Deductions Flashcards
What items are allowable deductions by a corporation in connection for the redemption of its stock?
For Example, a Corp incurred the following expenses:
Interest on borrowings used to repurchase stock: $100k
Legal & Acctg fees associated with the repurchase: $400k
No deduction is allowed for any amount paid/incurred by the for EXCEPT FOR INTEREST EXPENSE ON LOANS TO REPURCHASE STOCK
Answer - $100k
How may the personal holding company tax be avoided?
By dividend payments sufficient to reduce the undistributed personal holding company income to zero
These dividends include dividends paid during the taxable year, dividends paid within 3.5 months after close of the year, dividend carryover, & consent dividends
A taxpayer incurred the following expenses for their second residence:
Mortgage interest: $5k
Utilities: $1,200
Insurance: $6k
For regular income tax purposes, what is the max. amount (and character) allowable as a deduction for the taxpayer’s second residence during the current year?
$5k itemized deduction.
Utilities expense and insurance expense are nondeductible personal expenses
What type of deduction are jury duty fees?
Fees received for serving on a jury must be included in gross income. They are FOR AGI deductions
How are unreimbursed employee business expenses handled?
For example, Leslie is a corporate executive and incurred business-related unreimbursed expenses during the current year as follows:
Entertainment: $1,200
Travel: $600
Professional dues: $500
How much of these expenses should she deduct on her CY TR?
Unreimbursed employee business expenses are not deductible.
Answer: $0
How does a noncorporate shareholder treat the gain on a redemption of stock that qualifies as a partial liquidation of the distributing corporation?
Entirely as a capital gain
What amount is deductible by an individual for interest on qualified education loans per year?
$2,500 per year is deductible.
In what year is a charitable contribution from a promissory note delivered on November 1, Y6 which was paid upon maturity four months later?
It is not considered a contribution until payment of the note upon maturity in Y7
How are receipt of an inheritance and proceeds of a lawsuit for personal physical injuries treated when calculating AGI?
Inheritance and lawsuit proceeds for personal physical injuries are excluded from gross income
What type of entity does the rule limiting the deductibility of passive activity losses and credits apply to?
The passive activity limitations applies to individuals, estates, trusts, closely held C corporations, and personal service corps
In calculating an itemized deduction, what amount is the deduction for personal taxes limited to?
Personal taxes (state income and property taxes) is limited to $10k
Which of the following items are/are not deductible taxes in computing itemized deductions?
a) Property tax on residence
b) Special assessment for installation of a sewer line
c) State personal property tax on the value of their automobile
d) Property taxes on land held for long-term appreciation
a) Deductible
b) Not deductible
c) Deductible
d) Deductible
When calculating the amount of a loss carryforward, what item is used to determine the amount of the loss carryforward that will be used on the CURRENT year’s tax return?
For example, In 2021, WIlliam and Mary had an excess business loss of ($400k). In 2022, the couple’s taxable income before any NOL deduction is $500k. On what amount will the 2021 loss carryforward be based on?
The item that is used is the taxable income times 80%. The amount deductible in the carryforward years is limited to 80% of taxable income
Answer - Taxable income amount of $500k * 80%
