Final Review Flashcards by John McFarlin

What is the basis in stock repurchased resulting from a wash sales?

cost of replacement + disallowed loss

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Is a bank liable to the drawer if failure to obey a stop pay did not cause a loss?

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What is the basis in a new building that was destroyed and insurance was received for the loss?

Cost to rebuild

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Equation for Like-Kind Exchange

(+) Basis Given Up
(–) Boot Received
(+) Gain Recognized

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What is the distribution amount to a shareholder for property received with a liability to be assumed?

FMV of property - Liability assumed = Distribution

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Sec 1231 gain recapture as ordinary income is for how many preceding years?

5 years

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“Fit for all of the purposes for which the buyer intends to use the goods” is what type of warranty?

Merchantability

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Term used to avoid liability under SEC 1933

Due Diligence

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Does “Composition of Creditors” release the debtor from debt?

Yes

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Can a charitable contribution increase or create a NOL?

No, charitable contributions are not part of a NOL

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If it’s not clear if a property is joint tenancy or tenancy in common what is the default?

Tenancy in Common

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Lessee purchasing the leased property does what to the lease?

Terminates it

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Basis in partnership for a partner contributing services and property

FMV of Partnership interest - PMV Property Given = Income

BASIS = Income + Property AB

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Does a buyer in the ordinary course of business take free of any security interest, even if perfected?

Yes

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Are limited partners liable for who’s negligence?

Their own and who they supervise

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What must be proven to claim fraud in the inducement?

The defendant made a false statement with intent to deceive

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For a service contract where additional work is requested for additional pay, and the contract is over $500, is this binding?

Yes, additional pay is additional consideration

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Can a consumer recover from a manufacture even if they can not prove negligence?

Yes

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Shareholder’s basis in corporation when transferring property, equation

(+) Adjusted Basis
(+) Gain Recognized
(--) Boot Received
(--) Liabilities Assumed
(=) Basis in Corporation

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Corporation’s basis in property contributed by Shareholder, equation

(+) Shareholder’s Adjusted Basis

(+) Gain recognized by the Shareholder

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Holding period for Shareholder in property contributed to corporation

Capital or Sec 1231 - tack on

2. All of property - day of contribution

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Holding period for Corporation of property contributed

Tack-On Shareholder’s

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Realized Gain or Loss Equation

(+) Amount Realized
(–) Adjusted Basis
(=) Realized Gain/Loss

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Amounts Realized include what 4 items?

Cash
FMV of Property
Liabilities Assumed
Less: Selling Expense

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Are losses on personal assets deductible?

Contributing Inventory to a corporation is what type of asset and what holding period will it take

Ordinary, Tack-On holding period

No gain or loss recognized to the Shareholder in a corporate formation when what occurs?

* **80% rule is first test a. Stock is the only property received b. Stock is received in exchange for cash or property only, no services

If boot is received in a corporate formation what is the amount of boot?

Lower of: a. Realized Gain b. FMV of Boot

When can you not compute realized gain?

You can always compute realized gain, but it's not always recognized (ex. 80% test)

If debt assumed by a corporation is greater than the AB of property contributed by the shareholder what is the gain amount?

Gain = Debt Assumed -- Adjusted Basis of Property

How are Guaranteed Payments accounted for in Partnerships?

Deducted from Ordinary Income

When are "Hot Assets" accounted for?

Only on Sale or Termination of Partnership Interest, not non liquidating distribution

Can basis in a Partnership go below Zero?

What triggers an accrual basis tax payer?

Average over $5mill for 3 years

What is the tax return form for a S-Corp

1120-S

What or the Ordering Rules

1. Net Income 2. Distributions 3. Losses

TRP Penalty (not client penalty) for taking an "unreasonable position", not willfuly

Greater of: a. $1,000 b. 50% of income received from client

TRP Penalty (not client penalty) for taking an "unreasonable position", WILLFULLY

Greater of: a. $5,000 b. 50% of income received from client

How are medical expenses paid for a dependent deducted (For AGI or Misc Itemized Deduction)

For AGI

How are expenses related to passive rental income deducted?

Schedule E, above the line

Are gambling losses an itemized deduction subject to the 2% floor?

No, not subject to the 10% floor

Child tax credit per child

$1,000

How is the child tax credit phased out?

$50 for every $1,000 over, rounded up to the next $1,000

Is a scholarship that goes directly to tuition and fees taxable?

Fraud in the inducement is what type of defense?

Personal Defense

Tax Payer penalty for Under Reporting Income - Negligently

20% of tax due

Tax Payer penalty for Under Reporting Income - Fraud

75% of tax due

Tax Payer Failure to File Penalty

5% a month, not to exceed 25% of tax due

Tax Payer Failure to Pay Penalty

0.5% a month, not to exceed 25% of tax due

Is the appreciation of property since the time a debtor filed bankruptcy part of the estate?

Yes

3 items included in Bankruptcy estate if received after 180 of filing

1. Inheritance or Gift 2. Divorce, Separation, or Property Settlement 3. Beneficiary Proceeds from Life Insurance

Interest Income received on a mortgage loan is recorded on what schedule?

Computation of Self-Employment tax is based on what?

Net Earnings from Self-Employment

How is a net loss in an Asset Group applied to other asset groups?

Starting with the highest tax rate and moving down

When is the only time that the 60% rule of a secured party reposes collateral and having to sale it apply?

Consumer Goods

If a party take a note in "good-faith" they probably are what?

Holder in Due Course

If a negotiable instrument does not have a stated time that it pays when is it payable?

On demand

Official Bonds are the obligation of who?

The surety

When and how much can a noncorporate shareholder exclude gains from the sale of Qualified Small Business Stock?

Held after 5 years, 50% of the gain

Does a general partner in a limited partnership have the same rights as a general partner in a general partnership?

Yes

Past and Present owners of Environmentally Damaged property have what type of liability?

Joint & Several, all can be held liable for the whole thing

If a partner sales property to a partnership, not acting as a partner, they can recognize a gain or loss unless what situation?

They own 50% or more of the partnership

If an issuer has less than 35 unaccredited investors they qualify for which Reg D section

All 3; 504, 505, 506

When would a limited partner have a liability to a limited partnership on dissolution?

If the limited partnership as a receivable from the limited partner

Can a loss be recognized by a corporation for a non-liquidating distribution?

No, no loss on non-liqudating

When would a shareholder on a corporate formation defer a gain vs. recognize a gain?

Defer if part of the 80% "Control Club" | Recognize if not part of 80% or boot is received

Who is a "Tax Delinquency" penalty imposed on?

Someone who owes taxes but does not file a return

AMT Exemption amount equation

$40,000 - (25% over $150,000 AGI)

What is the standard deduction for Trust/Estates?

ZERO

Debt acquire by a corporation that is greater than the AB of property contributed results in what?

Gain to shareholder

"Hot Assets" result in what type of income?

Ordinary

Can a partner take a partnership loss that exceeds their basis?

No, it's carried forward

When is a S-Corp shareholder's basis increased for debt and when is it not?

Shareholder contributes debt - Increase | S-Corp gets own debt - Does NOT Increase

What is the tax treatment of Education IRA for contributions and withdrawals?

Contributions - NOT deductible | Withdrawals - Tax FREE for qualified education expense

Credit for AMT can be carried back/forward how long and can offset what?

Forward only, indefinitely | Only Offsets Regular Tax

Can Self-Employed individuals deduct their own salary as a business expense?

What tax form does a partnership file?

Form 1065

Limited Partners basis increase for what type of debt?

Non-recourse only | No change for Recourse debt

What are the 4 criteria for "Small Business Stock"

1. Held for 5 years 2. Corporation less than $50 million capital 3. 50% gain excluded 4. 28% tax rate on gain

Section 1244 gain and loss treatment

Gain - Capital Gain | Loss - Ordinary loss

When a shareholder buys property from a corporation for less than FMV what did the shareholder receive?

Constructive Dividend

What is the difference between a check and a negotiable time draft?

Negotiable time draft is payable at a definite time in the future, but is a 3 party instrument like a check

Does a buyer in the Ordinary Course of Business take free of any perfect security interest?

Yes

What amount of loss is allowed if partnership property is sold to an individual partner that owns more than 50% of the partnership?

Zero

If a merchant contracts to buy 100 lbs of gold over 6 months and circumstances change do they have to buy all 100 lbs?

Yes

Loss related to the sale of a subsidiary (80% ownership) is what type of loss to a corporation?

Ordinary

Do Limited Partners owe a fiduciary duty to the partnership?

What is the automatic start up and/or organizational cost deduction before amortization? What is it's limit?

$5,000 | Anything amount over $50,000 if phased out dollar for dollar

How is investment interest expense that does not exceed net investment income deducted?

Fully deductibe

What is the max amount that can be raised through crowd funding for a EGC?

$1 million

How is Interest on Tax-Exempt income treated for Personal Holding Tax?

Excluded

The term for basis used to determine gain on sale of property that was received as a gift

Transferred Basis

What is the only way that a Firm Offer is created?

MERCHANT makes a offer by SIGNED writing

For federal estate tax is a created allowed for state death taxes paid?

What is the term for the maximum amount of income taxable to beneficiaries of a trust?

DNI

Do trust or estate received a standard deduction?

How is all depreciation on Section 1245 property recaptured?

Ordinary Income, even if over straight-line

Uniform Capitalization applies to who?

3 years averaging over $10 million gross receipts

Do you use a partner's outside or capital basis in the partnership to calculate gain or loss on termination?

Outside Basis

S-Corp Eligibility rules for entities

1. No Foreign corporations 2. Members of consolidated group aren't eligible 3. Can own 80% or more of a C-Corp 4. My own a S-Corp

Shareholder Requirements of an S-Corp

1. Nonresident aliens, C-Corps, and Partnerships are not eligible 2. Estates can be shareholders 3. Trust can be shareholders

How many corporate shareholders have to vote for an S-Corp to be effective? How many to terminate?

Unanimous consent - Effective | Majority - Terminate

Can an S-Corp have a tax year other than a calendar tax year?

Yes

Are shareholder's of a s-corp liable for an S-Corps debt?

Do S-Corps pay AMT, Personal Holding Tax, or Accumulated earnings tax?

Are S-Corps entitled to normal C-Corp deductions, such as the DRD?

Final Review Flashcards

(106 cards)