Sim

Question 1

Partnership a cash contribution to a foreign charity

Answer 1

Non deductible, but making contribution decrease partner’s asset. this decreases partnership’s basis.

Question 2

office in home

business exp related to home such as property insurance, utilities can be deducted in sch. C. but it doesn’t mean

Answer 2

the rest of exp can be deducted in sch.A.(itemized deduction) mortgage interest, property tax can be deducted in sch. A.

*Dep exp can be deducted only up to taxable income. TI won’t go minus by deducting dep exp.

Question 3

Preliminary TI: (20,000)

200,000 USD of dividends received from a 25% owned domestic corporation

Answer 3

when TI is in deficit, you can take DRD either lower of
*TI before DRD or *Dividends received

in this case, it’s * (20,000)+200,000=180,000
or 200,000
therefore,
(20,000)+200,000-144,000(180,00080%) =36,000

Question 4

Partnership pays life insurance premium paid on lives of partners

Answer 4

will decrease the basis of partners

Question 5

Partnership purchased land for investment in cash

Answer 5

no affect on basis (dr:land cr:cash)

if the partnership loaned money for this purchases, this will increase partner’s basis based on their interest percentage

Question 6

CANNOT claimed as medical expenses

Answer 6

cosmetic surgery
drugs with no prescription
health club membership fee

appendix　盲腸
liposuction 脂肪吸引

Question 7

1/1 J purchased 30 shares @$5
6/30 J sold 30 shares @$3
7/15 J purchased 20 of same shares @$2

basis at 6/30 $150

Answer 7

6/30 realized gain 30*(3-5)=(60)
but because of wash sales, only 1/3 of loss is allowed to recognize. (20)

This disallowed wash sale loss is included in basis of future

wash sale: sold and purchase same share within 30 days!

Question 8

J gave E 1,000 shares @when the share was valued as $15, but the basis was @$22.
E sold the 400 shares for @$13.

Answer 8

since it’s depreciated,use magic hands. this case, $15 is used to determine the loss.
400*(13-15)=($800)

Question 9

Partnership

Form 1065 partnership’s PL

Answer 9

Schedule K : Partner’s distributive share item partnerの取り分合計

K-1 :　特定のPartnerの取り分

Question 10

loan interest exp for tax free investment(purchasing municipal bond)

Answer 10

Non deductible!

Question 11

organization exp, $5,000 for the first year.

Answer 11

also, 15 years amortization starts from Y1. therefore, Y1 total org cost is more than $5,000.

Question 12

Corporation. capital gain and loss can be netted. but need to be carry forward more than capital gain’s amount.

Answer 12

eg) capital gain $20,000
capital loss $30,000
for this year deductible capital loss amount is 20,000.but that’s netted and have no impact on income. remaining $10,000 is carry forward for 5 years.

For Fin, all capital loss is deducted before arriving NI.

Question 13

Entertainment expense is no longer deductible

Answer 13

sporting arena, golf club fee..

even if a substanctial or bona fide business discussion is associated with the activity

Question 14

Interest income arose from Municipal arbitrage bond is

Answer 14

taxable.

Question 15

DRD rule:

it required holding period is 45 days.

Answer 15

• No DRD from REIT
• Mutual fund which have only capital gain > distribution from that is capital gain and not DRD applicable
• distribution from Money market fund (toushishintaku) is interest income, not Dividends.

Question 16

line of credit loan is

Answer 16

deductible!

Question 17

life insurance spouse is beneficiary

Answer 17

needs to go gross estate first, but because of marital deduction net effect is zero

Question 18

Excecutor’s fee

Answer 18

Either fiduciary tax return 1041 or Estate tax return 706

Question 19

Is cash transferred from estate to decedent’s son taxable?

Answer 19

Yes. if it’s for his wife, no taxable(marital deduction)

Question 20

Funeral expense must be paid from

Answer 20

the estate 706, not from 1040 or 1041