Tax Flashcards

Question

Estimated tax payments safe harbor

Answer 1

The lesser of 90% of the current years tax 100% prior year or 110% if income over 150k

Answer 2

$@ last day/$ any time US residents JT 100/150 Sing/MFS 50/75 NonRes Jt 400/600 Sing 200/300

Answer 3

Over 10k at ANY time during the year File FinCEN

Answer 4

Remember that section 1231 assets are not capital. And losses are treated as ordinary. So do not use those when you net this list of things Musical composition created by himself and sold it again is ordinary.

Answer 5

Taxable distributions. Any distribution of income or corpus from a trust to a skip person that is NOT otherwise subject to estate or gift tax Taxable termination. Determination by death the lapse of time release of power or otherwise of an interest in property held in a trust resulting in skip persons holding all the interest in the trust Direct skips. A transfer subject to an estate or gift tax made to a skip person

Answer 6

Related is determined by family tree including in laws) Unrelated to someone between 37 and a half and 62 and a half years younger And remember a spouse of your son even though more than 37 and a half years younger still qualifies as only one generation down and is not a skip person A niece or nephew is only one generation away

Answer 7

Sold in a taxable transaction Gift. Added to donee's basis Divorce. Suspended losses added to the recipients basis Sold to related party when they sell to an unrelated party Inheritance? Deducted on final descendents return only to extent losses exceed the step up in basis

Answer 8

Two years from grant date plus one year from the date of exercise Otherwise they become NSOs

Answer 9

Tp wants to use cash but has some inventory. Use accrual or inventory purchases and sales of the inventory and Use CASH method for the service portion

Answer 10

Loans <10k = not imputed Loans b/w 10k and 100k -if NII<$1,000 = not imputed -Otherwise lesser of NII or AFR Loans > 100k = AFR Also not imputed: -Sales of property <3k -Pmts due w/i 6 mos -Debt subj to OID

Answer 11

Fifo is realistic Lifo of understates inventory during rising prices and overstates inventory during falling prices But when it is possible specific identification is actually the most accurate

Answer 12

(High end-AGI)/spread * Max contribution= maximum deduction Use the max contribution even if they did not make the max! Then compare the max deduction to their contribution

Answer 13

Investment interest expense limited to investment income Mortgage interest limited to less than or equal to 750k debt Casualty fed declared disaster only see separate card Cash charity limited to 60% of AGI Medical over 7 and 1/2% AGI Salt

Answer 14

Kid: Unearned + earned less: std deduction which is greater of: 1300 or (earned+450) less: amount taxed at parents rate = amount taxed at kids rate Parent. Unearned minus 2,600 = amount taxed at parents rate.

Answer 15

When ONLY unearned income Kids unearned income >2600 taxed at parents marginal rate = "kiddie"Tax First 1300 is zero tax Next 1,300 taxed at kids rate - add this if they ask for total tax Assume kids rate is 10%

Answer 16

Fifo.. default IRS Avg cost. Mutual funds companies prefer to use Specific id..best from tax planning perspective

Answer 17

ACID A/r, n/r Copyrights etc created by taxpayer Inventory Depreciable assets used in t or b ie s1231

Answer 18

Businesses including escorts must use accrual when inventory is necessary to account for income C Corporations. must use accrual if avg annual GR 3 prior taxable years exceeds 30 million even if they don't maintain inventory

Answer 19

General. full control and management but unlimited liability Limited. have minimum control /management but limited liability

Answer 20

Usage 2 of last 5 Ownership 2 of last 5 Both spouses must meet usage two of the last five Only one spouse has to meet ownership If don't meet may qualify for REDUCED exclusion Job relocation Employment change leaves you unable to pay living expenses Qualifying for unemployment benefits Divorce or legal separation Birth of multiples Health issues Disaster damage Condemnation Other unforeseen

Answer 21

Student loan multiply the percentage by 2500 to get the max. Then compare the actual to this and take the lesser For IRAs take the percentage times to Max

Answer 22

$600 failure diligence Hh Eic CTC, actc AOC, LLC Failure to $60 Furnish return Sign Provide id# Etc

Answer 23

50% of ss Plus other income Plus tax exempt 25/34 32/44

Answer 24

Year of death mfj or MFS Next two years qualifying widower if at least one child living with you who you can claim as a dependent and paid over half the cost

Answer 25

Gain is normal treatment No loss allowed initially between related parties But when the seller sells to an unrelated party at a gain they can take the seller's initial disallowed loss up to the amount of the gain on sale to unrelated A initial seller, related B initial buyer, related C unrelated buyer when B sells to C, the loss A incurred selling to B offsets the gain, if any So always calculate the initial loss

Answer 26

Generally passive but If you're an active participant, >=10% ownership Can deduct up to 25k if Magi without the rental loss is 100 to 150 k All is less than 100k Phase out for 100 to 150 Nothing if over 150 unless real estate professional who are never limited Phase out 150k -magi =Subtotal /2 =Allowed portion

Answer 27

You can use more section 179 if you or your spouse has W2 wages even from a completely separate job. However then remember you are giving up the opportunity to have lower SE tax in future years

Answer 28

fair market value property received plus or minus the net boot =Amount realized minus the basis of the property transferred =Realized gain Recognized gain is the lesser of the realized gain or the net boot received Deferred gain is the realized gain minus the recognized gain Substituted basis is the fair market value of the qualifying property received minus the deferred gain

Answer 29

Realty for realty only 45 days from the date of transfer to ID replacement Exchange must be completed no later than 180 days after the transfer of the property Or the due date of the tax return whichever is earlier

Answer 30

Property that is both used in a trade or business and held for the production of income Best of both worlds tax treatment Gains are capital Losses are ordinary 1245 is personalty and 1250 is realty They both fall under section 1231 Regarding dispositions Gains to the extent of depreciation taken 1245 are taxed as ordinary 1250 taxed at 25%s1250 dep recapture

Answer 31

Losses are taxed as ordinary Gains are taxed as capital But watch out on depreciation has been taken For 1245 property you have to pay ordinary income tax on the amount of the depreciation taken For 1250 it's 25%

Answer 32

Any gain to the extent of depreciation taken is taxed at ordinary rates Sold for more than original cost. Entire amount of depreciation taken taxed at ordinary rate plus amount over original cost is capital gain Sold between adjusted basis and original cost. Amount above adjusted basis taxed as ordinary income bc of depreciation taken Sold below adjusted basis ordinary loss

Answer 33

Remember 1250 is the realty, not equipment S1250 dep recapture is at 25% Vs yes 1245 taxes depreciation taken at ordinary rates but it's not technically called depreciation recapture

Answer 34

Deduct all then carryover any amount over business profit. Bus profit can't be less than zero OR Deduct only up to the business profit of zero and then you can deduct the macrs on remaining See attached example 125k cost of asset 85k business profit before dep

Answer 35

Spouse, child, grandchild, parent, sibling, entity greater than 50%

Answer 36

-Max 100 shareholders family members can be aggregated to count as one -One class of stock but can have voting in non voting (CCORP, partnerships and LLCs can have multiple classes) -opportunity to avoid payroll tax when set up properly. Tax-free distributions of retained earnings -use if you want liability protection and company funded benefits

Answer 37

Remember to take the SE earnings times .9235 "Se taxable" BEFORE multiplying by .153 Figure to compare to the max is this "Se taxable" after you've multiplied by 9235!!! Remember that after the max 2.9% Medicare still applies

Answer 38

Section 179 used in a given year is limited to the net profit. Well sometimes. See later card... Two options if it's more than the profit 1. Take 179 up to the profit and then you can take macrs depreciation the excess for yr 1. This will create a loss Be sure to take the total cost of the equipment minus the amount you won 79 to compute the makers 2. Take section 179 on it all and carry the amount above the profit over. Your profit here will be zero. If 179 elected it can be carried over

Answer 39

If selling above original cost part of your gain will be capital and part will be s1245 or 1250 If selling between original cost and adjusted basis all of your gain will be 1245 or 1250 If selling below adjusted basis you just have an ordinary loss

Answer 40

Scorp shareholders deduct losses only to the extent of their tax basis in the stock. Basis does not include any portion of the corpse debt Partnership and LLC. May deduct only to the extent of their tax basis in the partnership interest which includes their eligible share of debt for which they are liable

Answer 41

CORP when owners need company funded benefits and liability protection PARTNERSHIP. When taxes or product liability are not a concern. Generally owners don't have liability protection although limited partners have protection from partnership debts LLC. Need limited liability but partnership tax treatment example real estate investment owner Sole prop when taxes or product liability are not a concern. Mom and pop shops

Answer 42

CCORP most complex SCORP very complex LLC complex Partnership easy Sole prop easiest

Answer 43

Taxable income *Tax rate Gross tax due Less credits Final tax due Less w/h, estimates Net tax payable or refund due

Answer 44

Failure to PAY .5%/month max 25% Failure to FILE 5%/mo max 25% When they are in the same month the two above are limited to FTF Negligence 20% of the underpayment attributed to negligence Civil fraud 75% of the underpayment attributed to civil fraud Frivolous $5000 "go pound sand"

Answer 45

5 yrs. Autos, computers 7 yrs. Heavy machines and office furniture, fixtures and equipment 27.5 Residential 39 Commercial

Answer 46

No special treatment Adding with the other investment income Ps. You can exclude muni bond interest

Answer 47

Per bif Whenever avg gross receipts for the 3 prior years are 30 million Or When a business has inventory

Answer 48

-Is there unearned income -Did a minor ,19 or FT <24 receive it -Did amount exceed 2600 If yes, RTFQ to see what's asked then breakdown 1. Child's taxable income 2. Amount taxed at parents rate (unearned less 2600) 3. Amount taxed at child's rate Child's taxable step 1 less amount @ parents in step 2 4. Total tax due. Child's plus parents

Answer 49

A q e e / Total distribution times the interest So if the aqee was 7000 in the distribution was 10,000 Then seven deep percent of the interest is excludable. Watch exclude versus include

Answer 50

Obviously what short-term versus long-term Within that long-term be careful because they will sometimes have it straddle capital gain brackets Draw chart with ordinary income first then stack the capital gains on top of that when looking at the tax tables for capital gain rates

Answer 51

Be careful on the tables don't accidentally use MFS for single. Single is $200 in the all other category Tax exempt muni interest is not NIIT NQ annuity income is investment income

Answer 52

Straight line is mid-year for the first and last year Or if you straight line for rental it's mid-month