REG R1

Question 1

What is the Mom & Pop Exception for passive losses?

Answer 1

$25,000 may be deducted against nonpassive income if the taxpayer owns more than 10%, is an active participant, and has an AGI below 100,000. Phase out is for 50% of income over 100,000 - 150,000.

Question 2

The rule limiting the allowability of passive activity losses and credits applies to:

Answer 2

Personal Service Corporations

Question 3

Where is income reported for a trust when it is available to the recipient and not to the one who set it up?

Answer 3

Reported on form 1041 with a K-1 issued to the recipient

Question 4

If the value of services given for interest in a partnership is lower than the fair market value, which value is used as basis in the partnership?

Answer 4

The fair market value is used regardless of the value of the services provided

Question 5

When is the tax taken on a QUALIFIED employee stock plan?

Answer 5

• No tax at grant date
• No tax when exercised
• All tax (capital) when sold

Question 6

When is the tax taken on a NON-QUALIFIED employee stock plan?

Answer 6

• Some tax immediately at grant date

- Rest of tax at date of sale

Question 7

When is a non qualified stock plan taxed when value is readily available?

Answer 7

FMV at grant date (ordinary)

remainder at sale date (capital)

Question 8

When is a non qualified stock plan taxed when value is not readily available

Answer 8

FMV less cash paid at exercise date (ordinary)

Remainder at sale date (capital)

Question 9

Qualifications for An incentive stock option

Answer 9

Not more than 10% owner
Option price is greater than of equal to fmv at date of grant
Held two years from date of grant and 1 year from exercise date

Question 10

Qualifications of employee stock purchase plan

Answer 10

Option price must not be less than 85% of the stock price when granted or exercised.
Not more than 5% owner

Question 11

Are guaranteed payments subject to SE tax?

Answer 11

Yes

Question 12

CARES for qualifying children exemption

Answer 12

Close relative
Age limit (19 or 24 - college)
Residency & filing limit ( > 1/2 yr)
Eliminate gross income test
Support test changes (chld <1/2 sprt)

Question 13

SUPORT test for qualifying relative

Answer 13

Support test >1/2 
Under exemption amt of taxable income
Precludes dependent filing joint return
Only citizens of US or residnt of NAFTA
Relative (kissing cousins or foster beer)
OR
Taxpayer lives with individual whole yr