TAX

Question 1

Is a penalty owed on the interest of unpaid tax due to fraud/negligence?

Answer 1

No, penalty is only on the unpaid tax, not on the interest of the unpaid tax.

See tax 1-5 applying the fact.

Question 2

What’s deductible for SE, partners, and 2% owners?

Medical ins
Dental ins
LTC ins
Disability Ins

Answer 2

All EXCEPT disability ins. DI CANNOT be deductible. However group DI is allowable fringe benefit.

Question 3

Self employment tax rate

Answer 3

14.13%

Question 4

If home office expenses are $10K with net sch C income of $8K, how much is deductible?

Answer 4

Only $8K, not full $10K. Home office expenses are allowable for SE but CANNOT create a loss.

Question 5

Are misc expenses deductible?

Answer 5

No, misc itemized deduction were repealed in TCJA.

Question 6

What is SE income and subject to SE income tax?

Answer 6

Net sch C income
Part time earnings (1099s)
Board of directors’ fees
General partnership income (K1)
…
note NOT s-corp K1s

Question 7

Child tax credit amount

Answer 7

$2K for any kid under 17

(Subject to AGI phaseout)

Question 8

Dependent care credit

Answer 8

3K first kid, 6K for second or more. Then, 20% of either 3K or 6K. ($600 or $1200)

Question 9

How much is FICA tax?

Answer 9

7.65% for one. (6.2 SS + 1.45 Medicare)
(7.65 + 7.65 for empEE and empER)

Question 10

MACRS years for auto, computers, trucks

Answer 10

5 yr - 1245 property

Question 11

MACRS years for office furniture and fixtures

Answer 11

7 yrs - 1245 property

Question 12

MACRS years for residential rental RE

Answer 12

27.5 yrs - 1250 property

Question 13

MACRS years for non-residential RE

Answer 13

39 yrs - 1250 property

Question 14

MACRS Table

Answer 14

5yr 7yr

Yr 1 20% 14.29%
Yr 2 32% 24.49%

Question 15

Section 179

Answer 15

100% deduction of 1245 property in first year.

Helpful for $ purposes as well as not having to keep MACRS schedule.

Can count 1099 income too, but CANNOT create NOL for the biz.

Question 16

Section 121

Answer 16

Exclusion of 250/500 cap gains on home. Must live in for 2 of 5 years prior.

Question 17

Section 1231 gain

Answer 17

Capital gain. When doing CRDs, difference between gain and CRD, NOT crd and sales proceeds.

Question 18

What’s the recognized gain in installment sale? (Profit)

Answer 18

Profit amount / sale price = % of installment taxable

Question 19

What happens to CRDs if property sold as installment sale?

Answer 19

IF CRDs are more than captain gain (sale - basis), CRD recognized in sale year as 1245 gain recapture (ordinary income)

Question 20

AMT preference items

Answer 20

IPOD

Intangible drilling costs
Private activity mini bonds
Oil/gas % depletion
Depreciation

Question 21

AMT add-back items

Answer 21

SALT
ISO bargain element

Question 22

Charitable Deduction Maximums

Answer 22

Total 60%

Cash = 60% annual max
LT App Prop. = FMV or Basis 30 or 50% AGI
Ordinary Prop. = Basis, 50% AGI
Loss Prop. = FMV, but 50%

Question 23

Casualty Loss Deduction. Calculating deductible amount….

Answer 23

Value of prop lost
Minus insurance coverage
Minus $100
Minus 10% of AGI
Remaining amount is deductible.

Question 24

Casualty Loss Deduction. Calculating deductible amount….

Answer 24

Lesser of FMV/basis value of prop lost
Minus insurance coverage
Minus $100
Minus 10% of AGI
Remaining amount is deductible.

Question 25

Is health insurance deducted before calculating SE tax?

Answer 25

No, SE tax is on Net Income. Health ins is deducted from gross income box to give you AGI, not to calculate SE tax.

Question 26

FICA tax %

Answer 26

7.65% total for each EE and ER

(6.2% SS, 1.45% Medicare)

168,600 for SS, then only 1.45% Medicare FICA for EE after $168K

Question 27

Sources of Phantom Income

Answer 27

Insurance:
-lapse with a loan
-section 162 life & DI

Investments:
-zeros/STRIPS
-TIPS
-declared but not paid divs/CG

Tax:
-K1 from LP/FLP
-Recaptures

Retirement:
-ESOP Distribution
-Secular trust