REG2 Flashcards

Question

Gifted property for gain/loss purposes (general rule) & holding period

Answer 1

retains rollover cost basis basis is increased by any gift tax paid recipient assumes giftor's holding period

Answer 2

Lower FMV at date of gift Sell higher: use 'donor basis' to determine gain DONOR BASIS Sell between: No gain or loss LOWER FMV AT DATE OF GIFT Sell lower: Use lower FMV at date of gift to determine loss

Answer 3

date of death FMV becomes basis alternate date : earlier of 6 months later or date of distribution/sale automatically long term holding period

Answer 4

recognized gain is the lesser of realized gain or boot. basis is decreased by money received and increased by gain (boot) recognized.

Answer 5

Recognize over period cash is received gross profit = sale - cogs gross profit % = gross profit/sales price earned revenue = cash collections * gross profit %

Answer 6

W Wash Sale Loss R Related party transactions A -and- P Personal loss

Answer 7

When a security is sold for a loss and is then repurchased within 30 days before or after sale date.

Answer 8

Brothers/sisters, husband/wife, father/son/grandfather, entities that are more than 50% owned by individuals, corporations, trusts, partnerships. Capital gains taxes imposed on all transactions except husband to wife basis transfer Capital losses disallowed. Holding period starts fresh Same basis rules as gift tax

Answer 9

no deduction allowed for loss on a non business disposal or loss. maybe itemized deduction of casualty or theft

Answer 10

long term - holding period greater than 1 year 15% max tax rate short term- holding period 1 year or less treated as ordinary income.

Answer 11

single and mfj 3000 if husband and wife file separately, loss deduction limited to 1500.

Answer 12

carry forward indefinitely, no carry back

Answer 13

net capital gains > ordinary income net capital losses > can only be deducted from net capital gains. 3 back/ 5 forward

Answer 14

``` Homebuyer (1st time) Insurance costs (Medical) Medical Expense Disability events Education and Death ```

Answer 15

``` Homeowner Exclusion ($500k MFJ) Involuntary Exchange (No gain recognitions) Divorce Property Settlement Exchange of Like Kind Installment Sale Treasury and Capital Stock ```

Answer 16

``` Home Mortgage ($1m Home Mortgage limit; $100k Home Equity limit) Investment Interest Personal Consumer Interest Prepaid Educational Loan ($2500) ```

Answer 17

Real Estate Income Personal Property Sales (or income tax)

Answer 18

``` Interest on student loans Employment tax Moving expenses Business expenses Rent/Royalty & Flow through entities Alimony Contributions to retirement fund Early withdrawal penalty Jury Duty Pay Education Health Savings Account Farm Income ```

Answer 19

Charitable Contributions Other Misc. Deductions (Not subject to 2% rule) Misc. Deductions (Subject to 2% rule; unreim. emp. expenses, tax prep fees, certain otr exp.) Medical Expenses Interest Paid Taxes Paid but no FBI* Fed. Taxes, Business and Rental Property, Inheritance Taxes for States

Answer 20

``` +Passive Loss Accelerated Depreciation NOL’s Installment Sale from Dealer Contracts vs. % Completion method +Tax Deductions +Interest deductions on home equity loans +Med deductions (10% rule) +Misc. deductions (add back 2%) +Exemptions (Personal) and Standard Deduction ```

Answer 21

``` Foreign Tax Adoption Child Tax Contribution to Retirement Plan Earned Income ```

Answer 22

S corporations are corporations that elect to pass income, losses, deductions, and credits through to their shareholders. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. S corporations avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

Answer 23

Must be a domestic corporation Have only allowable shareholders: -May be individuals, certain trusts, and estates and -May not be partnerships, corporations or non-resident alien shareholders Have no more than 100 shareholders Have only one class of stock Avoids double taxation Liability Protection Once a year tax filing requirement vs. quarterly for C-corps

Answer 24

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. It "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return. Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions.

Answer 25

Partners have unlimited liability for business debts, injuries, etc.

Answer 26

A limited partnership is a special kind of partnership, in which there are two classes of partners. One class is that of general partners. The general partners run the business and share in any profits or losses the same as in a regular partnership. The other class is that of limited partners. Limited partners contribute money, but are not allowed a say in how the business is operated. They might also be called silent partners. Usually, limited partners are only liable for losses up to the amount of money they contributed to the partnership.

Answer 27

It operates like a limited partnership, but gives each member of the LLP protection from personal liability, except to the extent of their investment in the LLP. Generally, partners in a limited liability partnership aren't responsible for another partner's debts, obligations, or liabilities resulting from negligence, malpractice or misconduct. Professional organizations (such as accounting and law firms) often form as limited liability partnerships because an LLP is specifically designed to limit malpractice claims against uninvolved partners. Each partner is liable for debts and obligations created as a result of his or her own negligence, malpractice or misconduct, as well as negligence, malpractice or misconduct by any person under that partner's direct supervision.

Answer 28

For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders. The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation. Main Points: Unlimited # of owners (of which any can be foreign), may issue stock to attract investors, may be owned by another business. Quarterly tax filing requirement.

Answer 29

Creating an LLC is a good way to "wall off" your personal assets from your company's liabilities, offering protection for your personal assets in the event of a judgment against your business. For this reason, forming an LLC is a better fit for many owners than a sole proprietorship or a general partnership. A limited liability company (LLC) also has certain tax advantages. The business itself is not responsible for taxes on its profits. Instead, the LLC's owners, known as "members," report their share of business profit and loss on their personal tax returns, similar to tax reporting for a general partnership. This is known as "pass-through" taxation. Main points: Pass through taxation, owners need not be US Citizens, legal protection for business debts, unlimited # of owners