Review Flashcards
A nonprofit entity that is classified as a corporation must file _______ for tax purposes.
990
Is an individual considered an entity?
No
When must a 7203 be attached to a shareholder’s income tax return?
- The shareholder disposes of his/her stock during the tax year
- The shareholder receives a distribution from the S corporation
- The shareholder receives a loan repayment for the S corporation during the tax year
- The shareholder claims a deduction for a loss
Installment sale generally does not apply to:
- The sale of inventory, even if the business receives a payment after the sale
- A sale that results in a loss
- The sale of stock or securities traded on an established market
Safe harbor method to determine the amount of deductible expenses attributable to certain business use of a residence during the year:
$5 per square foot up to 300 square feet ($1,500)
When can a business only deduct the actual expenses of a car and not the standard mileage rate?
When they operate five or more cars or light trucks at the same time. This is considered a “fleet”
What would cause a partnership to automatically be required to file a return electronically?
Having more than 100 partners
Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets:
- Land
- Depreciable farm equipment
- Buildings and structures
- Livestock held for draft, breeding, sport, or dairy purposes (unless held as inventory or held primarily for sale)
A corporation must make estimated tax payments if it expects its tax due to be ____ or more during the taxable year
$500
What is a “hot asset”
Generally, assets that will generate ordinary income if the partnership had sold them (such as inventory)
Guaranteed Payments
Payments made to a partner without regard to the partnership’s income. For the partner, guaranteed payments are treated as income subject to estimated income taxes and self-employment taxes
Installment payments for estimated tax are due by:
The 4th, 6th, 9th, and 12th months of the corporation’s tax year
If a corporation cancels a shareholder’s debt without repayment by the shareholder, the amount canceled is treated as:
A distribution to the shareholder. The distribution is not deductible to the corporation
If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must:
Reduce its basis in the stock by the non-taxed part of the dividend
An “extraordinary dividend” is any dividend on stock that equals or exceeds a certain percentage of the corporation’s adjusted basis in the stock. The percentages are:
5% for stock preferred as to dividends, or
10% for other stock.
Guaranteed payments are deducted from:
partnership income before determining the distributive share of income or loss for each partner.
The following are types of expenses that go into figuring the cost of goods sold:
- The cost of products or raw materials, including freight
- Storage costs for unsold inventory
- Direct labor costs for workers who produce the products
- Factory overhead
Can an S corporation deduct amortized organizational expenses?
Yes, because these expenses are simply normal business expenses.
A calendar-year S corporation must file its tax return by:
March 15th
Section 351
if a taxpayer transfers property to a corporation in exchange for stock and immediately afterward, the taxpayer controls the corporation, the exchange may not be taxable.
Schedule L
An IRS schedule that shows a corporation’s balance sheets as of the beginning of the year
If a business’s ending inventory is understated:
net income will also be understated, resulting in (an incorrect) lower taxable income
8832
Used for an LLC that wants to elect federal tax treatment as a C-corporation
A qualifying S-election requires consent from who?
All shareholders
If a partnership is terminated before the end of the tax year, when is its final return due?
15th day of the 3rd month following the termination
When may a partnership elect out of a CPAR?
1.100 or fewer partners
2. Each partner is a permitted partner
CPAR: What are “eligible partners”?
- Individuals
- C corps
- Foreign entity that’s treated as a C corp
- S corp
- Estate of a deceased partner
Who can not elect Qualified Joint Venture status?
A married couple who file separate tax returns
Schedule K-2 & K-3 are used to report?
Items of international tax relevance
Are distributions from a C corp to a shareholder deductible?
No, but they do lower the shareholder’s adjusted basis
What business can use the cash accounting method?
Businesses with average gross receipts (3-year average) under $27 million
A business is required to keep records relating to employment for how long?
At least 4 years after filing the fourth quarter’s returns.
There is no penalty for underpayment of estimated tax if: (C Corp)
- The tax is less than $500
- Each quarterly payment was at least 25%
Cancellation of debt income affecting an S corporation is applied:
At the entity level
What does the term “inside basis” mean in reference to a partnership?
A partnership’s basis in its own assets
An S corporation’s basis in property contributed by a shareholder is the:
Lesser of it’s FMV or the shareholder’s adjusted basis
Can a nonprofit entity be organized as a partnership or sole proprietorship?
No, ut must be organized as a corporation, a trust, or an unincorporated association.
The following expenses related to inventory sold are included in COGS:
- Cost of products or raw materials, including freight
- Storage
- Factory overhead
- Labor costs for workers who produce the products
1128
Used by a corporation to adjust its filing year
M-1 must be prepared by corporations with gross receipts or total assets of:
$250,000 or more
M-3 must be prepared by corporations reporting gross assets of:
$10 million or more
A taxpayer may apply for an EIN online if their principal business is located
in the United States or in any U.S. Territory
943
used by agricultural employers to report wages to agricultural employees
Are sales tax included in a business’s gross receipts?
No, sales tax collected is never treated as business income, instead, they are treated as a liability until the amounts are reemitted to state and local tax agencies
Are excise taxes paid by a business deductible?
Excise taxes may be deductible currently or as the item is used, or may be subject to capitalization
8300
Used to report cash payments of $10,000 or more from a single payment
The amount of the Disabled Access Credit:
50% of qualified expenses, with a maximum credit per year of $5,000.
Disabled Access Credit: Requirements
A business must have had gross receipts of $1 million or less or had no more than 30 full-time employees during the proceeding tax year
