Tax Flashcards
Section 1231 Assets
- machinery and equipment
- buildings
- vehicles
- computers
Section 1250 Assets
- commercial buildings
- warehouses
- barns
- rental properties and their structural components
Section 1245 Assets
- furniture
- fixtures & equipment
- carpet
- decorative light fixtures
- electrical costs that serve telephones
- data outlets
Accelerated Cost Recovery System (ACRS)
- assets placed in service after 1980
- subject to wear & tear, obsolescence, etc
- determinable useful life
- tangible personalty or realty
- MACRS most common
General Depreciation System (GDS)
- nine property classifications
- 3yr, 5yr, 7yr, 27.5yr, 39yr
MACRS Depr. Method: 200% Declining Balance
- used over GDS recovery period
- extra depreciation in early years
MACRS Depr. Method: 150% Declining Balance
- used over GDS recovery period
MACRS Depr. Method: Straight Line Method (GDS)
- used over GDS recovery period
MACRS Depr. Method: Straight Line Method (ADS)
Sole Proprietorship
- Tax form
- What concept is taxed
- Tax form for owner’s compensation report
- Nature of owner’s income from organization
- Unlimited liability
- Form 1040, Schedule C
- Individual Level
- Form 1040, Schedule C
- Self-employment income
General Partnership
- Tax form
- What concept is taxed
- Tax form for owner’s compensation report
- Nature of owner’s income from organization
- Unlimited liability
- Form 1065
- Flow-through
- Schedule K-1, 1040
- Self-employment income
LLP
- Tax form
- What concept is taxed
- Tax form for owner’s compensation report
- Nature of owner’s income from organization
- Limited liability
- Form 1065
- Flow-through
- Schedule K-1, 1040
- Self-employment income
LLC
- Tax form
- What concept is taxed
- Tax form for owner’s compensation report
- Nature of owner’s income from organization
- limited liability
- (Sole) Form 1040, Schedule C
- (Partnership) Form 1065
- (C corp) Form 1120
- (S corp) Form 1120S
- Can be taxed as sole, partnership, c corp, or s corp
- Form 1040, Schedule C / K-1 / W-2, K-1 / W-2
- Self-employment tax / W-2 / ordinary income, W-2
Limited Partnership
- Tax form
- What concept is taxed
- Tax form for owner’s compensation report
- Nature of owner’s income from organization
- Limited liability
- Form 1065
- Flow-through
- Schedule K-1, 1040
- Ordinary income
S Corp
- Tax form
- What concept is taxed
- Tax form for owner’s compensation report
- Nature of owner’s income from organization
- Limited liability
- Form 1120S
- Flow-through
- Form W-2, K-1
- W-2, Ordinary income
C Corp
- Tax form
- What concept is taxed
- Tax form for owner’s compensation report
- Nature of owner’s income from organization
- Limited liability
- Form 1120
- Entity Level
- W-2, dividends Form 1099-DIV
- W-2, Dividend income
If your 2024 return is over 60 days late when due in 2025, the minimum failure to file penalty will rise to the smaller of:
$510 or 100% of the tax required
If your 2023 return is over 60 days late when due in 2024, the minimum failure to file penalty will be the smaller of:
$485 or 100% of the tax required.
Public Charity Donation: LTCG Property (intangible, real, tangible - related use)
Either FMV or Adj Basis
- 30% if FMV
- 50% if Basis
Public Charity Donation: Cash
- 60%
Public Charity Donation: Ordinary income property, STCG, All Loss property
Lesser of Adj Basis or FMV
- 50%
Public Charity Donation: LTCG Property (tangible personalty - unrelated use)
Lesser of Adj Basis or FMV
- 50%
Private Charity Donation: LTCG Property (intangible, real, tangible - related use)
- 20% must use basis
Private Charity Donation: LTCG Property (tangible personalty - unrelated use)
Lesser of Adj Basis or FMV
- 20%
Private Charity Donation: Ordinary income property, STCG, All Loss property
Lesser of Adj Basis or FMV
- 30%
Private Charity Donation: Cash
- 60%
Examples of real property
- land
- real estate
- sewers, buildings, etc
Examples of Tangible Personalty (related use) property
- related use =related to charity’s purpose
- office equipment, jewelry, toys, light trucks, buses, etc
Examples of Ordinary Income property
- inventory
- works of art created by donor
- capital assets held <1yr
Examples of Tangible Personalty (unrelated use) property
- unrelated use = not related to charity’s purpose
- office equipment, jewelry, toys, light trucks, buses, etc
Kiddie Tax: Unearned Income Process
- first $1,300 not taxed (standard deduction)
- next $1,300 taxed to child (single filer’s rate)
- above $2,600 taxed at parental rate
Kiddie Tax: Earned Income Process
Standard Deduction greater of:
- $1,300
OR
- Earned income + $450
Kiddie Tax: How to approach question
- Figure out standard deduction if earned income included ($1,300 or earned + $450)
- Apply $1,300 std deduc. to unearned income
- Apply remaining std deduc. to earned income
Like-Kind Exchanges: Receiving Boot (cash, mortgage relief, etc)
- recognize gain to extent of boot received
- if boot > gain, reduce basis
Like-Kind Exchanges: Losses realized
- not recognized until replacement property is sold
Like-Kind Exchanges: Paying Boot (cash, mortgage relief, etc)
- no gain
- increase basis by boot paid
Like-Kind Exchanges: When must new property be identified?
- within 45 days of when old property was transferred
Like-Kind Exchanges: When must new property be received?
Early of the following:
- within 180 days when old property transferred
- due date (including extensions) for tax return covering year
Like-Kind Exchanges: If boot exceeds gain
- reduces basis
Three types of income
- active
- passive
- portfolio
Deduction for medical care: Lodging
$50/night per person
Deduction for medical care: Mileage
Allowed
Golden Parachute payments made to ‘disqualified’ person
- includible in W-2 income (OI)
- amounts under SS cap subject to OASDI
- all amount subject to medicare tax
- additional 20% excise tax
Medicare tax
- 2.9% total
- 1.45% split
OASDI tax
- 12.4% total
- 6.2% split
What classifications of property are subject to cost recovery?
Personalty Personal use property Natural resources Intangible property Real estate including land
- Personalty - used in business (depreciation)
- Natural resources (depletion)
- Intangible property (amortization)
Approximate client’s minimum income tax liability: AGI < $150,000
three choices:
- 90% current year tax
- 100% prior year tax
- 110% prior year tax
Approximate client’s income tax liability: AGI > $150,000
two choices:
- 90% current year tax
- 110% prior year tax
What does SALT stand for?
- State and Local Taxes deduction
- limited to $10,000 FROM AGI (itemize deductions)
Unpaid medical expenses can be deducted on form ____ or form _____.
- 1040 (decedent’s Fed tax filing)
- 706 (estate tax to figure out estate tax due)
Any executor fees may be deducted on form ____ or the form _____.
- 1041 (estate tax return)
- 706 (estate tax to figure out estate tax due)
Definition of Section 179
- immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset over a period of time.
When do recapture rules of Section 179 apply?
- When asset sold before fully appreciated
- When business use drops below 50% for given year
