REG 7 Flashcards
Generally, C corporations performing services in health, law, engineering, architecture, accounting, and consulting would be considered personal service corporations.
Generally, C corporations performing services in health, law, engineering, architecture, accounting, and consulting would be considered personal service corporations.
If a person engages in a transaction with a partnership other than as a partner of such partnership, any resulting gain is generally recognized just as if the transaction had occurred with a nonpartner
If a person engages in a transaction with a partnership other than as a partner of such partnership, any resulting gain is generally recognized just as if the transaction had occurred with a nonpartner
A donee basis in property acquired by gift usually equals the donor’s basis in the property plus the gift tax paid. However, if the fair market value of the gifted property at the time of the gift is less than the donor’s basis in the property, the donee assumes the fair market value of the property at the time of the gift as its basis for computing losses. The donee still uses the donor’s basis in the property plus the gift tax paid in computing gains.
Think gift of stock with basis of $4K. FMV at time of gift was $3K. Stock is sold for $3500. NO GAIN IS RECOGNIZED NOR A LOSS
A donee basis in property acquired by gift usually equals the donor’s basis in the property plus the gift tax paid. However, if the fair market value of the gifted property at the time of the gift is less than the donor’s basis in the property, the donee assumes the fair market value of the property at the time of the gift as its basis for computing losses. The donee still uses the donor’s basis in the property plus the gift tax paid in computing gains.
Think gift of stock with basis of $4K. FMV at time of gift was $3K. Stock is sold for $3500. NO GAIN IS RECOGNIZED NOR A LOSS
The required annual amount for personal income tax is usually the lower of 90% of the tax shown on the taxpayer’s current year return or 100% of the tax shown on the taxpayer’s prior year return. If the taxpayer’s adjusted gross income exceeded $150,000 in the prior year and the taxpayer elects to base his/her required annual amount on the prior year, then the taxpayer would have to use 110% of the prior year’s return.
The required annual amount for personal income tax is usually the lower of 90% of the tax shown on the taxpayer’s current year return or 100% of the tax shown on the taxpayer’s prior year return. If the taxpayer’s adjusted gross income exceeded $150,000 in the prior year and the taxpayer elects to base his/her required annual amount on the prior year, then the taxpayer would have to use 110% of the prior year’s return.
A self-employed person may deduct one-half of the self-employment taxes paid as a deduction for AGI, not as an itemized deduction.
A self-employed person may deduct one-half of the self-employment taxes paid as a deduction for AGI, not as an itemized deduction.
A loss is disallowed if incurred in a transaction between a partnership and a person owning (directly or constructively) more than a 50% capital or profits interest.
A loss is disallowed if incurred in a transaction between a partnership and a person owning (directly or constructively) more than a 50% capital or profits interest.
In a general partnership, the partners have unlimited personal liability. That is, their personal assets may be seized to satisfy partnership debts if partnership debts exceed the value of the partnership. Personal assets may not be sought until all partnership assets have already been seized.
In a general partnership, the partners have unlimited personal liability. That is, their personal assets may be seized to satisfy partnership debts if partnership debts exceed the value of the partnership. Personal assets may not be sought until all partnership assets have already been seized.
The child care tax credit is from 20% to 35% of certain dependent care expenses limited to the lesser of (1) $3,000 for one qualifying individual, $6,000 for two or more; (2) taxpayer’s earned income, or spouse’s if smaller; or (3) actual expenses.
The child care tax credit is from 20% to 35% of certain dependent care expenses limited to the lesser of (1) $3,000 for one qualifying individual, $6,000 for two or more; (2) taxpayer’s earned income, or spouse’s if smaller; or (3) actual expenses.
Generally, a corporation will recognize gain or loss on the distribution of its property in a complete liquidation just as if the property were sold to the distributee at its fair market value. Since the marketable securities were held more than 12 months, their distribution results in a long-term capital gain of $120,000 − $100,000 = $20,000.
Generally, a corporation will recognize gain or loss on the distribution of its property in a complete liquidation just as if the property were sold to the distributee at its fair market value. Since the marketable securities were held more than 12 months, their distribution results in a long-term capital gain of $120,000 − $100,000 = $20,000.
Under the Statute of Frauds under contract law, a surety’s (guarantor’s) agreement to answer for the debt or default of another must be in writing.
Under the Statute of Frauds under contract law, a surety’s (guarantor’s) agreement to answer for the debt or default of another must be in writing.
Shareholders in S Corps do NOT have increases in their basis because of an increase in liabilities. Partners in Partnerships do.
If a shareholder in a S corp makes a loan to the corporation, the loan will increase the shareholders basis
Shareholders in S Corps do NOT have increases in their basis because of an increase in liabilities. Partners in Partnerships do.
If a shareholder in a S corp makes a loan to the corporation, the loan will increase the shareholders basis
Q: A CPA prepared a tax return that involved a tax shelter transaction that was disclosed on the return. In which of the following situations would a tax return preparer penalty not be applicable?
A: It is reasonable to believe that the position would more likely than not be upheld
Explanation - For tax shelters, the IRS has adopted a “more likely than not” (over 50%) standard.
Q: A CPA prepared a tax return that involved a tax shelter transaction that was disclosed on the return. In which of the following situations would a tax return preparer penalty not be applicable?
A: It is reasonable to believe that the position would more likely than not be upheld
Explanation - For tax shelters, the IRS has adopted a “more likely than not” (over 50%) standard.
Generally, no gain or loss is recognized if property is transferred to a corporation solely in exchange for stock, if immediately after the transfer, the transferors of property are in control of the corporation.
Generally, no gain or loss is recognized if property is transferred to a corporation solely in exchange for stock, if immediately after the transfer, the transferors of property are in control of the corporation.
A corporation may deduct up to $5,000 of organizational expenditures for the tax year in which the corporation begins business. The $5,000 amount must be reduced by the amount by which organizational expenditures exceed $50,000. Remaining expenditures are deducted ratably over the 180-month period BEGINNING WITH THE MONTH IN WHICH THE CORPORATION BEGINS BUSINESS.
Here, since organizational expenditures total $8,600, $5,000 can be deducted for 2019, with the remaining $3,600 deducted ratably over the 180-month period beginning with September (the month in which the corporation began business). Thus, the maximum deduction for 2019 would be $5,000 + ($3,600 × 4/180) = $5,080.
A corporation may deduct up to $5,000 of organizational expenditures for the tax year in which the corporation begins business. The $5,000 amount must be reduced by the amount by which organizational expenditures exceed $50,000. Remaining expenditures are deducted ratably over the 180-month period BEGINNING WITH THE MONTH IN WHICH THE CORPORATION BEGINS BUSINESS.
Here, since organizational expenditures total $8,600, $5,000 can be deducted for 2019, with the remaining $3,600 deducted ratably over the 180-month period beginning with September (the month in which the corporation began business). Thus, the maximum deduction for 2019 would be $5,000 + ($3,600 × 4/180) = $5,080.
Generally, a corporation must recognize gain when it distributes appreciated property to a shareholder. The gain is measured by treating the corporation as if it had sold the property to the shareholder for its fair market value. However, if there is a liability on the property that is assumed by the shareholder and the amount of liability exceeds the property’s fair market value, then the amount of liability is used to measure the gain. Here, Salon’s recognized gain would total $10,000 liability − $3,000 basis = $7,000.
Generally, a corporation must recognize gain when it distributes appreciated property to a shareholder. The gain is measured by treating the corporation as if it had sold the property to the shareholder for its fair market value. However, if there is a liability on the property that is assumed by the shareholder and the amount of liability exceeds the property’s fair market value, then the amount of liability is used to measure the gain. Here, Salon’s recognized gain would total $10,000 liability − $3,000 basis = $7,000.
