RV (2)

Question 1

limitation on charitable contribution

Answer 1

limited to 10% of taxable income before “special deductions”

ex: 410K income including 20k in dividend received deductions, 430K x 10% = 43K is max charitable contribution

Question 2

two rules in which an accrual based corporation can deduct an accrued contribution

Answer 2

1) authorized to a qualified charity by board resolution before the end of the taxable year
2) paid by 15th day of the fourth month after the end of the taxable year of accrual

Question 3

tax on imputed interest on an interest-free loan

Answer 3

imputed interest on interest free loan is subject to gift tax each year loan is outstanding
(ex: parents give interest free loan of 1M to daughter, need to pay tax per each year it is outstanding)

Question 4

how are married couples treated for accounting for the S corp 100 shareholder limit

Answer 4

for the purpose of the S corp shareholder limit, a married couple counts as 1 single shareholder

Question 5

how many classes of stock are allowed for an S corp?

Answer 5

only one class of stock! no common & preferred

Question 6

are decedents estates allowed to be shareholders of an S corp?

Answer 6

yeas

Question 7

form 1120 treatment for interest to purchase municipal bonds

Answer 7

NOT DEDUCTIBLE, as municipal bond interest income is not taxable

Question 8

form 1120, business entertainment expeneses

Answer 8

ok to deduct for book but NOT TAX

Question 9

form 1120, recovery of prior year bad debt

Answer 9

income subject to tax but not recorded on books

Question 10

form 1120, key person life insurance policies

Answer 10

TAX FREE, income for book but not for tax

Question 11

can a corporation deduct organizational costs

Answer 11

partially – up to $5K
any amount over $50K reduces the $5K
any excess is amortized over 180 months

Question 12

can a corporation deduct – life insurance premiums

Answer 12

life insurance premiums are fully deductible

Question 13

can a corporation deduct – vacation pay for employees

Answer 13

vacation pay for employees is fully deductible given two conditions:

1) vested under a plan
2) paid within 2.5 months after year-end

Question 14

can a corporation deduct – warranty expense accrued

Answer 14

only if an actual expense exists. if no actual warranty costs as of year end, then cannot deduct for IRS, but ok for gaap

Question 15

how is goodwill amortized for tax purposes

Answer 15

over 15 years & subtracted from schedule M-1 when getting tax income

Question 16

dividend received deduction

Answer 16

an allowed deduction of 50% of dividend income for qualified less than 20% owned domestic corporations

Question 17

what income is separately reported on schedule K

Answer 17

net rental income, interest income, dividend income, capital gains & losses, net section 1231 gain (loss), guaranteed payments

Question 18

section 179 deduction

Answer 18

allows for a deduction for new or used property (machinery/equipment) that is acquired from an unrelated party during the year

Question 19

rollover basis

Answer 19

if the basis after cash distribution is > NBV of property received, use the same basis the partnership uses.

ex: if begin basis is 50, receive 20 in cash, basis after cash distribution is 30
and if NBV of prop is only 25, since the after cash basis (30)> NBV (25), use the 25