final

Question 1

Income

Answer 1

Income is recognized and taxable in the year it is realized unless there is a special nonrecognition provision

Question 2

Computation of Tax

Answer 2

Gross income
less Non itemized deductions
equals Adjusted Gross income (AGI)
Subtract Itemized deductions or Standard deduction
Equals Taxable income
*Apply Tax Rates to determine Normal Tax
Subtract Tax Credits and Add Surtaxes
Equals Tax Due

Question 3

Basis

Answer 3

Taxpayer’s investment in property

Question 4

Cost Basis

Answer 4

the amount Taxpayer invested into the property
1. Cash for property: the basis in th acquired property is equal to the cash exchanged.
2. property for property (not cash): the basis in the axquired property is equal to the fair market value of the acquired property on the date of acquisition

Question 5

Substituted Basis:

Answer 5

basis measured by the basis of another asset
transferred basis: measured by someone else’s basis in the asset
exchanged basis: measured by the basis of a different asset

Question 6

Constructive Basis

Answer 6

not determined by the amount invested

Question 7

Adjusted Basis

Answer 7

basis used to determine gain or loss on sale or disposition of an asset
upward: amount of any capital improvement
downward: recapture of investment, tax benefit dependent on basis, depreciation, casualty

Question 8

Medical Insurance Payments (Excluded Fringe benefit)

Answer 8

amount an employer pays towards an accident or health plan for employee, spouse, and dependents

Question 9

No Additional Cost Service

Answer 9

1. type of service provided to customers in the ordinary course of the business in which the employee provides substantial services
   2.

Question 10

Qualified Employee discount

Answer 10

1. on property or services offered for sale to customers in the ordinary course of the line of business in which the employee performs sustantial services
2. not personal property held for investment or real property
3. discount on property must not exceed gross profit percentage: of price charged to customers
4. discount on services cannot exceed 20%
5. no discrimination in favor of highly compensated employees

Question 11

De minimis fringe

Answer 11

take into account value and frequency

Question 12

Eating facilities - De minimis if:

Answer 12

1. for convenience of employer
2. on or near business premises of the employer

Question 13

Qualified Transportation

Answer 13

1. parking
2. transportation in a commuter highway vehicle between residence and place of employment; and transit passes
3. after 2025: bicycle commuting
   cash reimbursement okay
4. excludable even if employee can choose between the benefit and additional compensation

Question 14

Retiring Planning services

Answer 14

retirement planning advice provided by employer maintaining a qualified employer plan

Question 15

Military Base Realignment and Closure

Answer 15

offset of losses in property values from base closing

Question 16

Athletic Facilities

Answer 16

1. located on the premises of employer
2. operated by employer
3. sustainability all of hte use is by employees, spouses, and dependent children

Question 17

reimbursed expenses

Answer 17

personal expenses include
expenses incurred in conduct of employer’s business excluded

Question 18

Per diem:

Answer 18

in lieu of actual expenses when traveling, excluded if below federal per diem rate

Question 19

Meals and lodging: excluded under 119 if

Answer 19

1. for convenience of employer
2. to employee, spouse, and dependents
3. on business premises of employer
4. for lodging, acceptance of lodging a condition of employment
5. furnished in kind

Question 20

group term life insurance

Answer 20

employer paid premiums excluded to $50,000 of insurance, no discrimination in favor of key employees

Question 21

Dependent Care Assistance: excluded if

Answer 21

1. employment related expenses
2. pursuant to qualified program
3. annual limit and earned income limit
4. no discrimination in favor of highly compensated employees

Question 22

Educational Assistance Program

Answer 22

1. maximum annual amount
2. written plan specifying qualifying employee classifications, not discriminating in favor of highly compensated employees.
3. cannot provided alternative remuneration
4. Notification of terms and eligibility to all eligible employees
5. Excludable benefits - tuition, fees, book, equipment

Question 23

Qualified Tuition Reduction

Answer 23

1. for employees of educational organization below graduation level (exception for teaching and research assistants)
2. employee, spouse, or dependent children
3. no discrimination in favor of highly compensated individuals
4. not excluded to extent it represents payments for services (standard: services are primarily for grantor’s benefit)

Question 24

Adoption Assistance

Answer 24

maximum per child and phased out at higher levels of income

Question 25

Cafeteria plans

Answer 25

provide a choice among several benefits, including cash

Question 26

Cash compensation for services

Answer 26

Income when received by service provider

Question 27

Compensation other than cash

Answer 27

amount of income = fair market value of property or service received

Question 28

Property for services

Question 29

Services for services

Question 30

Property for Property

Question 31

Bargain Transaction

Question 32

IRC Section 83(a) (restricted property)

Answer 32

The receipt of property subject to a substantial risk of forfeiture or (2) the recipient has the right to transfer the property 1. transferer owner of property for tax purposes 2. recipient owner under state law purposes

Question 33

IRC Section 83(b)

Answer 33

Election to have fair market value of property less amount paid included in income in year of receipt despite lapse restrictions 1. determine value of property as if lapse restrictions are non-existent 2. recipient full owner of property 3. no additional income upon vesting regardless of then FMV 4. no deduction if property is forfeited