REG mod 35d

Question 1

Describe the tax treatment of a $250,000 loss on the sale of a personal residence.

Answer 1

No deduction is allowed for this loss.

Question 2

Describe the tax treatment of business start-up costs.

Answer 2

Business start-up costs are amortized over 15 years (180 months). Note: a taxpayer may elect to deduct up to $5,000 of start-up expenses in the first year. This $5,000 is reduced dollar for dollar by the amount of start-up costs expenses that exceed $50,0

Question 3

Describe the use of Form 1041.

Answer 3

Form 1041 is the annual income tax return for estates and trusts.

Question 4

Describe when an AMT Credit may be used.

Answer 4

The AMT Credit may be used in future years to reduce regular tax liability. It is carried forward indefinitely, but cannot be carried back.

Question 5

Does the accumulated earnings tax apply to Personal Holding Companies?

Answer 5

No

Question 6

For how many years may a person be a qualifying widower with a dependent child?

Answer 6

Two years following the year in which the spouse died

Question 7

Gambling losses are always deductible in full. True / False

Answer 7

False. Gambling losses are only deductible to the extent that the taxpayer had gambling winnings. (Note: a taxpayer must itemize their deductions in order to deduct gambling losses)

Question 8

Gambling winnings are included in a tax payer’s gross income. True / False

Answer 8

TRUE

Question 9

Home equity interest is deductible on loans up to $100,000. True / False

Answer 9

TRUE

Question 10

How is a distribution from an S Corporation’s AAA to a shareholder taxed, if the entity was previously a Corporation?

Answer 10

As Dividends to the shareholder if there were earnings and profits from when the entity was a C Corporation.

Question 11

How is a gift measured?

Answer 11

At fair market value on the date of the gift.

Question 12

How is AMT calculated?

Answer 12

AMT Income
(Exemptions)
= AMT Base
X 26% (26% of the first $175,000; the amount over $175K is taxed at 28%)
=Tentative AMT
(AMT Foreign Tax Credit)'=Tentative Minimum TAX
=Tentative Minimum TAX
(Regular Tax Liability)
=Alternative Minimum TAX

Question 13

How is an individual’s AMT Income calculated?

Answer 13

Taxable Income
+/- Adjustments
+ TAX Preferences
= AMT INCOME

Question 14

How is an LLC taxed on income?

Answer 14

An LLC is a flow-through entity. The income flows to the members, who are then taxed.

Question 15

How is the amount of a casualty loss calculated?

Answer 15

The loss is the lesser of: 1. The property’s adjusted basis
2. The decrease in the property’s Fair Market Value
After selecting the lesser of the two options above, subtract any insurance reimbursements, and finally subtract the $100 floor.