Sample Exam 1 Flashcards
The distributive share of a partnership’s operating loss that is deductible by an individual partner is limited to .
the adjusted basis of his or her partnership interest
The maximum tax rate on long-term capital gains is generally ___ percent under current law.
20
“Collectibles” gain is taxed at
28 percent maximum rate
The portion of long-term gain attributable to unrecaptured depreciation is subject to a ____ percent maximum rate when real estate is sold
25
Up to $_____of net capital losses ($____ if married filing separately) may be used to offset ordinary income in any given year.
3000/1500
Assets in the 5-year property class are subject to a ______ convention.
half year
The convention for the year the property is placed in service ____ apply in the year in which the property is disposed of.
does
A “_____” convention applies if more than 40 percent of all property placed in service by a taxpayer during the year and otherwise qualifying for the “_____” convention is placed in service during the last 3 months of the taxable year.
Midquarter/half-year
Real estate is subject to a “_____” convention
mid-month
personal exemption amount is
indexed for inflation
kiddie tax is applicable to the ____ of children under a specified age
net unearned income
The _______ is the only court that will hear a tax case without prior payment of the assessed deficiency.
Tax Court
there are no _____ in the Court of Federal Claims
jury trials
prepayment of the assessed deficiency is _____in the District Court.
required
Tax Court ____ have jury trials
does not
Premiums for the first _____ of group term life insurance coverage are tax free to the employee.
$50,000
A nonbusiness bad debt can be deductible only as a
short-term capital loss.
In order to be treated as a “qualifying child” of the taxpayer for dependency exemption purposes, an individual must
be below the age of 19
The total medical expenses applicable floor of adjusted gross income for taxpayers over 65
7,500
The total medical expenses applicable floor of adjusted gross income for taxpayers under 65
10,000
The ____ tax bracket applies to the first $50,000 of corporate taxable income.
15 percent
________ is the only court in which a taxpayer can have a jury trial in a civil tax case.
The U.S. District Court
The maximum charitable deduction that the taxpayer will be allowed for the current year is
one-half of adjusted gross income
This year an individual taxpayer (other than a married individual filing a separate return) has $30,000 of investment interest expense and $1,000 of net investment income. The maximum amount of investment interest expense this taxpayer may deduct this year is
$1,000
In the case of a variable annuity, the annuitant may recalculate the exclusion ratio with respect to future payments if he or she receives a payment that is
less than the currently excludible amount.
A woman purchased a $100,000 whole life insurance policy on her life and designated her husband as beneficiary. Several years later the woman surrendered the policy for its cash value of $50,000. At the time of surrender, the woman had paid gross premiums of $45,000 and had received policy dividends of $10,000. What were the income tax consequences to the woman upon receipt of the cash surrender value?”
She received $35,000 tax free and $15,000 as ordinary income.
The taxpayer must have occupied the residence for an aggregate of ____ out of the previous 5 years to be eligible for the exclusion of gain on the sale of a principal residence
2
The maximum exclusion of gain on the sale of a principal residence for married couples filing jointly is $___
500k
The maximum exclusion of gain on the sale of a principal residence for single taxpayer is $___
250k
The individual AMT rate is ___percent on the first $185,400 of ATMI
26
The individual AMT rate over $185,400 of ATMI is
28%
The individual AMT breakpoint is
185,400
only ___percent of entertainment business expenses are deductible
50
Are fines for violation of law deductible, even if they are incurred in the ordinary course of business
No
Cash dividends from a corporation to its shareholders are generally taxed at a maximum capital gains rate of ____ percent under current law
20
distribution of any type of property in the form of a dividend can be taxed as a dividend and not as a .
capital transaction
The corporation’s payment of premiums on a life insurance policy be taxable to an insured employee if
the employee is the owner of the policy
functions of the federal income tax system
- reduce inflation
2. encourage economic activity
Faith Forrester has the following selected information concerning her interest expenses and investment income for this year: Interest income from corporate bonds = $5,000 Dividend income not eligible for the lower maximum tax rates on qualifying dividends = $10,000 Interest paid to acquire common stock portfolio = $18,000 Interest income from public-purpose municipal bonds = $4,000 Interest paid to acquire the municipal bonds = $2,000 Qualified residence interest paid on principal residence = $10,000 Based on the above information, the total amount of all of Faith’s interest deductions for this year is
Faith can deduct investment interest up to the limit of her net investment income. However, municipal bond interest income or the interest paid to acquire municipal bonds does not qualify as investment income or interest. Thus, the only investment interest that qualifies is the $18,000 paid to acquire the common stocks. Since Faith has only $15,000 of net investment income, she is limited to a $15,000 investment interest deduction. The $10,000 mortgage interest on the home is fully deductible. Faith has total interest deductions this year of $25,000.
What type of corporation cannot have preferred stock
S-Corp
How many shareholders can an s-Corp have
100
How much of a majority of both houses of Congress is needed to override the presidents veto of a tax bill
2/3
