REG11 Flashcards
Review example of AMT…
TI = $40,250 \+ Adjustments: Taxes $4,000 Passive activity loss adjustment $20,000 Depreciation adjust $1,550 \+ Tax preference: Depletion $27,000 AMT Income $92,800 - Exemption ($70,300) SINGLE AMT Base $22,500 x .26 Total tentative tax = $5,850 - Regular tax ($5,834) AMT = $16
Are reimbursements by one’s employers for medical and hospital expenses that are not included in GI subject to FICA Tax?
No, they are not subject to FICA
What is the amount of accumulated earnings and profits if there is $35,000 in accumulated earnings and profits on January 1 of this year. Had $10,000 in earnings and profits for the entire year and there was a distribution of $25,000 cash to its SH on April 1 this year.
Current E&P is to be computed at the end of the tax year without regard to distributions during the year. Current E&P = $10,000 and accumulated E&P = $35,000.
The cash distribution comes first from current E&P ($10,000 – $10,000 = $0), with the balance from accumulated E&P, AE balance = $20,000 ($35,000 – $15,000).
Review example of E&P fro AET calc…
E&P at 12/31/Y1 $95,000 TI for Year 2 $185,000 \+ Tax-exempt interest $3,000 Excess depreciation $1,500 - Excess contributions ($1,500) Interest paid on tax-exempt bonds ($1,000) Federal income taxes ($55,400) E&P at 12/31Y2 $226,600
In the first year, a corporations federal TI was $400,000, and federal income tax was $84,000. What is the maximum amount of accumulated taxable income that may be subject to the accumulated earnings tax for 2018?
The minimum Accumulated Earnings Credit is $250,000 for nonservice corporations. The credit is a negative adjustment to taxable income in computing ATI. ATI is $66,000 ($400,000 taxable income – $84,000 federal income tax – $250,000 minimum AEC).
What is included in Rule 10b-5?
It is illegal for any person, directly or indirectly, to use the U.S. mail or any instrumentality of interstate commerce or a national securities exchange to defraud anyone in connection with the purchase or sale of any security.
Must prove a misstatement or omission of a material fact or other fraud; its connection with any purchase or sale of securities; the defendant’s intent to deceive, manipulate, or defraud; reliance on the misstatement; and loss caused by the reliance.
A claim for a refund must be filed within how many years?
Within 3 years from the filing date of the return or 2 years from the payment of the tax, whichever is later.
Charitable deductions at FMV of capital assets to a church are limited to what %?
Limited to 30% of AGI.
If an omission of income in excess of 25% of gross income stated in the return occurs, the statute of limitations for assessment is how many years?
6 years from the date the return was filed (or the due date, if later). This applies even if the omission is made in good faith.
What is the corporation’s basis in property if shareholders who control more than 80% of a corporation contribute property without recognition of gain or loss?
Under Sec 351…the corporation takes a carryover basis in the property, and the taxpayer takes a substituted (equal to the basis given up) basis in the shares of the corporation received. However, a contribution by a SH who does not qualify under Sec. 351 would trigger a gain to the SH, and the corporation would take a FMV basis in the property.
What is the shareholder’s basis in property received in a nonliquidating distribution?
It is the FMV at the date of distribution. If the SH also assumes a liability with the property distribution, it must be compared to the property’s FMV. In the event the liability > the FMV, the liability is the shareholder’s basis in the property. If the liability is less, the basis will remain equal to the FMV.
Will a SH ever treat a distribution as a capital loss?
No, the amount of a distribution may be treated as ordinary dividend income, capital recovery, or gain on sale. Never as a capital loss.
Does a corporation recognize any gain it realizes on distribution of property in redemption of its stock in a complete liquidation?
Yes, gain or loss is recognized when a corporation distributes property as part of a complete liquidation.
A redemption made in partial liquidation of an interest held by a noncorporate shareholder is treated how?
It is treated as a distribution in exchange for the stock, i.e., a sale. The SH will treat any gain on the redemption as a capital gain. The amount of the distribution is the FMV of the property.
What are two ways a SH treats amounts realized on a redemption?
Not in liquidation, is treated as either as a dividend (e.g., OI if paid from E&P) or as a sale of the stock redeemed (capital gain or loss). Under Sec. 302, redemptions of stock by a corporation are treated as dividends unless the redemptions; terminate a SH’s interest, are substantially disproportionate between SH, are not essentially equivalent to a dividend, are received by an estate, are from a SH, other than a corporation, in partial liquidation.
