REG Custom Flashcards
1
Q
What is Section 1231 gains and losses?
A
Section 1231 governs the tax treatment of gains and losses of real and depreciable property used in a trade or business and held over one year. Such property would include not only personal property (Section 1245 property) but also real property such as a building (Section 1250 property).
As you can see, section 1245 property and Section 1250 property can be referred to as section 1231 property if held more than one year when sold or exchanged since they would be subject to the tax treatment of section 1231.
A net section 1231 gain is taxed at the lower capital gain rates.
A net section 1231 loss is fully deductible as an ordinary loss.
2
Q
What is the real estate loss phaseout?
A
For every $2 above $100K, $1 of loss deduction is phased out. The total deduction is $25K. So at $150K, the deduction is completely phased out.
3
Q
What is the basis of partnership property when contributed by a partner?
A
Remember: the basis of contributed property is same as it is in the hands of the partner (adjusted basis)
4
Q
Unless the IRS consents to a change of method, the accrual method of tax reporting is mandatory for a sole proprietor with average annual gross receipts of over $1 million when there are:
A
year-end retail trade merchandise inventories
5
Q
Does ERISA require employers establish any sort of pension plan?
A
There is no requirement that employers establish employee pension plans of any sort under ERISA
6
Q
What are liquidated damages?
A
Liquidated damages are damages that are agreed upon by the parties at the time of contracting and are contained in the contract.
7
Q
When are domestic wages subject to Social Security and Medicare tax?
A
Over $1,900 to one employee in a year
8
Q
Name the schedules on a 1040:
A
Schedule A: itemized deductions
Schedule B: interest & ordinary dividends
Schedule C: P&L from business
Schedule D: capital gains and losses
Schedule E: supplemental income and losses
Schedule F: P&L from farming
Schedule SE: self-employment tax
9
Q
Which of the following corporations are required to file Form 1120, Schedule M-3?
A
Corporations with total assets of $10 million or more.
10
Q
How is a Section 1244 loss treated?
A
Section 1244 stock is treated as an ordinary loss (up to $50,000 if single).
11
Q
Generally, an estate is liable for which debts owed by the decedent at the time of death?
A
All of the decedent’s debts
12
Q
Which entities can freely select their tax year?
A
Only three entities are permitted to freely select a fiscal year: C corporations, estates, and tax-exempt entities
13
Q
What is the unified credit?
A
Estate and gift taxation has been combined into a unified system. The unified credit is a specific credit allowed against the estate tax and will encompass prior gifts as well.
14
Q
What is novation?
A
A three party contract where the creditor agrees to release the original debtor and take a third party as substitute. The novation discharges the contractual obligation of the original debtor.
15
Q
Explain what a contract is and what is “discharge”?
A
A contract is basically a judicially enforceable promise between parties, and that is “discharge” is termination of that promise or duties, usually by performance.
16
Q
What is Form 8832?
A
Form 8832 is the election form filed with the IRS by an unincorporated business entity to elect to be treated as a corporation for federal income tax purposes.
17
Q
Are tuition payments on another’s behalf taxable as a gift?
A
Tuition payments made to an educational organization on another’s behalf are not subject to the federal gift tax.
18
Q
The uniform capitalization (UNICAP) rules require manufacturers to capitalize what?
A
UNICAP rules require the capitalization of all direct materials and direct labor. Some indirect costs such as indirect labor and handling costs may be capitalized. Some indirect costs are not capitalized such as selling and distribution costs.
19
Q
The credit for prior year AMT liability paid carries forward how many years?
A
Indefinitely
20
Q
How do you treat gambling winnings and losses?
A
Winnings are included in gross income. Losses are deductible up the amount of winnings and is not subject to 2% AGI floor. Available only if you itemize.
21
Q
What is a limited partnership?
A
A limited partnership is a partnership created by statute (not common law) consisting of at least one general partner and one or more special or limited partners.
22
Q
What are the rules for using an IRA distribution for first time home buyer expense?
A
the homebuyer is the taxpayer, spouse, child or grandchild of either, or ancestor of either,
the home is used as a principal residence by the homebuyer.
the homebuyer (and if married, the homebuyer’s spouse) has not had a present ownership interest in another principal residence within the 2-year period ending on the date that the current principal residence is acquired, and
the distribution is used within 120 days to pay for qualified acquisition expenses, such as buying, building or reconstructing the residence, as well as usual or reasonable settlement, financing, or other closing costs.
Only $10,000 of aggregate distributions received by an individual can be treated as made for qualified first-time homebuyer expenses. This is a lifetime limit.
23
Q
What is basis of inherited property?
A
Basis in inherited property is generally based upon the fair market value (FMV) at time of death.
24
Q
When property is transferred to a corporation, the basis of any property received is what?
A
FMV
25
What is the $1 million cap?
Compensation deduction for a publicly traded company is limited for $1M for CEO and next four highest paid executives.
26
How should an employer treat the payment of an employee's share of the FICA tax?
Payment of the employee’s share of FICA is additional compensation to the employee. The employer must include the amount of taxes that they pay in the employee's gross wages for income tax purposes (gross wages) but does not count them as Medicare or Social Security wages.
27
Are private foundations subject to accumulated earnings tax?
Private foundations are not subject to an accumulated earnings tax.
28
How do you calculate a casualty loss deduction?
1. insurance or other reimbursements received,
2. $100 per event reduction, and
3. 10%-of-AGI aggregate reduction.
29
Do personal exemptions apply to a simple trust?
A personal exemption of $300 is allowed for a trust that is required to distribute all of its income currently (simple trust).
30
Is interest from a home equity loan deductible?
Interest paid on home equity debt is deductible. Home equity debt cannot exceed the lesser of $100,000 or the difference between the FMV of the home and the acquisition debt on the home.
31
Who is allowed to use the cash basis of accounting?
Individual taxpayers typically use the cash basis for their tax returns. Qualified personal service corporations are allowed to use the cash basis of accounting.
32
What is cumulative voting?
The number of votes a shareholder gets is determined as follows: Number of shares owned × number of directors being elected.
33
What is fraud in the inducement?
Fraud in the inducement is false representation or failure to disclose of a material fact knowingly, which resulted in injury by the party relying on the facts or lack thereof.
34
What is the general rule when service is paid for by an exchange of property instead of cash?
The general rule is that when services are paid for in property (any compensation other than cash), the fair market value of the property at the time of receipt must be included in income.
35
What is the corporate limit on charitable contributions?
The corporate limit for charitable contributions is 10% of taxable income before consideration of the contribution and DRD.
36
When must a corporation make estimated tax payments?
A corporation is required to make installment payments if the estimated tax (not estimated income) is $500 or more.
37
Is mortgage relief part of boot?
Yes mortgage relief is considered as part of boot received
38
What happens when a cash basis taxpayer prepays expenses?
If a cash method taxpayer prepays expenses that cover a period substantially beyond the end of the tax year, the expenses must be capitalized and amortized over the period to which they relate.
39
When must a fiduciary file a income return for an estate, and for a trust?
A fiduciary must file a tax return for an estate if there is gross income of $600 or more.
A fiduciary must file a tax return for a trust if there is any taxable income, or gross income of $600 or more.
40
What is the limitation of investment interest expense?
Generally, your deduction for investment interest expense is limited to your net investment income (investment income - expenses). You can carry over the amount of investment interest you could not deduct because of this limit to the next tax year.
41
For corporate tax purposes, what is the character of capital loss carryover?
Corporate income tax: When a capital loss is carried to another year, it is treated as a short-term loss. It does not retain its original identity.
42
What happens to the unused exclusion for an estate when there is a surviving spouse?
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 contains a provision that will allow the unused portion of a decedent's exclusion (taxable estate protected by the unified credit) to be used upon the subsequent death of the surviving spouse.
43
When does risk of loss pass from a merchant seller to a buyer?
When the seller is a merchant, the risk of loss passes from the merchant seller to the buyer upon the buyer's actual receipt of the goods. (If the seller had been a nonmerchant, risk of loss would have passed upon “tender of delivery.”)
44
What is the limit on a deduction of a business gift?
Deductions for business gifts to customers are limited to $25 PER person during the tax year.
45
Which of the following must take place for a corporation to be voluntarily dissolved?
Passage by the board of directors of a resolution to dissolve. Voluntary dissolution of a corporation occurs when the board of directors passes a dissolution resolution.
46
If the alternative valuation date is elected bu t the property was disposed before that date, what is the basis for that property?
The basis of the property will be FMV at the date of disposition.
47
Are disability insurance premiums a deductible medical expense?
Since a disability insurance policy would provide payments that are unrelated to medical care, the disability insurance premiums are not deductible as a medical expense.
48
Define Composition agreement with creditors (also called composition of creditors’ agreement)
A composition of creditors occurs when creditors make an agreement with each other to accept less than the full debts as full satisfaction of those debts. Once the debtor performs under the agreement, the debts are discharged, so this generally causes a release of the debtor from its debts.
49
What happens in this situation?
B buys a stereo from S but the check bounces. P, a good-faith purchaser, pays B for the stereo.
If party having voidable title transfers goods to a good-faith purchaser for value, the latter obtains good title.
EXAMPLE: B buys a stereo from S but the check bounces. P, a good-faith purchaser, pays B for the stereo. S cannot get the stereo from P but must recover money from B.
Thief does not have voidable title but void title
EXAMPLE: Same as above except that B stole the stereo. P does not obtain title of the stereo.
50
What are the separately stated items on a K-1 and why do they need to be separately stated?
Code Section 702 establishes a list of items that must be separately stated at the partnership level so that their character can remain intact as the income and losses are passed through and reported at the partner level. Section 702(a) lists the following items that must be stated:
- Net short-term capital gains and losses.
- Net long-term capital gains and losses.
- Section 1231 gains and losses,
- Charitable contributions.
- Dividends eligible for a dividends-received deduction.
- Taxes paid to a foreign country or to a U.S. possession.
- Any other items provided by the Regulations.
51
Explain what a distribution deduction is for an estate.
An estate’s DNI represents the maximum amount of available distribution deduction, and the maximum amount on which beneficiaries can be taxed. Here, since only $9,000 was distributed to a beneficiary, only $9,000 can be claimed on the estate’s fiduciary income tax return as a distribution deduction, and only $9,000 will be taxed to the beneficiary.
52
What is excluded from Section 1231 property?
Specifically excluded from Sec. 1231 is inventory and property held for sale to customers, as well as accounts and notes receivable arising in the ordinary course of a trade or business. Additionally, copyrights, literary, musical, and artistic compositions held by a taxpayer whose personal efforts created such property are excluded from Sec. 1231.
53
Are hobby losses deductible?
Only to the extent that you have hobby income, and you need to itemize your deduction. Hobby losses can be taken on Schedule A, itemized deduction as a miscellaneous deduction if it's over 2% of your AGI. Hobby losses cannot be carried forward.
54
What is the corporate AMT exemption and phase out?
AMTI is offset by a $40,000 exemption. However, the exemption is reduced by 25% of AMTI over $150,000, and completely phased out once AMTI reaches $310,000.
55
What are the necessary components of a valid deed?
The necessary requirements for a valid deed are (1) the names of the buyer (grantee) and the seller (grantor), (2) words evidencing an intent to convey, (3) a legally sufficient description of the land, (4) the grantor’s (and usually the spouse’s) signature, and (5) delivery of the deed.
Purchase price not necessary in deed
56
How is income from real estate rental activity treated if the taxpayer materially participates?
A real estate rental activity is generally considered to be a passive activity, even though the taxpayer materially participates in the rental activity. That is important because losses from passive activities can only be used to offset income from other passive activities.
57
Are unpaid taxes discharged in bankruptcy?
Any unpaid amount of taxes due to the United States or to any state or subdivision thereof from within 3 years preceding bankruptcy is not discharged by the bankruptcy proceeding.
58
In order to admit a new limited partner, what written approval is needed?
The admission of a new limited partner requires the approval of not only all the general partners, but also the limited partners.
59
Are corporate reorganizations generally taxable to the corporation and its shareholders?
Corporate reorganizations are generally nontaxable under the theory that they represent a mere change in form since there is an underlying continuity of shareholder interests and a continuity of the business enterprise.
60
What is an "insider" when it comes to bankruptcy proceedings?
Insiders are close blood relatives, officers, directors, controlling stockholders of corporations, or general partners of partnerships.
61
What happens when a holder has only paid a partial amount of the agreed upon price of a negotiable instrument and then learns of a defense against the note?
UCC provides in situations where the holder provides partial value that the holder is entitled to the percentage of the value provided, rather than just the actual value provided.
Ex: If C has paid 20%, $50/$250, before he learned of the defenses, then C is entitled to 20% of the face value ($300) of the note: $60.
62
What is the depreciation lives for residential and nonresidential real property?
real property must be depreciated over 27.5 years for residential property, 39 years for business property.
63
Define mislaid property and how title is affected.
Mislaid property
(1)
Happens when owner voluntarily puts the property somewhere but forgets to take it
(2)
Finder does not obtain title to mislaid property
(a)
Owner of premises becomes caretaker in case true owner of mislaid property comes back
64
Define lost property and how title is affected.
Lost property
(1)
Happens when owner involuntarily leaves property somewhere
(2)
Finder has title to lost property which is valid against all parties except the true owner
EXAMPLE: A loses his watch. B finds it but C attempts to take it from B even though both know it is not C’s watch. B has the right to keep it from C.
65
Define abandoned property and how title is affected.
Abandoned property
| 1
Generally, finder has title valid against all parties including owner that abandoned property.
66
What term is used to describe a partnership without a specified duration?
A partnership at will.
67
Explain how to determine the holding period for property received as a gift.
a. If the basis of property to a prior owner carries over to the present owner (e.g., gift), the holding period of the prior owner “tacks on” to the present owner’s holding period
.
b. If using the lower FMV on date of gift to determine loss, then holding period begins when the gift is received.
EXAMPLE: X purchased property on July 14, 2014, for $10,000. X made a gift of the property to Z on June 10, 2016, when its FMV was $8,000. Since Z’s basis for gain is $10,000, Z’s holding period for a disposition at a gain extends back to July 14, 2014. Since Z’s $8,000 basis for loss is determined by reference to FMV at June 10, 2016, Z’s holding period for a disposition at a loss begins on June 11.
68
How do you calculate the holding period for an asset when it is transferred to a corporation?
The corporation's holding period in the property received always includes the period that the transferor held the property before the exchange regardless of the character of the property to the transferor.
69
How is compensation calculated when a taxpayer provides service to a partnership in exchange for interest?
The calculation of compensation income is based upon the fair market value of the partnership assets.
70
Are members of a LLC responsible for their proportionate share of the entity's debts?
Generally, the members of an LLC are not personally liable for the entity's debts. Thus, the recourse debt on the balance sheet (i.e. lines of credit and equipment loans) does not impact the bases that the LLC members have in their LLC interests.
71
Are medical insurance premiums paid with after tax dollars deductible?
Insurance premiums on policies that provide medical care paid with the taxpayer's after-tax dollars are deductible as medical expenses.
72
What is a shareholder's basis in property received in a corporate distribution?
A shareholder’s tax basis for distributed property is the property’s FMV at date of distribution (not reduced by liabilities).
73
Under Section 12 of the Securities Exchange Act of 1934, in addition to companies whose securities are traded on a national exchange, what class of companies is subject to the SEC’s continuous disclosure system?
Companies with assets in excess of $10 million and 500 or more shareholders.
74
How do you calculate the basis of an asset received in a like-kind exchange where boot was received?
```
Example:
Basis of asset given up $3,000
Less boot received − 500
Plus gain recognized + 300
Basis of asset received $2,800
```
75
How do you determine the amount of dividend income to be reported by shareholders from a corporate distribution?
Amounts distributed to shareholders are dividends to the extent paid out of current or accumulated earnings and profits.
76
May a lessee assign and sublease his lease without the leassor's permission?
Lessee may assign or sublease unless prohibited or restricted in lease.
77
Where should guaranteed payments appear?
Both included in the partnership's return and partner's K-1.
Guaranteed payments are deductible by the partnership in computing its ordinary income, and must also be separately listed on Schedules K and K-1 because the receipt of guaranteed payments by partners must be reported as ordinary income.
78
How soon must a corporation file a Form 8-K after a material event?
Current reports of certain material events such as a change in corporate control, a revaluation of assets, or a change in the amount of issued securities, must be filed within 4 days after the material event occurs.
79
What is the limitation of a business casualty loss?
Note that the "$100 floor" and "10% of adjusted gross income" limitations that apply to non-business casualty losses of individuals do not apply to business casualty losses.
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.
80
a secured creditor rightfully repossesses and sells a debtor's collateral, which of the following obligations is the first to be paid from the proceeds of the sale?
Reasonable expenses incurred for the sale.
81
Explain rescission
Contract is cancelled and both sides are excused from further performance and any money advanced is returned.
82
Explain subrogation
When one party can step into the shoes of another party to collect on the other party's claims.
Example: A surety who pays off the debts of the principal debtor may be entitled to be subrogated to the creditor's former claims and collect against the debtor to recover the sum paid as the surety.
Another example, an insurance company pays its insured to make the insured whole. The insurer, to make itself whole, then has the right to sue the third-party that caused the damage.
83
If stock is received in a stock dividend, what is the holding period?
The holding period of the new shares includes the holding period of the old shares.
84
Explain how an artisan's lien works?
UCC states that when a person in the ordinary course of business furnishes services or materials for goods subject to a security interest, an artisan’s lien on such goods, which arises under state law, takes priority over prior perfected security interests unless the statute expressly provides otherwise.
85
In a Sec. 322 liquidation, if appreciated property is distributed to a 80% distributee, what is the G/L recognition and what is the basis of the property?
No gain or loss is recognized by the liquidating corporation on distributions made to its parent corporation or 80%-control distributee.
The property will be transferred with it's adjusted basis.
86
In order to negotiate bearer paper, one must
Bearer paper may be negotiated by mere delivery of the instrument (no need to endorse).
87
Does an assignment of a contractual agreement mean an assignment of rights under the contract or a delegation of duty?
An assignment of a contractual agreement is taken to mean both the assignment of the rights of the contract as well as the delegation of the duties of the contract
88
Will contracts be enforceable under regulatory licensing statute or revenue seeking statutes?
If a contract violates a regulatory licensing statute, it will be unenforceable by either party. The main function of a regulatory licensing statute is to protect the public against unskilled or dishonest persons.
A contract that violates a revenue-seeking statute is enforceable. Since it's revenue seeking, licensure is merely incidental to the performance of the contract.
89
If a corporation sells property to a shareholder at below FMV, what is the treatment?
If a corporation sells property to a shareholder for less than fair market value, the shareholder is considered to have received a constructive dividend to the extent of the difference between the FMV of the property and the price paid.
Example, a shareholder’s dividend income is $30,000 if the transaction is $80K FMV — $50K purchase price for a property.
90
How long is a trademark of a corporation valid under the law of the United States?
Trademarks last as long as they retain their distinctiveness. Therefore, they can last indefinitely. Trademarks are terminated by their actual abandonment or their constructive abandonment if the owner allows the trademark to lose its distinctiveness.
91
Can you deduct the FMV of services contributed to a charity?
A charitable contribution deduction is not allowed for the value of services performed for a charity.
92
What generally falls under the MACRS five year convention vs seven year convention?
The MACRS five-year property classification includes autos and taxis, light and heavy general-purpose trucks, calculators, copiers, computers, and peripheral equipment. The MACRS seven-year property classification includes office furniture, fixtures, and equipment, as well as agricultural machinery and equipment.
93
How do you calculate the shareholder's basis in the stock received in a Sec. 351 contribution?
The formula for determining the shareholder's basis in the stock received is:
Adjusted basis of property transferred
+ Gain recognized
- Boot received (including any liabilities transferred)
- Election to adjust property for loss
-----------------------------------------------------
= Adjusted basis of stock received
94
Can stock issuance costs be amortized?
The expenses of issuing stock are not amortizable; they must be charged against paid-in capital. These expenses include printing costs, professional fees, commissions, and charges for listing the stock on an exchange.
95
What happens when a shareholder contributes property to a corporation with liability in excess of its basis?
The same contribution rules apply to shareholders in a C corporation and shareholders in an S corporation. If a shareholder contributes property with a liability in excess of basis, the excess is considered a gain.
It will be ordinary gain if ordinary income property was contributed, or capital gain if capital gain property was contributed.
96
Explain what is the kiddie tax?
The “kiddie tax” is a tax on unearned income paid to minors. For 2016, the first $1,050 of such income is tax free, the second $1,050 is taxed to the child at his/her tax rate, and all unearned income over $2,100 is taxed at the parents’ tax rate.
The kiddie tax rule now applies to children under age 19 and full-time college students under the age of 24.
97
A general business credit in excess of the limitation amount is carried:
Back 1 year and forward 20 years.
98
How may income taxes paid by an individual to a foreign country be treated?
Foreign income taxes paid by an individual may be deducted as an itemized deduction (not subject to the 2% floor), or may be subtracted as a credit against federal income taxes due.
99
The credit for prior year alternative minimum tax liability may be carried:
Forward indefinitely.
100
Under the cash method of reporting, an individual should report gross income:
For the year in which income is either actually or constructively received either in cash or in property.
101
What are the deductible moving expenses?
Deductible moving expenses include the costs of moving household goods and personal effects from the old to the new residence, and the costs of traveling (including lodging) from the old residence to the new residence.
102
What are the non-deductible moving expenses?
Nondeductible moving expenses include the costs of meals, househunting trips, temporary lodging in the general location of the new work site, expenses incurred in selling an old house or buying a new house, and expenses in settling a lease on an old residence or acquiring a lease on a new residence.
103
For the first taxable year in which a corporation has qualifying research and experimental expenditures, the corporation can:
Has a choice of either deducting such expenditures as current business expenses, or capitalizing these expenditures.
Then, if the capitalized costs are not subject to depreciation (because there is no determinable life), the taxpayer can amortize them over a period of 60 months or longer beginning with the month in which benefits from the expenditures are first realized.
104
When a stock becomes worthless in a tax year, when is it deemed worthless?
The asset is deemed to be worthless on the last day of the year.
105
Do you recognize a gain if a partnership distributes property to you in a liquidating or non-liquidating distribution?
No you do not recognize a gain on property distribution. Only on cash distribution.
106
What is a lookback rule?
Under a lookback rule, the taxpayer is required to recalculate the annual profit reported on a contract. In other words, it requires the taxpayer to substitute the actual costs and revenues for the estimated revenues and costs used in the percentage-of-completion method.
107
What filing status would be used when a spouse dies during the tax year?
You can still use married filing jointly with your deceased spouse for the year of death -- unless you remarry during that year.
For the two years following the death of your spouse, if you have a dependent child and meet all of the requirements, you may use the filing status "qualifying widow(er) with dependent child
108
Are the proceeds of a life insurance paid to the beneficiary taxable?
The proceeds of life insurance paid to the beneficiary of a decedent's life policy are not taxable.
109
What must a plaintiff prove under the 1933 Act in an action against a CPA?
Under the 1933 Act, the plaintiff must prove damages were incurred and that there was a material misstatement or omission in the financial statements included in the registration statement.
Thus, proving that the false statement is immaterial is a viable defense. Other viable defenses are the due diligence defense, proving that the plaintiff knew the financial statements were incorrect when the investment was made, and proving the loss was caused by factors other than the misstatement or omission.
110
What is Preemptive right?
This is the right to subscribe to new issues of stock (at FMV) so that a stockholder’s ownership will not be diluted without the opportunity to maintain it
EXAMPLE: A corporation has one class of common stock. Stockholder A owns 15%. A new issue of the same class of stock is to be made. Stockholder A has the right to buy 15% of it.
111
How much control of a partnership must a partner have to be considered a controlled partnership?
A partner must actually or constructively own more than 50% of the partnership interests for the partnership to be considered a controlled partnership.
112
Can you deduct services performed for a charity?
The fair market value of services performed for a charitable organization is NOT deductible as a charitable contribution
113
What is fraud in the inducement?
Fraud in the inducement is false representation or failure to disclose of a material fact knowingly made or omitted, justifiably relied upon in the making of the contract, and resulting in injury. It is antecedent fraud that occurs during the negotiation, precedes the making of the contract, and induced the other party to enter into the contract, and may be in the form of an act, an omission, a concealment, or a nondisclosure.
114
What is a type B reorganization?
A type B reorganization effectively results in a parent-sub relationship. The requirements for a B reorganization (which is tax free) is the acquisition by one corporation of stock in a second (target) corporation in exchange solely for the acquiring corporation's voting stock (or voting stock of its parent) if the acquiring corporation has control of the target immediately after the exchange. (IRC Section 368(a)(1)(B))
115
How is an exempt organization's unrelated business income (UBI) taxed?
If the organization's UBI is taxed, trust rates apply if it is a trust and corporate rates apply if it is a corporation.
116
How is capital asset defined?
The definition of capital assets includes investment property and property held for personal use, but excludes property used in a trade or business.
117
The holding period of a partnership interest acquired in exchange for a contributed capital asset begins on the date:
The holding period for a partnership interest that is acquired through a contribution of property depends upon the nature of the contributed property.
If the contributed property was a capital asset or Section 1231 asset to the contributing partner, the holding period of the acquired partnership interest includes the period of time that the capital asset or Sec. 1231 asset was held by the partner.
For all other contributed property, a partner’s holding period for a partnership interest begins when the partnership interest is acquired.
118
What is the limitation on a corporation's dividend received deduction?
A corporation's dividends-received deduction (for dividends from unrelated domestic corporations) is 70% of the lesser of the dividend received or taxable income before the dividends-received deduction.
119
How are consideration received for non-compete agreements taxed?
Amounts received for noncompetition agreements are taxed as ordinary income in the year received.
120
Does a guarantee for another's debt or suretyship need to be in writing?
Guaranty’s agreement to answer for debt or default of another must be in writing
121
How much of an exempt organization's UBI is exempt from tax?
The first $1,000 of unrelated business income of a nonprofit is exempt from tax.
122
Explain the Ultramares doctrine
Under the Ultramares doctrine, a CPA is not liable to third parties for mere negligence, but may be held liable to any party who suffered a loss as a result of fraud or gross negligence. These third parties need not be in privity of contract with the CPA and need not be specifically known to the CPA.
123
Under the position taken by a majority of the courts, to which third parties will an accountant who negligently prepares a client's financial report be liable?
Any foreseen or known third party who relied on the report.
124
For property contributed to a partnership, a partnership must hold contributed property how long before distributing it to avoid pre-contribution gain being taxed to the contributing partner?
Seven years
125
Without an agreement, how is profit shared under the Revised Uniform Partnership Act (RUPA)?
RUPA provides that in the absence of a profit-sharing agreement, profits are shared EQUALLY by the partners.
126
What is the SL depreciation for residential vs business real estate?
IRS depreciates residential rental buildings over 27.5 years and retail and other commercial structures over 39 years.
