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CFP Missed Concepts > Tax > Flashcards

Tax Flashcards

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1
Q

Name the assets that are not considered Capital assets

A

Inventory, depreciable property, copyrights, account receivable

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2
Q

What are ordinary income assets

A

Inventory, account receivable, creations in the hands of the creator, copy rights in the hands of the creator

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3
Q

What are section 1231 assets

A

Depreciable property or real property that are used in a trade or business

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4
Q

When does the wash sale does not apply?

A

To gain and when dealing with index fund for a managed large cap fund

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5
Q

What is a section 1231 asset ?

A

Real property and assets that are depreciable

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6
Q

What are section 1245 assets
Wha is not a 1245 assets

A

Equipment, intangibles like copy rights, patents.
Not real property

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7
Q

How do you calculate straight line depreciation

A

Value - salvage value= estarme depreciation
Estimate depreciation/ useful life years =
Annual depreciation deduction

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8
Q

What are the Macrs depreciation categories

A

5 year term - Cars and computers
7 year term - office furniture
27.5 year term - residential property
39 year term- non residential property

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9
Q

What is the exclusion ratio for basis of annuities and retirement accounts

A

Investment (cost or after tax) / expected total return or FMV of asset

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10
Q

What are the 2 hurdles that taxpayer must not pass for their SS benefits not be taxed

A

Hurdle 1 MFJ not go over 32k and others 25k
Hurdle 2 MFJ not go over 44k and others 34k

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11
Q

Hurdle 1 calculations to tax benefits are which ones?

A

Lesser of
1. 50% (benefits) = ?
2. 50% (MAGI + 50%(benefits) - Hurdle 1)

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12
Q

Hurdle 2 calculations to tax benefits are which ones

A

The lesser of
1. 85% (benefits)
2. 85% (MAGI + 50%(benefits) - hurdle 2)

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13
Q

Are employee meals and lodging provided by employer excludable from income to the employee

A

Yes, as long as it’s for the convenience for the employer and on employer premises for meals and the lodging is a requirement in order to do the job

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14
Q

How much is excludable from income for Dependent care provided by employer?

A

$5,000

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15
Q

Are cafeteria plan taxable provided by employer?

A

If chosen cash it is. If not chosen cash it is not.

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16
Q

Are qualified moving expenses escludabke from employees income?

A

No, the reimbursement must be included in employees income. Only Exception is for the member of armed forces due to change of station.

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17
Q

What are the conditions for claim foreign income exclusion of (112,000)

A

Us citizen that is a resident in other country for a full tax year. US resident who is citizen or national of a country that the US has income tax treaty and lived for a full tax year there.
Us citizen or resident who is physically present in other country at least 330 days of consecutive 12 months

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18
Q

What is the breakdown for charitable dedication private va public charities

A

Públic: short term intangibles or tangible related property 50% of AGi, long term is 50% of AGI if basis or 30% of AGi if FMV, cash is 60% of AGi
Private: short term, intangible and cash 30% of AGi, long term tangible related or unrelated 20%

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19
Q

Name all 9 tax credits

A

Earned income, adoption expenses, child tax credit, family credit, child dependent care credit, lifetime learning credit, American opportunity credit. Foreign tax credit. Credit for elderly/disabled

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20
Q

What are the qualifications to claim earned income credit

A

Be employed or self-employed and have a qualifying child’s exceptions apply for not having child if you are between 24-64 of age

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21
Q

What are the qualifications to claim adoption expenses tax credit

A

Have an eligible child of less than 18 years of age. and physically or mentally handicapped
Non refundable but can be carried forward up to 5 years

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22
Q

What are the qualifications to claim the child tax credit

A

Child must be under age 17, can be stepchild or foster child but must be auS citizen. Must file MFJz the amount is $2000 per child, tax creyó FI refundable up to $1,400 per child

23
Q

What are the qualifications to claim the family tax credit

A

Must be a qualifying child or other dependent. The amount is $500

24
Q

What are the qualifications to claim the child dependent care credit

A

Costs must be incurred due to being employed. Cannot claim if caregiver is also a dependent. Child must be under age 13 or handicapped dependent or spouse. Must file MFJ
The amount is 20% of costs or the lesser of 3k per child or up to 6k for 2 children

25
Q

When is kiddie tax apply

A

After $2300 of unearned income wil be subject to parents tax rate for a child under age 19 or a full time student under 24

26
Q

How do you calculate a child standard decduction for kiddie tax purposes

A

Deduction is $1,150, the following 1,150 is taxed as child marginal tax rate. Total is $2300 not subject to kiddie tax

27
Q

How do you calculated earned income standard deduction for a child

A

Earned income under the Single standard deduction plus $400

28
Q

What is AMT

A

Alternative tax for those you take advantage of items of tax preference

29
Q

What are items of tax preference

A
  1. Percentage depletion, taken in excess of adjusted basis
  2. intangible drilling costs
  3. Interest private activity bonds uses to digest interest income
30
Q

What if the basic formula for AMT

A

Taxable income - adjustments for preference items is AMTI which is subtracted by exemption then X AMT tax rates - any foreign tax credit and regular tax = AMT

31
Q

What are adjustments for AMT

A

SUBTRACT
Accelerated depreciation
Standard deduction
Star and local taxes

32
Q

What are the at risk limitations

A

Excess losses of basis are suspended until you increase your basis then you can deduct

33
Q

Passive rental losses are only aplicable if

A

You are not an active participant

34
Q

What is considers an active participant in rental properties

A

Own at least 10% or do the day to day tasks, work 500 hours a year or 100 hours and you are the one who works the most in the property then you are able to deduct up to 25k against ordinary income

35
Q

How do you handle losses and gains of more than one Publicly traded LLP

A

You can only offset gains and losses of same publicly trade LLP. Any losses are carried forward

36
Q

On what schedule is rental income reported

A

Schedule E

37
Q

What is the rule for vacation home to exclude income from rentals

A

If rented for 14 days or less income is excluded and can deduct mortgage interest and taxes from AGI
If rented for 15 days or more income is included but can deduct more expenses except for mortgage interest

38
Q

What if the statue of limitations for the IRS to audit a tax return

A

3 years

39
Q

What is the statue of limitations for the IRS to collect tax

A

10 years

40
Q

What is the status of limitation to collect tax if Income is understated by 25%

A

6 years

41
Q

What is the statue of limitations of there was fraud in filing the tax return to evade taxes

A

There is none

42
Q

When does the statue of limitations start?

A

When the return is filed

43
Q

What is the failure to pay penalty

A

.5% per month up to 50 months

44
Q

What is the failure to file penalty

A

5% per month up to 5 months

45
Q

If a taxpayer is subject to both failure to file and pay what is his per month charge

A

4.5%

46
Q

What is the penalty for fraud

A

75% of tax understated

47
Q

What is the penalty for negligence of understating income tax

A

If understatement is greater than 10% or 5k than 20% of understated tax

48
Q

What are the appropriate cost recovery methods for the following items :
Desk
Patent
Oil well

A

Desk depreciation
Patent amortization
Oil well depletion

49
Q

True or false
You can deduct inventory in your tax return since it’s for business purposes

A

False

50
Q

What is the convention period of placing and si paint of rental residential property and non residential property

A

Mid month

51
Q

What are the categories under the MACRS GDS

A

3 years for trucks, rent to own and race horses
5 years for cars, computers and office machinery
7 years for office furniture and fixtures
27.5 years for rental homes
39 years for non resential buildings

52
Q

What is the deductibility of dividends for shareholders owning the following of c corporation B
John , 18%
Clover 23%
Alex 90%

A

John 50%
Clover 65%
Alex 100%

53
Q

What are the rules for deducting dividends for share holders

A

Less then 20% ownership may deduct 50%
Between 20-80% ownership May deduct 65%
At least 80% ownership may deduct 100%

54
Q

For an S corp to be eligible for this classification it must

A

Only have 100 employees
Shareholders must be US citizens or resident
Not be an insurance or financial company or domestic international corporation

CFP Missed Concepts (6 decks)

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