Taxes Flashcards
Who can represent the taxpayer at an IRS audit?
Attorney
CPA
Enrolled Agent
Enrolled Actuary
Hobby Loss vs. Business Expense?
An activity must generate net income in three out of the last five years to be considered a business expense.
True or False: Scholarship used toward room and board is not taxable.
False.
What is the limit for home equity indebtedness?
$100,000
True or False: Qualified dividends cannot be deducted against ordinary income.
True
Deduction Treatment for Purchase of Tax Exempt Bonds
No deduction is allowed for interest paid on this debt.
How many exemptions may a married couple who are both age 65 claim?
Two. They get an extra standard deduction when they are 65 and older.
How is the Child Care Credit found?
Multiply 20% by either $3,000 (one dependent) or $6,000 (two dependents).
Above what dollar limit can a business NOT use cash accounting?
$5 Million
Formula for Gross Profit Percentage
Profit / Total Contract Price
Which forms of businesses can’t use net operating loss?
Partnerships and S Corps
If a business uses FIFO, how will inventory be shown?
Inventory will reflect current cost.
If a company wants to reduce taxes in an inflationary period, would they use FIFO or LIFO?
LIFO.
True or False: C Corporations can not deduct dividends received.
False, they can.
When would a trust be considered defective?
If the grantor retains the right to income or right to use the property,
OR if the grantor retains a reversionary interest that exceeds 5%.
What other business form can a publicly traded partnership offset income from?
None, it can only offset from itself.
How much can qualifying taxpayers deduct for net losses in real estate activity?
25k
How many days can a home be rented for during the year with no tax consequence?
15
True or False: Closely held partnerships can use passive losses to offset active income.
True
Alimony Recapture (shortcut)
Add first two years of payments and then subtract 37,500
A deduction of loss property is limited to…
FMV
What business form is equipment leasing parternships good for?
C Corps
Are S Corps affected by AMT?
NO
When is the Child Tax Credit phased out?
$110,000
