SE1 Flashcards
which of the following activities regularly carried out by an exempt organization will not result in unrelated business income?
a. the sale of heavy-duty appliances to senior citizens by an exempt senior citizens center
b. the sale of laundry services by an exempt hospital to other hospitals
c. accounting and tax services performed by a local chapter of a labor union for its members
d. the sale of a trade association of publications used as course materials for the association’s seminars, which are oriented towards its members
d. the sale of a trade association of publications used as course materials for the association’s seminars, which are oriented towards its members, will not result in UBI.
UBI is:
1. derived from an activity that constitutes a trade or business,
2. is regularly carried on, and
3. is not substantially related to the organization’s tax-exempt purpose.
an unrelated business does not include any activity where all the work is performed for the organization y unpaid volunteers. Thus, using unpaid volunteers makes that business or activity “related”
which of the following is not a category of income for foreign tax credit limitation purposes?
a. foreign branch income
b. general category income
c. passive category income
d. foreign-derived intangible income
d. foreign-derived intangible income is not a category of income for foreign tax credit limitation purposes.
The categories of income for foreign tax credit limitation purposes are general category income, passive category income, foreign branch income, and global intangible low-taxed income.
life insurance
protects against the economic loss created by death
life insurance
provides income to surviving dependents, satisfies outstanding debts, and pays for funeral expenses and sometimes children’s college costs
umbrella insurance contracts
provide benefits for a liability claim, as opposed to a benefit for a property claim. A liability claim arises from an injury or damage to another persons property (not the insured)
A piece of depreciable machinery is sold. It has been held for 3 yrs and qualifies as Section 1231 property. The selling price is greater than the adjusted basis but less than the original purchase price. Which statement below is correct?
a. Section 1245 recapture will not apply bc there is a loss on the sale
b. All of the gain will be subject to Section 1245 recapture
c. Only a portion of the gain will be subject to Section 1245 recapture
d. None of the gain will be subject to Section 1245 recapture
b. There is a gain on the sale bc the selling price is greater than the adjusted basis. The gain up to all accumulated depreciation is subject to Section 1245 recapture. Bc the selling price is below the original purchase price, all of the gain is due to accumulated depreciation. Therefore, all of the gain is subject to Section 1245 recapture.
Gain is recaptured as ordinary income under Section 1250
to extent of depreciation in excess of straight line
partner owns 60% of partnership and sells stock to the partnership at a loss. How is the loss treated by the partner?
Partner owns more than 50% of partnership so they are related parties and the loss is disallowed. The partner is not allowed to deduct the loss on this sale made to the pship sorry bruh
partner’s basis in partnership interest immediately after formation
partner’s basis in partnership interest is the partner’s basis in the property contributed at the date of contribution. Regardless of built in gains
partnership’s basis in property contributed upon formation
partnership takes on the contributor’s basis of the contributed property; regardless of if any built in gains exist
corp’s basis in property contributed upon formation
greater of contributor’s basis in the property or debt assumed by corp
property distribution made to shareholders when property distributed’s fmv > basis
corp treats property distributions as if sold at fmv, so the gain on the distribution fmv-basis=gain which MUST BE ADDED TO CURRENT E&P before determining how much will be a taxable dividend to the recipient shareholder.
simple trust
cannot make distributions to charitable organizations/have charitable beneficiaries
simple trust
must distribute all income currently; cannot distribute out of corpus/principal
trust accounting income
includes all taxable and nontaxable income and expenses other than capital gains and trust administrative expenses allocated to corpus