Review Mods 23-39

Question 1

Interest income derived from a temporary investment must be classified as…

Therefore it will not be…

Answer 1

Portfolio income

Not be included in passive activity loss

Question 2

MACRS for furniture and fixtures

Answer 2

200% declining balance over 7 years

Question 3

Property taxes that buyer of house pays on May 31st are…

Answer 3

Deductible on a pro rata basis

Question 4

A cash basis tax payer who writes off uncollectible accounts receivable for their accounting practice. How is this treated on the tax return?

Answer 4

Not deductible, because cash basis tax payer

Question 5

If a payor makes alimony payments of $40,000 in 2011 and pays nothing in 2012 and 2013, what is the recapture for 2013?

Answer 5

$25,000 ($40,000 - $15,000)

Question 6

If a payor makes alimony payments of $60,000 in 2011, $25,000 in 2012 and nothin in 2013. What is the recapture for 2012? 2011? 2013?

Answer 6

2012 = $10,000 = $25,000 - $15,000

2011 = $37,500 = $60,000 - (($15,000 + ((25k-10k + 0)/2))

2013 = $47,500 = 2011 recapture + 2012 recapture

Question 7

How do you calculate basis of new property acquired in a like kind exchange?

Answer 7

Basis of old real estate transferred
\+ liability assumed 
\+ gain recognized
- liability given
= basis

Question 8

A partner contributes property with an adjusted basis of $5,000 to and a loan of $7,000 that is assumed by the partnership, what is the partner’s basis?

Answer 8

$0 = $5,000 - $7,000

Question 9

If a partner with a 50% interest in the partnership received $20,000 in guaranteed payments through December 31, 2013 and the partnership had ordinary income of $40,000 for fiscal year June 30, 2013 and $55,000 for fiscal year June 30, 2014. How much income is included in the partner’s return?

Answer 9

$40,000 =
guaranteed payments for entire year
+ 50% 2013 partnership fiscal year payments

Question 10

If partnership book income is $90,000 and guaranteed payments are $50,000, what amount should be reported as ordinary income on the partnership’s 2013 return?

Answer 10

$90,000

Question 11

On the U.S. Return of Partnership Income, where does advertising expense go?

Answer 11

Line 20 other deductions

Question 12

What type of entity is the partner (on partnership return)?

Answer 12

Individual

Question 13

Current year increase in capital account, how do you calculate it on partnership schedule K-1?

Answer 13

Add and subtract lines 1 through 13

Question 14

How do you calculate net earnings from self-employment on line 14A of schedule K?

Answer 14

Net earnings from self employment =

Ordinary business income + guaranteed payments

Question 15

Gross nonfarm income on schedule K equals…

Answer 15

Gross profit on form 1065

Question 16

Self employment earnings line 14A on schedule K-1 is calculated by…

Answer 16

Self-employment earnings =

Ordinary business income (schedule K-1) + guaranteed payments

Question 17

Self employment earnings line 14C on schedule K-1 is calculated by…

Answer 17

Guaranteed payments

+ (gross profit - guaranteed payments) x partnership %

Question 18

Portfolio income includes all interest income other than interest income…

Answer 18

Derived in ordinary course of trade or business

Question 19

In determining the NOL for 2013, given that deductions in the tax return exceed gross income, DRD would…2

Answer 19

1 Be allowed

2 does not need to be added or subtracted

Question 20

In determining the NOL for 2013, given that deductions in the tax return exceed gross income, NOL deduction (carryover from 2012) would…2

Answer 20

1 not be allowed

2 must be subtracted from excess deductions on the tax return

Question 21

Distributions of property to shareholders reduce earnings and profits by…

Answer 21

The greater of property’s adjusted basis

or FMV at date of distribution

Question 22

If there is a distribution to shareholders to reduce E&P, a gain must be recognized and is calculated by…

Answer 22

Gain recognized =

FMV distributed property - basis of distributed property

Question 23

What is the net change in E&P if FMV of property distributed is $13,000, basis of property distributed is $6,000 and a liability on the property is $4,000?

Answer 23

Gain recognized (FMV - basis). $6,000
Distribution FMV property. (13,000)
Distribution of liability. 4,000
Net Decrease in E&P (before tax). $3,000

Question 24

A series of adjustments must be made in arriving at a corporation’s undistributed personal holding company income (UPHCI), these adjustments include…

Answer 24

Deduction of federal income taxes

Question 25

A manufacturing company is entitled to a minimum accumulated earnings credit of…

Answer 25

$250,000

Question 26

When an S-Corp earns $20,000 in net income what 2 items are affected?

Answer 26

1 shareholder’s basis increases by $20,000

2 AAA increases by $20,000

Question 27

A distribution of an S-corp will reduce both…

Answer 27

Shareholder’s basis and AAA simultaneously

Question 28

What is the order of how distribution of an S-corp is treated? 4

Answer 28

1 AAA (non taxable)
2 C-corp E&P (dividend)
3 return of basis (nontaxable)
4 capital gain

Question 29

When built in gain is treated as a LT capital gain, built in gains tax is treated as…

Answer 29

A LT capital loss

Question 30

On schedule M-1 how are dividends treated?

Answer 30

Dividends received deduction is not included on schedule M-1

Question 31

How do you calculate net business income per share when a company has net business income of $16,300 , 400 shares outstanding and there are 360 days in the calendar year?

What is net business income of a shareholder that owns 50 shares on schedule K-1 and acquired the shares on January 16th?

Answer 31

Net business income = ($16,300/200 shares)/360 days per share

Net business income x 350 days x 50 shares

Question 32

A purchase of an S-corporation stock for $3,000. The $3,000 is the shareholder’s…

Answer 32

Beginning basis

Question 33

What 4 items that don’t not result in an adjustment in computing AMTI or ACE?

Answer 33

1 DRD 70%
2 tax exempt interest
3 real property in service from 1999 on
4 charitable contributions