TCP2

Question 1

The shareholder’s basis in the property distributed from an S Corp is what?

Answer 1

The FMV at date of distribution

Question 2

What entities are tax advantageous to flow through losses as long as the investor has basis and is actively involved?

Answer 2

S Corp and Partnership

Question 3

3 requirements to file consolidated returns?

Answer 3

1- can’t be foreign Corp
2- each member had to give consent
3- each member must have same tax year as parent

Question 4

Who files form 1120-F?

Answer 4

Foreign person must file to report income earned by foreign branch

Question 5

What is not a component of global intangible low taxed income, or GILTI?

Answer 5

subpart F income

Question 6

Are non-liquidating distributions from partnership taxable?

Answer 6

Gain is only recognized if cash exceeds partner’s basis in the partnership before distribution.

Basis in the property received is the same as the partner’s basis in the partnership if it exceeds the partner’s basis. Partner’s basis is reduced to $0 and no gain recognized.

Question 7

How to calculate Q2 Corp estimated taxes?

Answer 7

Q1 x 12/3 x tax rate = annualized tax lib
X 50% is half of the year tax liability
Less PY tax x 25%
=required Q2 payment

Question 8

C Corp dividends are paid to the extent of what?

Answer 8

Accumulated E&P and current earnings to the extent of FMV

Question 9

What is the basis in the C Corp property distributed to the shareholder?

Answer 9

The FMV of the property to the c corp

Question 10

What is the basis to the shareholder for property distributed from an S Corp?

Answer 10

The basis to the S Corp

Question 11

When C Corp distributes property in nonliquidating distribution is it a gain?

Answer 11

Yes and FMV less basis is used to calculate but losses are not deductible

Question 12

In a liquidating distribution from a partnership, how is basis in the asset distributed determined?

Answer 12

Adjusted basis in partnership less cash distributed. Then take basis of asset against that. If basis is negative after then use basis before asset distribution.

Question 13

Is relief in liabilities for liquidation of partnership interest considered a gain?

Answer 13

It may result in a capital gain. It’s treated like a cash distribution.

Question 14

If distributing inventory in liquidating partnership distribution, what happens?

Answer 14

Use the adjusted basis of the inventory to offset basis. Only gain can be recognized, not a loss.

Question 15

What is a hot asset?

Answer 15

Unrealized receivable
Appreciated inventory
Gain on hot asset is ordinary

Question 16

Complex trust vs simple trust. Who can distribute income?

Answer 16

Both but simple has to, complex doesn’t have to distribute income.

Question 17

Complex vs simple trusts. Who can make charitable contributions?

Answer 17

Complex only.

Question 18

Who manages trust property for the benefit of beneficiaries?

Answer 18

The trustee, not grantor

Question 19

What is a revocable living trust?

Answer 19

Used instead of a will to show asset distribution after death. Is a grantor trust. Trust assets are still grantor’s assets. All income and deductions are passed thru to the grantor.

Question 20

Capital and casualty gains and losses are allocated to what?

Answer 20

Corpus

Question 21

What is the simple vs complex trust exemption?

Answer 21

Simple $300
Complex $100

Question 22

Gain on nontaxable disposition is the lesser of what?

Answer 22

Lesser of realized gain or boot (cash) received

Question 23

Holding period for new building in involuntary conversation is what?

Answer 23

Beginning date of old property purchased if new property is purchased within 2 years of conversion

Question 24

What qualifies for like-kind exchange?

Answer 24

Real estate

Question 25

How is basis of property in divorce settlement determined?

Answer 25

It’s the carryover basis of the former spouse if there was a divorce decree on or before the divorce

Question 26

What is taxable in the divorce?

Answer 26

Nothing as long as the transferred property was approved in a divorce decree

Question 27

What is the basis of new property received in a nontaxable disposition?

Answer 27

The FMV of the property rec’d Less deferred gain Plus deferred loss

Question 28

Who is a related party?

Answer 28

Brother Sister Spouse Ancestor Descendant *treat as if they own what the other owns

Question 29

Are related party losses deductible?

Answer 29

No but you can use the loss to offset the gain to the unrelated party but not less than $0

Question 30

When is no gain or loss recognized in related party sale?

Answer 30

If the proceeds from the unrelated party are in between the 1st related party’s cost and 2nd related party’s proceeds. Or when the sales price to the unrelated party is between the org cost and the related party purchase price.

Question 31

In a complete liquidation of partnership interest, a partner only recognizes gain to the extent that ______?

Answer 31

To the extent that money received exceeds the partner’s adjusted basis in the partnership interest before the distribution.

Question 32

Realized gain = ?

Answer 32

FMV of the property contributed Less: shareholder basis of that property

Question 33

Recognized gain = ?

Answer 33

Realized gain (FMV less adjusted basis) vs. boot or cash received *lesser of boot received or gain realized *if no boot received then no recognized gain

Question 34

Basis in shares = ?

Answer 34

Basis in property Less debt assumed by Corp Plus cash contributed Less cash received Plus gain recognized

Question 35

What does the Corp get on books for asset donated?

Answer 35

FMV is recorded on Corp books for asset contributed

Question 36

What is the basis in the asset to the Corp when shareholder contributed property?

Answer 36

Corp basis is the basis of the transferor plus cash received by the transferor

Question 37

At risk rules applicable to losses, with regard to S corps and their shareholders_______

Answer 37

Limit the ability to flow through losses from the S Corp to the shareholder

Question 38

Calculate gain realized for taxpayer

Answer 38

FMV of property received Plus cash boot received Plus net debt relief (debt relief less debt assumed by taxpayer) Less adjusted basis of property given up = gain realized *recognized is lesser of boot received or gain realized

Question 39

What is not subject to US withholding tax requirements?

Answer 39

A customer payment for the sale of inventory within the US. This is considered business income which is taxed on a net basis and is not subject to withholding.

Question 40

What is the basis in the partnership on contribution of property to the contributing partner?

Answer 40

Basis of the property in the hands of the partner at contribution (so cash contributed plus cost of assets or adjusted basis of assets). If the FMV is greater, the unrealized gain is allocated to that partner upon sale of that contributed property. *Generally no gain or loss is recognized at contribution to partnership.

Question 41

What is the basis in the asset to the Corp after shareholder contribution?

Answer 41

The corporation’s basis is the adjusted basis in the transferred assets carried over from the shareholder.

Question 42

What is the partnership’s basis in the contributed property?

Answer 42

The partnership’s basis in the contributed property is the carryover basis of the contributor. Not accounting for debt relief.

Question 43

On contribution of property to partnership, is there gain recognized?

Answer 43

Generally no gain recognized on contribution to partnership.

Question 44

What is the partner’s basis of contributed property to partnership?

Answer 44

Adjusted basis in the hands of the contributing partner

Question 45

What is not part of GILTI?

Answer 45

Subpart F is not part of GILTI

Question 46

How long is Built in gains tax exempt after S election is made?

Answer 46

5 years if nothing is sold

Question 47

Capital losses from consolidated group are treated how?

Answer 47

Carried back 3 years Carried forward 5 years Cannot offset ordinary income

Question 48

Can capital losses offset ordinary income in consolidated group?

Answer 48

No capital losses cannot offset ordinary income

Question 49

Is related party sale at a loss that is further sold for a loss to unrelated party deductible?

Answer 49

The first loss is not. The 2nd loss to unrelated is deductible.

Question 50

What is form 1120-F used for?

Answer 50

Foreign income earned by US branch

Question 51

If organized as a partnership can the partner avoid recognizing gain on contribution on appreciated property?

Answer 51

Yes a partner avoids recognizing gain in appreciated property at contribution.

Question 52

When corporations are distributing property in complete liquidation, does it recognize gain?

Answer 52

Yes the Corp will recognize gain in complete liquidation and so will the shareholders. Calculated as FMV less adjusted basis of the property.