REG 6 Flashcards

1
Q

Prepaid rent must be included in income in the year received regardless of the period covered or the accounting method used.

A

Prepaid rent must be included in income in the year received regardless of the period covered or the accounting method used.

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2
Q

Although taxpayers may generally choose to use either the cash or the accrual method, the cash method cannot generally be used if inventories are necessary to clearly reflect income, and cannot generally be used by C corporations. Taxpayers permitted to use the cash method include a qualified personal service corporation, and an entity (other than a tax shelter) if for every year it has average gross receipts of $25 million or less for any prior three-year period and does not have inventories.

A

Although taxpayers may generally choose to use either the cash or the accrual method, the cash method cannot generally be used if inventories are necessary to clearly reflect income, and cannot generally be used by C corporations. Taxpayers permitted to use the cash method include a qualified personal service corporation, and an entity (other than a tax shelter) if for every year it has average gross receipts of $25 million or less for any prior three-year period and does not have inventories.

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3
Q

The uniform capitalization rules generally require that all costs incurred in acquiring property for resale must be capitalized as part of the cost of inventory. The costs that must be capitalized include the costs of purchasing, handling, processing, repackaging and assembly, as well as the costs of off-site storage.

A

The uniform capitalization rules generally require that all costs incurred in acquiring property for resale must be capitalized as part of the cost of inventory. The costs that must be capitalized include the costs of purchasing, handling, processing, repackaging and assembly, as well as the costs of off-site storage.

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4
Q

Beginning in 2018, an employee can no longer deduct moving expenses nor can an employer pay or reimburse an employee’s moving expenses on a tax-free basis.

A

Beginning in 2018, an employee can no longer deduct moving expenses nor can an employer pay or reimburse an employee’s moving expenses on a tax-free basis.

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5
Q

A single individual with AGI over $73,000 for 2018 would only be entitled to an IRA deduction if the taxpayer is not covered by a qualified employee pension plan.

A

A single individual with AGI over $73,000 for 2018 would only be entitled to an IRA deduction if the taxpayer is not covered by a qualified employee pension plan.

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6
Q

If IRA contributions are deductible, they are always deductible from gross income in arriving at adjusted gross income.

A

If IRA contributions are deductible, they are always deductible from gross income in arriving at adjusted gross income.

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7
Q

A partnership functions as a pass-through entity and its items of income and deduction are passed through to partners on the last day of the partnership’s taxable year. Income and deduction items pass through to be reported by partners even though not actually distributed during the year.

A

A partnership functions as a pass-through entity and its items of income and deduction are passed through to partners on the last day of the partnership’s taxable year. Income and deduction items pass through to be reported by partners even though not actually distributed during the year.

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8
Q

Beginning in 2018, miscellaneous itemized deductions subject to 2% of AGI phase-out are not deductible.

A

Beginning in 2018, miscellaneous itemized deductions subject to 2% of AGI phase-out are not deductible.

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9
Q

Under the UCC, if the parties agree in good faith to a modification of their contract, then that modification is enforceable even if there is no additional consideration. Also, under the UCC, the contract can be modified through the good faith agreement of the parties with only one side receiving additional consideration.

A

Under the UCC, if the parties agree in good faith to a modification of their contract, then that modification is enforceable even if there is no additional consideration. Also, under the UCC, the contract can be modified through the good faith agreement of the parties with only one side receiving additional consideration.

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10
Q

Net capital losses of up to $3,000 for individuals are deductible in arriving at AGI

A

Net capital losses of up to $3,000 for individuals are deductible in arriving at AGI

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11
Q

For itemize deductions you can only deduct income tax or sales tax. It can’t be both, so you’ll choose the higher of the two.

A

For itemize deductions you can only deduct income tax or sales tax. It can’t be both, so you’ll choose the higher of the two.

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12
Q

self-employment tax is not deductible as an itemized deduction. Instead, a portion of the self-employment tax is deductible from gross income in arriving at adjusted gross income.

A

self-employment tax is not deductible as an itemized deduction. Instead, a portion of the self-employment tax is deductible from gross income in arriving at adjusted gross income.

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13
Q

An individual qualifies as a taxpayer’s dependent for purposes of the medical deduction if the individual is of a specified relationship or a member of the taxpayer’s household, is a U.S. citizen or resident, and the taxpayer provides more than half of the individual’s support.

A

An individual qualifies as a taxpayer’s dependent for purposes of the medical deduction if the individual is of a specified relationship or a member of the taxpayer’s household, is a U.S. citizen or resident, and the taxpayer provides more than half of the individual’s support.

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14
Q

the nonprescription drugs do not qualify as deductible medical expenses.

A

the nonprescription drugs do not qualify as deductible medical expenses.

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15
Q

Even back taxes can be deducted by Burg as long as he was the owner of the property during the period of time to which the back taxes are related.

A

Even back taxes can be deducted by Burg as long as he was the owner of the property during the period of time to which the back taxes are related.

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16
Q

The investment interest expense deduction is limited to net investment income.

A

The investment interest expense deduction is limited to net investment income.

17
Q

The land Charitable contribution is subject to a 30% of AGI limitation.

A

The land Charitable contribution is subject to a 30% of AGI limitation.

18
Q

The donation of appreciated stock held more than 12 months is a contribution of intangible, long-term capital gain appreciated property. The amount of contribution is the stock’s FMV of $70,000, but is limited in deductibility for 2018 to 30% of AGI. Thus, the 2018 deduction is $100,000 × 30% = $30,000. The amount of contribution in excess of the 30% limitation ($70,000 − $30,000 = $40,000) can be carried forward for up to five years, subject to the 30% limitation in the carryforward years.

A

The donation of appreciated stock held more than 12 months is a contribution of intangible, long-term capital gain appreciated property. The amount of contribution is the stock’s FMV of $70,000, but is limited in deductibility for 2018 to 30% of AGI. Thus, the 2018 deduction is $100,000 × 30% = $30,000. The amount of contribution in excess of the 30% limitation ($70,000 − $30,000 = $40,000) can be carried forward for up to five years, subject to the 30% limitation in the carryforward years.

19
Q

If business property is completely destroyed, the amount of casualty loss deduction is the property’s adjusted basis immediately before the casualty, less any insurance reimbursement.

A

If business property is completely destroyed, the amount of casualty loss deduction is the property’s adjusted basis immediately before the casualty, less any insurance reimbursement.

20
Q

If business property is completely destroyed, the amount of casualty loss deduction is the property’s adjusted basis immediately before the casualty.

A

If business property is completely destroyed, the amount of casualty loss deduction is the property’s adjusted basis immediately before the casualty.

21
Q

$5,000 of organizational expenses may be deducted, but the $5,000 is reduced by the amount of expenditures incurred that exceed $50,000. Expenses not deducted must be capitalized and amortized over 180 months, beginning with the month that the corporation begins its business operations. Organizational expenditures qualifying for the election are:

  1. Legal expenditures incurred by the corporation;
  2. necessary accounting services;
  3. expenditures of temporary directors and of organizational meeting directors and shareholders; and
  4. fees paid to the state of incorporation. Expenditures for issuing or selling shares of stock and for transferring the assets to the corporation do not qualify for the election.
A

$5,000 of organizational expenses may be deducted, but the $5,000 is reduced by the amount of expenditures incurred that exceed $50,000. Expenses not deducted must be capitalized and amortized over 180 months, beginning with the month that the corporation begins its business operations. Organizational expenditures qualifying for the election are:

  1. Legal expenditures incurred by the corporation;
  2. necessary accounting services;
  3. expenditures of temporary directors and of organizational meeting directors and shareholders; and
  4. fees paid to the state of incorporation. Expenditures for issuing or selling shares of stock and for transferring the assets to the corporation do not qualify for the election.
22
Q

Distributable net income (DNI) is the maximum amount of distributions that can be taxed to beneficiaries as well as the maximum amount of distributions deduction for an estate.

A

Distributable net income (DNI) is the maximum amount of distributions that can be taxed to beneficiaries as well as the maximum amount of distributions deduction for an estate.