Tax Planning Flashcards
An LLC is considered what, if immediately after the receipt of appreciated property, more than 80% of the value of the assets of the LLC are held for investment purposes, and consist of readily marketable stocks are securities?
An investment company. And a gain is recognized when a partner contributes appreciated property to an investment company.
What are the rules when deducting mortgage interest?
Must be a primary residence or second home
Can deduct points, and other forms of interest
Deductibility limited to $750,000
-The home equity indebtedness deduction is eliminated
-Qualified HELOC interest is limited to buy build or substantially improve the taxpayers home that secures alone.
To receive qualified dividend treatment and be taxed at capital gains rates an investment must be?
Dividend has to be paid by an American company or qualified foreign company
The holding period for common stock is 60 days before or after the ex dividend date .
The holding period for preferred stock is 90 days before or after the ex dividend date.
Net of capital gains means?
If the net of all capitol gains and losses still result in a loss:
-3000 of capital loss may offset ordinary income
-The remaining loss may be carried forward 
A partners basis in a partnership decreases when?
By their share of partnership, losses, and nondeductible expenses.
By distributions of income or property.
A partners basis in a partnership increases when?
To reflect their share of partnership, taxable and tax exempt, income, and gain.
How do you calculate a partners basis in a partnership or LLC?
Add:
Capital contributions + allocable share of recourse debt + share of qualify nonrecourse debt + income/gains
Minus distributions
Less deductions/losses
For pass-through entity basis, income tax losses may be deducted up until what amount?
Losses may be up to the amount of the owners basis
-The unused loss is suspended and carry forward until sufficient basis becomes available.
A debt that holds the borrower personally liable is called?
Recourse debt.
All other that is considered non-recourse.
In general, recourse that allows lenders to collect what is owed for the debt, even after they’ve taken collateral (harm, property). Lenders have the right to garnish, wages, or levy accounts in order to collect what is owed.
What is a nonrecourse debt?
A debt that does not allow the lender to pursue anything other than the collateral.
An account that tracks, the allocation of partnership income, or loss
Capital account.
Passive activities do not include what kind of income?
Portfolio income, such as interest, dividends, annuities, and royalties.
Passive activities, often involve real estate rentals, residential commercial, agricultural or industrial
Income from passive activities is usually tax at ordinary income, tax rates and the 3.8% that investment income surtax may apply.
What is depreciable and real property used in trade or business that is held for at least one year and allowed capital gains treatment on gains, and ordinary income treatment of losses.
Section 1231 property
When certain small companies stock owners are allowed ordinary income treatment for losses (up to $50,000 individually and $100,000 joint) versus capital gains tax treatment.
Section 1244 stock
What is re-characterize section 1231 real estate gain property to be taxed as ordinary income to recapture accelerated depreciation on certain real property?
Section 1250.
An unrecaptured section 1250 gain is an income tax provision designed to recapture the portion of a gain related to previously used depreciation allowances.
It is only applicable to the sale of depreciable real estate.
Section 1250 gains can be offset by 1231 capital losses.
This is the general rule for allocating income, deductions, credits, and other corporate level items to shareholders. Each item is to be allocated on a per share, per day basis.
Pro rata allocation
When a partner transfers property to an LLC and receives cash or other property. In addition to an LLC interest, the transfer is treated as both a tax-free contribution and a taxable sale of the property to the LLC.
Disguised sales 
How do you calculate a partners basis who has contributed property subject to a liability?
Partners basis in the contributed property
+
Add the partners share of the total LLCs liabilities ( total liabilities/ # of partners)
—
minus the partners share of liabilities contributed to the LLC.
See photo example.
Unlike a transfer to an LLC, a transfer of property to a corporation in exchange for its stock will receive non-recognition treatment only if the transfer or group of transfer owns what percentage of the corporation immediately after the transfer?
80%
The transferor partner takes a substituted bases in the acquired LLC interest equal to …
The amount of money contributed plus the adjusted tax basis of any property contributed.
The LLC takes a carryover basis in the property contributed by the partner.
When contributing property subject to liabilities, an increase in a partner share of liabilities is treated as…
While a decrease in a partner, share of liabilities is treated as…
And increase in liabilities is treated as a contribution of cash by the partner, while a decrease in liabilities is treated as a distribution of cash to the partner.
Any unrecognized gain or loss inherent in contributed property, is allocated, when recognized by the partnership, to the…
Contributing partner, S- Corps
What is the 2023 AMT exemption amount?
$126,500 for married filing joint and $81,300 for single filers.
At what amount does the AMT exemption phase out begin in 2023
$1,156,300 for Married filing joint
How much is the AMT exemption amount reduced when the phase out amount begins?
The exemption amount is reduced by $.25 on each dollar over the phase out amount.
What are the 2023 AMT rates?
26% for amounts up to 220,700 for married filing joint.
28% for amounts over $220,700 for married filing joint
How do you calculate estimated tax payments?
If AGI is less than or equal to $150,000 = 100% of the prior year’s tax or 90% of the current years tax
If AGI is greater than $150,000 = 110% of prior tax or 90% of current year tax
Which ever is less
What is the self-employment tax rate?
15.3% = 12.4% Social Security tax +2.9% Medicare tax.
12.4% Social Security tax equals 6.2% employer liability +6.2% employee liability.
Social Security tax applies up to $160,200 of earned income
2.9% Medicare tax is on self-employed net earnings without a cap
Medicare tax = 1.45% employer +1.45% employee liability.
.9% net income tax on MAGI greater than $200,000 for single and $250,000 for married.
What is the effective tax rate?
A measure of total tax obligation relative to income
- Useful to measure the portion of income paid in taxes from person to person. Good for evaluating tax policy.
- The calculated amount can vary depending on use of gross total income versus AGI
*Calculated by dividing total tax by total income.
Section 1250:re-characterization of cap gains as ordinary income to recapture accelerated depreciation on certain real property
Section 1231:depreciable and real property used in trade or business and held for more than one year are allowed cap gains treatment of gains and ordinary income treatment of losses
Section 1244:certain small company stock owners are allowed ordinary income (vs. capital gains) treatment for losses up $50k/individual and $100k/joint
Section 1031:allows tax deferral on qualified like-kind exchanges of real property
