Tax

Question 1

Sec. 1245 equals….

Answer 1

the lesser of realized gain or accumulated depr. taken, i

Question 2

Amount of a gift included in a recipient’s income

Answer 2

0

Question 3

Sec. 1250 tax as ordinary income equals….

Answer 3

amount of depr. claim excess of straight line depreciation.

Question 4

Sec. 1250 property tax at 25% gain equals……

Answer 4

Straight line depreciation

Question 5

1/2 yr convention is used for….

Answer 5

Personalty in the year of acquistion and year of disposal

Question 6

mid quarter convention is used for…..

Answer 6

all personalty if more than 40% is placed in service during the laster quarter of the taxable year

Question 7

What is Schedule C tax form?

Answer 7

Sole proprietorship

Question 8

What is Schedule A tax form?

Answer 8

itemized deduction

Question 9

Deductible Interest for home equity loans….

Answer 9

Deductible interest also includes interest on the portion of home equity loans that does not exceed the lesser of:

1. The fair market value of the residence less the remaining acquisition indebtedness, or
2. $100,000

Question 10

Real estate taxes are deductible?

Answer 10

Yes

Question 11

“Points,” a fee charged by lenders based on a percentage of the loan amount, are deductible?

Answer 11

if paid at the time the residence is purchased or when funds are obtained for home improvements.

Question 12

16. Contributions to Roth IRAs are not deductible?

Answer 12

No

Question 13

14. An individual can deduct the greater of state income taxes paid or sales tax paid?

Answer 13

Yes

Question 14

Tax preparation fees are deducted?

Answer 14

Yes. Schedule A as a 2% miscellaneous itemized deduction, even if all of the taxpayer’s income is related to a Schedule C sole proprietorship

Question 15

Property insurance deductible on Schedule A?

Answer 15

No. It is deductible on Schedule C if it is for a business

Question 16

gross income exceeds the 2016 exemption amount, of………..to not qualify a person as a qualify relative

Answer 16

4050

Question 17

any of the children could claim her as a QR since each contributed more than ______of relatives’s total support.

Answer 17

10%

Question 18

For kiddie tax, the amount taxed at the parent’s rate is the unearned in excess of……

Answer 18

2100

Question 19

What is the alternative minimum tax formula?

Answer 19

Regular taxable income
± Adjustments
\+ Preferences
AMT Income
− Exemption
AMT Base
× Rate
Tentative Minimum Tax before Foreign Tax Credit
− Certain credits (see discussion below)
Tentative Minimum Tax
− Regular Tax Liability
AMT (if positive)

Question 20

what tax form calculates amt?

Answer 20

form 6251

Question 21

what is the personal exemption amount?

Answer 21

4050

Question 22

when is the child credit phased out?

Answer 22

he credit is phased out for married taxpayers with AGI in excess of $110,000 ($75,000 for unmarried). The credit is reduced $50 for each $1,000 (or portion) over the trigger AGI amount. These amounts are not indexed for inflation.

Question 23

what are the refundable credits?

Answer 23

Refundable Credits:
Earned Income
Child Credit (partially refundable)
American Opportunity/Hope Credit (partially refundable)
Health Coverage Tax Credit

Question 24

what is the dependent care credit phase out rule?

Answer 24

the credit percentage begins at 35% if an AGI is less than $15,000, and is reduced by 1% for each $2,000 increment (or part) in an AGI above $15,000. The minimum dependent care credit is 20%.

Question 25

what is the maximum amount of expense eligible for the dependent care credit?

Answer 25

The maximum amount of expense eligible for the credit is $3,000 ($6,000 if more than one individual qualifies for care) or, if lower, earned income (of the lesser-earning spouse if married).

Question 26

What is the phase out rules for lifetime learning credit?

Answer 26

Since the Flint's AGI exceeded $110,000 (for 2016) they lose some of the benefit of the credit. The phase-out for married taxpayers is proportional over a $20,000 range ($10,000 range beginning at $55,000 for single taxpayers). Since their income exceeds the threshold by $1,000 ($112,000 − $111,000) then they lose 5% of their credit ($1,000/$20,000). Therefore, they lose $45 of the credit ($900 × 5%) and the final credit is $855 ($900 − $45).

Question 27

How much of interest expense on home equity indebtedness is deductible?

Answer 27

up to $100,000 of home equity loans secured by a first or second residence regardless of how the loan proceeds were used

Question 28

The corporation's basis in the property received is

Answer 28

Shareholder's basis in the property + Gain recognized by the shareholder

Question 29

The shareholder's basis in the stock received from the corporation is:

Answer 29

Basis of all property transferred to the corporation + Gain recognized by shareholder − Boot received by shareholder − Liabilities assumed by corporations

Question 30

Schedule M-1 rules...

Answer 30

A. Nondeductible expenses are added to book income (federal tax expense, net capital loss, expenses in excess of limits, etc.). B. Income that is taxable but not included in book income is added to book income (e.g., prepaid income included in taxable income). C. Nontaxable income that is included in book income is subtracted from book income (municipal interest, life insurance proceeds, etc.). D. Deductions not expensed in book income are subtracted from book income (dividends received deduction, election to expense, etc.).

Question 31

How much can a corporation deduct of organizational expenditures & start up cost for the tax year in which the corporation begins business?

Answer 31

5000 + (remaining bal. * # of months/180)

Question 32

what is the charitable contributions deduction rule for corps.?

Answer 32

the limit on the decutions is 10% of taxable income.

Question 33

Start up cost threshold

Answer 33

Total start-up expenses are the $54,000 paid for training before business operations begins. Only $1,000 of these expenses can be deducted because the total start-up expenses exceed the $50,000 threshold by $4,000 ($54,000 - $50,000 = $4,000 reduction in the original $5,000 deduction). The remaining $53,000 can be amortized over 180 months beginning in the first month that business begins (April). Therefore, they can be amortized for nine months in 2016, for a deduction of $2,650 ($53,000/180 months x 9 months).

Question 34

Corporate AMT formula

Answer 34

Taxable Income + Tax Preferences + or - AMT Adjustments and ACE Adjustment = Alternative Minimum Taxable Income (AMTI) - Minimum Tax Exemption = Tax Base x Tax Rate (20%) ``` = Tentative Tax before Credits - Foreign Tax Credit = ``` Tentative Tax - Regular Tax = Alternative Minimum Tax (AMT)

Question 35

The Accumulated Earnings Tax Formula

Answer 35

``` The Accumulated Earnings Tax Formula Taxable Income plus or minus Adjustments: − corporate income tax − excess charitable contributions − net capital loss − net capital gain (after tax) + dividends received deductions less Dividends paid or deemed paid less Accumulated earnings credit equals Accumulated Taxable Income ```

Question 36

The Personal Holding Company Tax Formula

Answer 36

``` Taxable Income plus or minus Adjustments: − corporate income tax − excess charitable contributions − net capital gain (after tax) + dividends received deduction + net operating loss carryover (not previous year) equals Adjusted Taxable Income less Dividends paid or deemed paid equals Undistributed PHC Income ```

Question 37

Basis of the property distributed to a shareholder from a corporations is.....

Answer 37

the FMV-liabilities

Question 38

Distribution from a corporations steps:

Answer 38

1. Taxable as dividend income to extent of the shareholder's pro rata share of E&P 2. Excess is tax-free to extent of shareholder's basis in stock (and reduces the basis) 3. Remaining distribution amount is taxed as a capital gains

Question 39

Foreign Tax credit formula

Answer 39

Limit = U.S. tax on worldwide income × Foreign source taxable income / Worldwide taxable income

Question 40

The tax law provides ordering rules for how basis is adjusted at the end of the tax year, as follows:

Answer 40

1. Increase basis for all income items 2. Decrease basis for distributions 3. Decrease basis for all loss items

Question 41

what are hot assets?

Answer 41

Unrealized receivables and inventory

Question 42

how are hots assets treats when sold?

Answer 42

as ordinary income

Question 43

Formula for basis in stock for a s corporation

Answer 43

``` Initial basis +stock purchases +taxable and tax exempt income -AAA distribution -deductible and non-deductible expenses ```

Question 44

tax return preparer, who prepares a return or refund claim, which includes an "unreasonable position," must pay a penalty of

Answer 44

the greater of 1000 or 50% of the income derived by the preparer for preparing the return

Question 45

If the understated tax liability is due to an unreasonable position and the preparer willfully attempts to understate the tax liability or recklessly or intentionally disregards rules or regulations, the penalty is

Answer 45

the greater of $5,000 or 75% of the income earned by the tax preparer for preparing the return or claim

Question 46

NOL carryback and forward rules?

Answer 46

A NOL may be carried back 2 years and carried forward 20 years to offset taxable income in those years.

Question 47

Articles of Incorporation (charter) are filed with the state and contain

Answer 47

(1) Proposed name of corporation (2) Purpose of corporation (3) Powers of corporation (4) Name of registered agent of corporation (5) Name of incorporators (a) Incorporators may be promoters (6) Number of authorized shares of stock, types of stock, and whether stock has par value, stated value, or neither

Question 48

An estate tax return must be filed if ..........?

Answer 48

An estate tax return must be filed if the decedent’s gross estate exceeds $5,430,000 in 2015. The return must be filed within nine months of decedent’s death, unless an extension of time has been granted.

Question 49

Charitable contributions subject to the 50% limit that are not fully deductible in the year made may be....

Answer 49

carried forward 5 years

Question 50

Schedule M-2 of Form 1120

Answer 50

``` Balance at beginning of year Add: Net income per books Other increases Less: Dividends to shareholders Other decreases (e.g., addition to reserve for contingencies) Balance at end of year ```

Question 51

corporation’s net operating loss is computed the same way as its taxable income.

Answer 51

(a) The dividends received deduction is allowed without limitation. (b) No deduction is allowed for a NOL carryback or carryover from other years. (c) A NOL is generally carried back two years and forward twenty years to offset taxable income in those years. However, a three-year carryback is permitted for the portion of a NOL that is attributable to a presidentially declared disaster and is incurred by a small business corporation (i.e., a corporation whose average annual gross receipts are $5 million or less for the three-tax-year period preceding the loss year). (d) A corporation may elect to forego carryback and only carry forward twenty years

Question 52

S-corporation stock basis is adjusted in the following order:

Answer 52

a. Increased for all income items b. Decreased for distributions that are excluded from gross income c. Decreased for nondeductible, noncapital items d. Decreased for deductible expenses and losses

Question 53

The maximum interest deduction is

Answer 53

3000