Reg 8 Flashcards
The negligence penalty with respect to understatement of tax
Is an accuracy-based penalty for negligence or for disregard of tax rules and regulations
Credit that can only be claimed by individuals, not corporation
Earned income credit
Accumulated earning credit
50,000
Payment subject to US witholding tax
Payment to Dividend, interest and foreign financial institution
MACRS rules
39 lifes insurance
If an accounting firm failed to discover material overstatement of assets of a company and the company have a loss
The accounting firm can be liable for the loss
statute of limitations
Must be determined
Distribution to C corporation that exceed the C corporation current or accumulated earnings and profits are treated as
nontaxable returns of capital
Distribution from C corporation un excess of both earnings and profits and a shareholders basis in the stock of a corporation are treated
as a capital gain
Distribution to C corporation are considered
Dividend income (ordinary income)
S corporation basis
Beggining basis
+ income
- loss
- net capital loss
Deduction for bad debts
A corporation is required to use the direct charge-off method rather than the reserve method
Foreign taxes paid by a corporation
May be claimed either as a deduction or as a credit, at the option of corporation
Expenses owed by an accrual-basis corporation to a cash-basis shareholder who owns at least 50%
expenses are not deductible until paid
As long as the CPA ask the client whether the client has documentation
CPA will not be liable for either a penalty or interest because of the client misrepresentation
More likely than not standard
Any penalty More than 50% should be disclosed
Ordinary and necessary administration expenses paid by fiduciary of an estate are deductible
On the fiduciary income tax return only if the estate tax deduction is waived for these expenses
Premiums on a disability insurance policy
Excluded from qualifying expense
Installment method
Annual gain = total gain/contract price * payment
Built and gain tax
C corp to s corp
( FMV asset - basis )* tax rare
