TCP1

Question 1

When is ordinary income recognized according to NPO stock?

Answer 1

When it has ascertainable value which is when it is selling on an establish exchange, which increases the value of the stock.

Question 2

When does employee recognize capital g/l on stock? How is the gain calculated?

Answer 2

When sold. Gain is the sell price less the basis which is the FMV of stock on vesting date.

Question 3

What type of stock is receiving right to purchase and not actual stock?

Answer 3

ISO or ESPP

Question 4

Kiddie tax subject to parents rate is unearned income over what amount?

Answer 4

$2,500

Question 5

Income types - what are the 3?

Answer 5

Active, passive, portfolio

Question 6

PALs offset what type of income and when can you use them?

Answer 6

Offset passive income not portfolio or active. Are suspended and carry forward until passive income in future years from that activity.

Question 7

What’s the phase out for real estate professional??

Answer 7

Can take a loss up to $25k but phase out starts at $100k AGI to $150k at 50cents per $1. Loss will get limited.

Ex: $120k AGI before $40k loss is $20k over or $10k limited from the $25k loss allowed. $15k loss allowed only.

Question 8

What are future gifts of interest?

Answer 8

Interest in a trust where one can’t take distributions annually or until a certain age. The gift exemption is not used against this.

Question 9

What types of gifts are excluded from gift tax?

Answer 9

Medical directly, tuition directly, spouse always.

Question 10

What is considered present interest gift?

Answer 10

Gifts to life estate and these quality for annual gift exclusion.

Question 11

A donated car deduction is considered by taking the value of what?

Answer 11

The selling price of the car by the org.

Question 12

Can you use spouse use earned income for your IRA contribution?

Answer 12

Yes, but up to the limit of annual contributions.

Question 13

What loan is based on financial need?

Answer 13

Subsided stafford loan - this is where the gov pays interest while in school

Question 14

ROI is calculated how

Answer 14

(Investment less cost of inv)/ cost of inv

Question 15

ATRR is calculated how

Answer 15

ROI x (1- tax rate)

Question 16

C Corp loss gets carried back how many years and how many years forward ?

Answer 16

3 years back
Forever forward

Question 17

NOL can be used after 12/31/2017

Answer 17

Yes but only up to 80% of taxable income current year

Question 18

The basis of the property to corporation is ….

Answer 18

The greater of 1) adjusted NBV of s/h plus any gain recognized by the s/h or 2) debt assumed by the Corp

Question 19

Is there a gain or loss to corporation issuing stock in exchange for property?

Answer 19

No

Question 20

Basis of the property to the corporation is the greater of …

Answer 20

1) adjusted NBV of shareholder plus any gain recognized by the s/h or
2) debt assumed by the Corp

Question 21

Distribution from C Corp to the extent of what is considered dividends?

Answer 21

Extent of current or accumulated earnings and profits

Question 22

Distributions in excess of current and accumulated earnings and profits is considered what?

Answer 22

Nontaxable return of capital to the extent of s/h basis

Question 23

Distribution from C Corp that is in excess of basis and current or accumulated earnings and profits is considered what?

Answer 23

Capital gain

Question 24

Members of what group may file consolidated tax returns?

Answer 24

Affiliated group

Question 25

What is an advantage of a consolidated tax return?

Answer 25

Offsetting gain/loss amount with group members as id they were one single taxpayer

Question 26

What are the rules to file as consolidated group?

Answer 26

1) must have consent 2) must have been member of an affiliated group at some time 3) common parent owns 80% or more of voting power of outstanding stock and 80% or more of the value of all outstanding stock of each Corp

Question 27

Are interco dividends eliminated?

Answer 27

Yes 100% of intercompany dividends paid from the sub/parent to sub/parent are eliminated

Question 28

What’s a disadvantage of consolidated returns?

Answer 28

Mandatory compliance with complex regulations

Question 29

Can consolidated returns be elected annually?

Answer 29

Yes election is made annually.

Question 30

Subpart F income is taxed immediately if it’s what type of income?

Answer 30

Passive or related party active income

Question 31

What increases corporate foreign derived intangible income?

Answer 31

Sales to non-US persons of property for use outside of the US

Question 32

What is a permanent establishment?

Answer 32

When a US Corp has a place of business in a foreign country generating revenues

Question 33

Foreign branch vs foreign subsidiary. Which is a separate entity?

Answer 33

Foreign sub is separate entity

Question 34

What is GILTI inclusion ?

Answer 34

US s/h share of CFC’s net income less excess of either 1) 10% of the CFC aggregate adjusted basis in the depreciated tangible property used in its T or B, over 2) the CFC net interest expense.

Question 35

BEAT rules apply to what type of corporations?

Answer 35

Large ones with $500M gross receipts and large deductions related to foreign affiliates.

Question 36

Corporate capital losses are carried back and forward how much?

Answer 36

Back 3 years, forward indefinitely

Question 37

Pre 2018 NOL can be used how much vs post 2017 NOL ?

Answer 37

Pre 2018 can be used 100% Post 2017 can be used only 80% Of taxable income

Question 38

How to calculate tax estimates for CY if Corp had no tax liability in PY?

Answer 38

Cannot rely on PY if $0. Need to use CY tax

Question 39

Do owners of LLC, GP, LP have personal liability for the obligations of the business beyond their investment?

Answer 39

No for LLC For LP, atleast one GP has limited personal liability. For GP all members have unlimited personal liability.

Question 40

Which entity has the most flexibility in choosing accounting period?

Answer 40

C Corp

Question 41

Does the C Corp one owner have to be a US citizen?

Answer 41

No

Question 42

What entity can be formed verbally?

Answer 42

GP

Question 43

What entity shareholders can transfer their ownership without consent?

Answer 43

C Corp

Question 44

What entity is most advantageous for tax purposes?

Answer 44

S Corp

Question 45

What types of entities recognize gain on distribution of appreciated property?

Answer 45

C or S corp

Question 46

What is used for the shareholder basis in the property distributed by an S Corp?

Answer 46

FMV

Question 47

S corp basis in the property is calculated how?

Answer 47

The same as the contributing shareholder’s basis

Question 48

Excess of basis of property over liability is considered what?

Answer 48

Recognized gain

Question 49

How is loss limitation on Sec 382 stock triggered during ownership change?

Answer 49

When one or more 5% shareholders increase their ownership by more than 50%

Question 50

How are dividends treated according to E&P?

Answer 50

Dividend payout is first with current E&P then accumulated if any.

Question 51

What is considered non effective tax planning in regards to accelerating or decelerating deductions or income ?

Answer 51

A company accelerates deductions when tax rates are increasing from one year to the next. A higher tax rate in the future May outweigh the discount factor.

Question 52

Are Sec 1244 losses ordinary or capital?

Answer 52

Ordinary, limited to $50k per taxpayer

Question 53

When contributing to a Corp, the corp’s basis in the property is calculated how?

Answer 53

The basis of the shareholder who contributed the property. Computed separately from any debt that it assumes related to the building.

Question 54

How to calculate non taxable distribution out of an S Corp?

Answer 54

Non taxable to the extent of AAA then multiply by ownership, limited to basis is non taxable portion.

Question 55

If a domestic Corp owns 100% of a foreign Corp that operates outside of the US, the foreign co sub part F income will be treated how?

Answer 55

Treated as deemed dividend subject to immediate recognition by the domestic co

Question 56

A foreign co is considered a CFC when?

Answer 56

If more than 50% if its stock is owned by a US shareholder on any day of the year

Question 57

Perks for a foreign subsidiary?

Answer 57

Income earned is generally not included in income and eligible for dividends received deduction until the earnings are paid as a dividend to the US shareholder

Question 58

A partner’s tax basis in property received in a liquidating distribution from a partnership is equal to what?

Answer 58

The partner’s remaining basis in the partnership interest after cash distributions.

Question 59

A shareholder’s tax basis in property received in a liquidating distribution from an S Corp is equal to what?

Answer 59

The FMV at the date of distribution.

Question 60

Loss on worthless sec 1244 stock can be used by who?

Answer 60

Only original owners