Review Mods 23-37 Flashcards
A blank endorsement converts…
Order paper to bearer paper
Use of special endorsement converts…
Bearer paper into order paper
A qualified endorsement that does not specify any payee converts…
Order paper into bearer paper
To qualify as a holder in due course, an individual most be…3
1 holder of properly negotiated negotiable instrument
2 give value for instrument
3 take instrument in good faith without problems
How do you calculate the gain realized, in a like kind exchange? 5 steps
FMV prop received \+ boot received = amount realized - basis of property exchanged = gain realized
Recognized gain in a like-kind is the lesser of…2
Boot received or amount realized
A corporation’s net capital loss…
Cannot be offset against ordinary income
Net capital loss is generally carried back…
2) And carried forward…
3 years
2) 5 years
Tax basis on involuntary conversion where $10,000 is destroyed and $13,000 is received with $11,000 reinvested?
$10,000 ($11,000 cost - $1,000 deferred gain)
With an involuntary conversion, if $10,000 of property is destroyed and $14,000 is received by the county. And $16,000 is reinvested what is the realized gain? How much is recognized?
Realized gain = $4,000
Recognized gain = $0
Fees received for jury duty represent compensation for services and must…
Be included in gross income
Jury duty fees are taxable as…
Other income on page 1 of Form 1040
Accounts receivable resulting from services rendered by a cash basis tax payer have…
Zero tax basis
A loss sustained from a Nonbusiness bad debt is always…
Classified as a short term capital loss
Non business bad debt is deductible on…
Schedule D
Rental property including parking lots is reported on…
Schedule E
Schedule E- Supplemental Income and Loss is used to report on income and loss from…5
1 royalties 2 partnerships 3 S-corporations 4 estates 5 trusts
Loss resulting from sale of personal residence is…
Why?
Not deductible
Because property held for personal use
When alimony payments of $2,000 are reduced by $300/month due to divorce decree, when a child reaches age 21. What is the tax treatment of these payments?
$300 of the $2,000 per month will be treated as child support
What is the installment method formula for the amount reported each year?
Gain from sale =
(Gross profit/total contract price) x Amount received in year
How do you calculate contract price for the installment method formula?
Contract price = selling price - mortgage assumed
How do you calculate gross profit for the installment method formula?
Gross profit = selling price - basis
For farm income, soil and water conservation expenditures are $20,000 for the year and gross income from 2 farms is $40,000, the deduction is limited to…
$10,000 = ($40,000 x 25%)
Gross income x 25%
Feed and planting seed expenses can be deducted up to…
50% x other expenses
A retiree’s pension contribution is…
Excluded from income on a pro rata basis
For a two-family rental apartment, where one is lived in and one is rented out, depreciation would be…
Subtracted by 50% against rental income
Passive activity loss calculation
Passive activity loss = (Ownership %) x operating loss
When the midquarter convention is used in the last quarter, you should…
Multiply by 1/8
Emergency room fee cannot be deducted for a family member that…
Provides more than half their support
2 expenses that are not deductible relating to adoption of a child?
1 legal expenses
2 agency fee
Delinquency taxes not paid by the seller and paid by the buyer are…
Not deductible
2013 property taxes, for property bought on July 1st, 2013 and paid in full by the buyer are…
Deductible on a pro rata basis
For a deduction for a qualified residence, what are 2 examples of Nondeductible personal expenses?
1 utilities expense
2 insurance expense
All unreimbursed business expenses of an outside salesman are deducted as…
Miscellaneous itemized deductions subject to a 2% floor
In determining net self-employment income, estimated income taxes on self-employment income are…
Excluded from its computation
Guaranteed payments go on…
Line 4 of schedule K
Net earnings from self employment on schedule K is calculated by…
Net earnings = ordinary business income + guaranteed payments
Where is gross income reported on schedule K?
Line 14C gross nonfarm income
How is ordinary business income on schedule K-1 calculated?
(Ordinary business income from line 1 schedule K) x partnership %
How is self-employment earnings on line 14A of schedule K-1 calculated?
Self-employment earnings =
(ordinary business income on K-1) + guaranteed payment
How is self-employment earnings on line 14C of schedule K-1 calculated?
Self employment income C =
Guaranteed payment
+ (gross income - guaranteed payment) x partnership %
What is the IRS center where the partnership filed the return?
Ogden, Utah
For the partnership return SIM, was any capital contributed during the year?
No
How do you calculate the current year increase in partner’s capital account? 2 steps using items from schedule K-1
1 Add all income items (except guaranteed payments)
2 subtract all deductions and losses
Tax exempt interest is included when calculating…
Current year increase in partner’s capital account
Guaranteed payments are deducted in computing…2
1 partnership book income
2 partnership ordinary income
If an item is deductible in computing both partnership book income and partnership ordinary income, when computing partnership ordinary income from book income…
The item is not added back
Charitable contributions are deducted in…
Arriving at partnership book income
Charitable contributions must be separately passed through to partners on schedule K-1 and cannot…
Cannot be deducted in computing partnership ordinary income
A deduction that is included in book income, but not ordinary income for a partnership is…
Added to book income
When there is a guaranteed monthly payment and ordinary income for the fiscal year is given, in regards to ordinary income assume that…
Guaranteed payments have already been subtracted
Although, the sale of a partnership interest generally results in a capital gain or loss, ordinary income must be recognized to the extent of selling partner’s share of…2
1 unrealized receivables
2 appreciated inventory
If there are $800,000 in unrealized receivables and the partner sells their 1/4 interest in the partnership, what is recognized?
$200,000 ordinary gain (800k/4)
A current distribution is also known as…
A nonliquidating distribution
No loss can be recognized as a result of a…
Current (nonliquidating) distribution
In a nonliquidating distribution, a gain will be recognized only if…
Cash received exceeds the basis for the partner’s partnership
Interest
If both cash and noncash property are received in a single distribution, the basis for the partner’s interest is…
first reduced by the cash, before noncash property
Since $30,000 cash does not exceed the $31,000 basis of Andrew’s partnership interest…
No gain is recognized
When there is a cash and noncash (land) nonliquidating distribution, where cash reduces the partner’s interest basis to $20,000. Land distributed with a basis of $35,000 will…
Have its basis limited to $20,000 (partner’s basis after reduction
Of cash)
In a complete liquidation of a partner’s interest in a partnership, the property distributed will have a basis equal to…
Adjusted basis of partner’s partnership interest - money received
Generally, in a liquidating distribution, the basis for a partnership interest is first reduced by…
Amount of money received
In a liquidating distribution, the basis for partnership interest is first reduced by amount of money received, it is then reduced by unrealized receivables and inventory…
Received
A distributed partner can recognize loss only upon…
Complete liquidation of the partner’s interest
A distributed partner can recognize loss only upon complete liquidation of the partner’s interest through receipt of…3
1 money
2 unrealized receivables
3 inventory
If there is a basis of $20,000 and the partner received a liquidating distribution of $2,000 cash and inventory with a basis of $4,000 and FMV of $10,000, what is the gain or loss recognized? (Show calculation)
$14,000 loss ($20,000 - cash - basis of inventory)
