REG Deck #1 Flashcards
How much of Gross Income related to educational expenses paid by an employer can be excluded by an employee?
$5,250
What are the terms for excluded income related to the sale of a residence?
1) Home was used as personal residence for 2 years out of the 5 years period ending on the date of sale.
2) Up to $250k exclusion for single individual taxpayer
Life Insurance Premiums are non-taxable up to what amount?
$50,000 of coverage per employee. Anything > $50k is taxable to the employee.
What is the calculation for Itemized Medical Expenses?
Medical Expense - Insurance Reimbursement - 7.5% of AGI
=Deductible medical expenses
What is the QBI taxable income threshold for Category 1?
$182,100 for single or $364,200 for married
(>$232,100 Cat 2 applies, No SBI for SSTB deduction)
What are the AGI Limitations for Charitable Contributions?
60% of AGI = Cash given to Public Charities and Private Operating Foundations
50% of AGI = Property <1yr Operating Public/Private Charities
30% of AGI = 1) Cash and Property <1yr Non-operating Private Foundations 2) >1yr property for Operating Public/Private Foundations
20% of AGI = >1yr property for Non-operating Private
How do you calculate the maximum amount deductible for self-employed IRA contributions?
Lessor of 66,000 OR 20% “Net Earnings”
Net Earnings = Income - (50% of self-employed taxes)
Calculation for Basis of New Property?
Gain Realized = FMV of New Property - Adjusted basis-Net debt of boot paid
Gain Recognized = Lessor of Gain Realized or Boot Received
Gain Deferred = Gain Realized - Gain recognized
Basis = FMV of New Property - Gain Deferred + Deferred Loss
List of Refundable Credits that may result in refund even with no income tax liability?
1) Child Tax Credit
2) Earned income credit
3) Federal income tax withheld
4) Excess SS tax paid
5) American opportunity credit (40% refundable)
List of Deductions “for” AGI?
Business, IRA, HSA, student loans, moving
1) Trade or business expense
2) Rent or royalty expenses
3) 50% self-employment tax
4) 100% medical insurance premiums if self employed
5) Contribution to retirement plans
6) Contributions to HSA
7) Student loan interest ($2,500 limit)
8) Moving only for Armed Forces
9) Capital losses in excess of capital gains ($3k)
10) Penalty for early withdrawal of savings account
Itemized Deductions or Deductions “from” AGI?
1) Charity
2) Casualty losses (10% AGI, $100 floor)
3) Medical Expenses (7.5%)
4) State, local, real estate, property tax, foreign taxes paid ($10k limit)
5) Interest paid on Home Mortgage
6) Business Gifts ($25)
7) Gambling losses to the extent of Gambling winnings
What is the exception for losses regarding passive real estate participation?
1) Owns >10% of the property and actively participates in rental real estate
2) Up to $25k of passive losses may offset nonpassive income
3) $25k allowance is reduced by 50% of AGI >$100k (phase out at AGI of $150k)
What defines the cost basis of the donee if the FMV < Donor’s basis?
1) If SP > donor’s cost basis then donee’s cost basis is the donor’s cost basis
2) If SP < FMV of property at time of gift, then donee’s basis = FMV of property at time of gift
3) If SP < donor’s cost basis BUT > FMV at time of gift, no G/L recognized
To avoid penalties a taxpayer must pay what amount on tax liability?
90% of current tax liability or 100% of previous year’s liability
Exception - if AGI $150k in PY then 110% of previous year’s liability is owed
What is the deduction calculation for casualty losses?
Smaller Loss (lessor of cost or change in FMV)
<Insurance>
<$100> (each loss separately)
<10% AGI> (aggregate loss)
=Deductible Loss
</Insurance>
Define Section 1231 Assets?
Property used in business and held for >12 months
Are losses on the sale of personal assets deductible?
No
Define Capital Assets?
Non-business related property (real and personal) that is held by the taxpayer:
Examples: car, furniture, stocks, personal or real property not used in business, interest in partnership, goodwill of a corporation, musical compositions.
What is the maximum expense deduction for Organizational Costs?
$5,000 in the year of organization, net difference is amortized over 180 months. Can deduct amortization for that year + add back the $5k
Define Section 1245 Gain?
1) Equipment used in a trade or business for >1 year
2) Gain is ordinary income to the extent of total depreciation (any remaining gain is Section 1231)
How do you calculate the gain under the Installment Method?
1) Calculate GP Margin
2) GP Margin x Cash payment made in the year
Partnership Basis Calculation?
Initial Stock Basis
+ Cash
+ Basis of property
+ FMV Services
- Liabilities/Debt assumed by partners
+ Share of partnership liability
What is a “built-in gain?”
1) C Corp elects S Corp status
2) C Corp’s basis is < FMV on election day
3) Tax Liability = (Basis - FMV) X corp tax rate
S Corp Basis Calculation?
Initial Stock Basis
+ Add contributions
+ Ordinary Income, Gains, Tax-Exempt Income
- Distributions
- Nondeductible expenses
- Ordinary loss
*No debt included
What is Subpart F income?
Taxable income included by a US corp by a foreign corp, but has no economic connection to the country of origin. (ex. Service provided by an Irish company in England for a US parent)
What does a partner Realize on the sale of his Partnership?
1) Cash
2) FMV of property received
3) Proportionate share of liabilities
What property is included in MACRS by YEAR and what depreciation is used?
5 Year - Automobiles, computers, typewriters, copiers (Usually Half year but Mid-quarter if >40% are bought in Q4)
7 Year - furniture/fixtures, equipment (Usually Half year but Mid-quarter if >40% are bought in Q4)
27.5 Year - Residential real estate (Mid-month)
39 Year - Non-residential real estate (Mid-month)
Five elements of Fraud?
1) Misrepresent facts
2) Intent to deceive
3) Reliance on misrepresentation
4) Intent (scienter) to induce reliance
5) Damages
Four elements of Negligence?
1) Duty of care
2) Breach (lack of care)
3) Causality
4) Injury
What is the criteria for a PHC?
1) >50% of the stock are owned by 5 or fewer people
2) 60% or more of AGI must consist of investment income
