Excess of Net Capital Gains & $3,000 of Ordinary Income will be carried forward Indefinetly
Nondeductible Losses
Cannot Deduct “Personal Use” Losses
Personal Residence
Persoanl-USe Vehicle
Hobbies
Deductible Losses
Rental Homes
Business Vehicles
Capital Losses - $3k Loss
Passive Income
Rents
Royalties
Stakes in Limited Partnerships/ S Corps
Calculate Basis to C Corporation
- Cash Received
+ - Property: GREATER OF
a) NBV of property received + Any Gains recognized by shareholder from transaction
OR
b) Debt Associated W/ Contributed Property
- Calculate Gain Recognized by Shareholder
a) Boot Received
b) Property: Excess Debt Over NBV of Property Contributed
Debt assumed by Coporation - NBV of Property Contributed = Excess Debt ( Gain to Shareholder)
What does Boot consist of?
Cash Received
Cancellation of debt
Marketable Securities
Dividends Received Deduction
0-20% Ownership (Unrelated Company) = 50% Deduction
20-80% Ownership = 65% Deduction
80% Plus ownership = 100% Deduction
Deduction is limited to the lesser of:
- 50% (or 65%) of Div Received
OR - 50% (or 65%) of the corps CALCULATED TAXABLE INCOME W/ OUT REGARDING THE DRD, ANY NET OPERATING LOSSES, ECT
Deductible Taxes (Corporations)
State Income Taxes
Real Estate Taxes
City Income Taxes
Payroll Taxes (Federal, State & PAYROLL)
Deductible Taxes (Individuals)
State Income Taxes
Real Estate Taxes
Sales Taxes
Included Deductible Organizational & Start-Up Costs
- First $5,000 of Qualified Expenses
- Remaining Deductible Expenses amortized over 180 months (12 years)
Included costs:
Minutes of an organizational meeting
Accounting Fees
Legal Fees when Drafting the Corporate Charter
Bylaws
Incorporation Fees
Excluded Start up Costs
Underwriter Fees
Issuance Costs
Sales & Commissions
Capital Raising Campaigns
Other Transfer Costs
Corporations
Deductible: Life Insurance Premiums
Deductible If: Employee (or family) is the Beneficiary
Nondeductible if: Company is the beneficiary - Company Pays the Cash
Nontaxable: Life insurance Proceeds
Nontaxable if: Company is the Beneficiary
Deductible Casualty Losses (Corporations)
Step 1)
Determine if partially or Fully Destroyed
Step 2a) If Fully Destroyed:
Adjusted Basis (NBV) - Insurance Reimbursement = Deductible Loss
Step 2b) If partially Destroyed:
Lesser of: decrease in FMV OR Adjusted basis (NBV) - Insurance Reimbursement = Deductible Loss
No Random $100 deduction or 10% AGI Test for Corps
Personal Holding Company (C-Corp) requirements
More than 50% Owned by 5 or less owners
&
More than 60% of taxable income from:
Net Rent
Royalties
Taxable Interest
Dividends
Personal Service Companies
Health, Law, Engineering, accounting, consulting, architecture
