Tax

Question 1

Home bought for $100K, sold for $475K by a single person. What recognized and what’s realized

Answer 1

Realized - $375K

Recognized - $125K

You may have realized the gain, but your only going to recognized the smaller gain

(Any additions/renovations done to the home are added to home basis)

Question 2

Donations to charity can be __% of AGI

__% of AGI to public charities
__% of AGI to private charities

__% of income for business

Answer 2

60%

50%
30%

10%

Question 3

Boot received =

Boot paid =

Basis ____ from previous property

Answer 3

= recognized gain

= add to basis

carries over

Question 4

1250 depreciation recapture

Ex.) Land bought for $100K three years ago, depreciation $25K, sold for $140K

Answer 4

25% on depreciation is taxable

and gain from sale is tax at Capital Gains rate

$25K @ 25% = $6,250

$40K gain @ LTCG

Question 5

How to calculate charity bargain sales?

Bought land for $100K, FMV of $500K, sold to charity for $300K

Answer 5

Basis is adjust down by % of property sold compared to the FMV

(Sale / FMV) x Basis = New Basis of $60K (basis is reduced by 60% because = 300/500)

*so you now have a lower basis, but get a charitable deduction on top of that

Question 6

Charitable donations are deductible up to __% of AGI?

What __% of AGI for public and private?

Answer 6

60% of AGI for total donations

50% of AGI for public charities

30% of AGI for private charities

Question 7

Unique items like artwork collectibles and short term capital gains property, that is for income by the charity is limited to ____ for a tax deduction?

Answer 7

Basis

Question 8

Donations of assets can be __% of AGI for Basis or ___% of AGI for FMV

Answer 8

50% of basis or 30% of FMV (Basis is 5 letters, FMV is 3 letters)

(almost always use FMV calculation (30% of AGI) for Long Term appreciated property)

Question 9

A donation that is use-related and that is at short-term capital gains is deductible up to FMV or basis?

Answer 9

Basis

(tricky question because normally anything that is for use, is considered to get the 30% FMV deduction, but because it was short term holding period, only gets the basis deduction)

Question 10

Stocks and real estate that’s donated is always considered ____ and is deductible up for ___ which is ___ %

Answer 10

Use-related

FMV which is deductible up to 30% of AGI

Question 11

Unused charitable deductions can be carried forward for __ years

Answer 11

5 years (total of 6 year window)

Question 12

For an AGI of $130K which stock sale has the highest overall tax deduction?

Stock A: Basis - $50K & FMV - $80K
Stock B: Basis - $65K & FMV - $90K

Answer 12

Stock A because will be able to deduct the FMV, but only $39K this year, and then $41K deduction carries forward. Stock B gets a deduction of the full $65K this year, but none of it carries forward.

***be careful for questions asking about tax deductibility for “this year” or “overall” tax deductions

Question 13

Beneficiaries must report income from Trust/Estate even in not ___ that year

Answer 13

Must report even if not distributed that year

Question 14

Grantor Trust have beneficial enjoyment for ____ & ____ for grantor or spouse

Answer 14

principal and income

Question 15

1245 property has a recaptured gain which uses?

1231?

Answer 15

Lesser of adjusted basis or the gain realized

The 1231 transaction subtracts the realized gain from the CRD

Question 16

An Installment 1245 recapture is calculated the same as a normal 1245 recapture, but the lesser of ____ & ____ is considered?

Answer 16

Lesser of cost recovery deduction (CRD) OR gain. The lesser of these two is then taxed at ordinary income, with remaining amount for the instalment sale.

Question 17

LLC partners can or can not actively participate in the business?

Answer 17

Can not actively participate in order to maintain their Limited Liability status

Question 18

Section 1244 stock allows single and MFJ to write off how much? and against what? and how much can be carried forward each year?

Answer 18

Can write off $50K and $100K against ordinary income each year (instead of a $3,000 cost carrying forward with normal stock)

Question 19

Income from a S-corp increases ____ and avoid what type of tax?

Answer 19

Increases basis and avoid FICA and FUTA tax

Question 20

Donations of over $250 require?

Donations of under $250 require?

Answer 20

Written acknowledgement of the value of the FMV and Cost Basis of the items gifted to the charity

A date reciept