Deck 39 Flashcards Preview

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Flashcards in Deck 39 Deck (21):
1

How will book income be affected by "interest income from municipal bonds"?

Subtracted from book income

2

How will book income be affected by "excess capital losses over capital gains"?

Add back to book income

3

Unlimited exclusion from gift tax includes:

1) payments made directly to an educational institution for a donee's tuition, (2) payments made directly to a health care provider for medical care, (3) charitable gifts, and (4) marital transfers

4

Capital assets generate either:

Long-term capital gains or long term capital asset

5

What limitations exist that won't allow an item to qualify for the 179 deduction?

1) When there is a loss or 2) when the purchases exceed $2 million or 3) when it is land 4) can't exceed $500,000; if none of these limitations apply then the amount of the deduction is equal to lessor of the amount purchased or the taxable income amount

6

Maximum cap on 179 deduction?

$500,000

7

When a partnership purchases an asset, does this affect a partner's basis?

NO

8

How does the dividends received deduction affect book income?

Add back to book income to get taxable income

9

When you sell an item that you normally sell within your business, you treat the gain as...

Ordinary income

10

When you sell a random item that is not in your ordinary course of business, the gain is treated as....

Short-term or long-term capital gain

11

What transactions are subject to a securities exemption?

Securities of charitable organizations, municipal bonds, and stock splits

12

When a seller notifies the buyer, before acceptance, that the seller is shipping nonconforming goods; what results?

This is considered a counteroffer (If there was no notification, then it would be acceptance and breach of contract)

13

Two have an enforceable option contract, two things must happen:

Must be for the sale of goods and there must be consideration exchanged (writing is not required, can be oral)

14

Priority rules for Bankruptcy (SAG WEG CTI)

S: support to spouse, children; A: Administration expenses (fees); G: gap claims; W: wage claims up to $12,475; E: employee benefit plans up to $12,475; G: grain farmers; C: consumer deposits; T: Tax claims; I: injury claims from intoxication

15

In calculating the tax of a corporation for a short period, what process is used?

Annualize income and calculate the tax on annualized income, then multiply by the number of months divided by 12

16

Taxable gross profit =

amount collected x gross profit percentage

17

When a corporation distributes assets to a shareholder, the corporation must:

Recognize a gain as if it sold the asset; FMV or liabilities (whatever is higher) minus the adjusted basis of the asset

18

An investment in a capital asset (stock) results in the income being:

Capital; capital loss or capital gain

19

A partner will recognize a gain only when:

Money received exceeds the partners basis

20

Form 1065 reports:

Reports ordinary business income for partnership (interest income not included)

21

Schedule K-1 reports:

Separately stated items for each partner