Income Tax Flashcards

Question

Corporate accumulated earnings

Answer 1

Regular corp can accumulate $250k (150k for PSC) in earnings without establishing a business need and without being penalized a tax of 20% (Income - taxes - dividends paid) + prior accumulated income - credit of 250 or 150 = income

Answer 2

Firms realize revenue from services in the year of payment regardless of when services performed Businesses having NO MORE then $25mm in revenue

Answer 3

Firms realize revenue when the earnings process with goods or services they provide is complete regardless of when payment was received. Mandatory for business with inventories over $25mm

Answer 4

FIFO: increase earnings; greater tax; current cost of inventory LIFO: reduced earnings; tax deferral; understated inventory Use specific lot I’d when selling company

Answer 5

NOL received in one year can be used to offset taxable income for future years No carrybacks Pre 2018 grandfathered forward for 20 years otherwise indefinite Scorps and partnerships can’t claim NOL

Answer 6

Includes legal fees; sales taxes; freight; improvement DOESN’T include repairs; real estate taxes or normal business expenses

Answer 7

During life: Basis = owners basis UNLESS if FMV date of gift is lower than basis AND you sell below FMV at date of gift then loss otherwise use donors basis

Answer 8

Recovery of certain capital expenditures that are not ordinarily deductible in a manner like straight line

Answer 9

Discount is earned over years as taxable income and bonds basis is increased Phantom income

Answer 10

All recovery property NOT land or intangibles Straight line offered but with half use 5 YEAR - computers, autos. Light truck (1245) 7 YEAR - office furniture and fixtures (1245) 27.5 YEAR - residential real property (1250) 39 YEAR - non residential real property (1250)

Answer 11

Business expense up to $1.08 million of qualifying property in the year it was acquired Person can’t apply Loss can’t be created Avoid burden of maintaining MACR Deduction is limited by income received from any trade or business Only section 1245 property can be 179’ed Goodwill or franchise or any intangible property can’t be elected for 179 deduction

Answer 12

Properties must be same in nature rental for rental NO inventory or tax payers principal resident Tax is deferred No boot = 0 gain If completed with family and they sell within 2 years then gain is recognized exchange collapses

Answer 13

Mainly for equipment When businesses take depreciation or CRD then CRDs offset business ordinary income 1. 1245 gain = the lesser of total CRDs or gain realized 2. 1231 recovery = if CRDs are lower then gain take excess - CRDs. If gain is less then CRDs then no recovery Taxed at ordinary income tax rates

Answer 14

All depreciation recapture must be reported as income in year of disposition.

Answer 15

Property sold to charity for less then FMV Adjusted basis = (Price sold/fmv) * basis Gain= Sale price - adjusted basis

Answer 16

1040 income itemizing or AGI standard Add back items Add preference items equals AMT base Subtract exemptions AMTI MULITPLE BY 28% If regular tax is greater than AMT then no AMT is due If regular tax less than AMT then difference between the two is due

Answer 17

Also known at MLP Losses may NOT be used to offset passive income from other sources Loss is carried forward and used ONLY against future income from that same partnership or when partnership is sold

Answer 18

Losses can be taken up to income from any partnership Loss is fully deductible is asset is disposed

Answer 19

Must own at least 10% and have active material participation to Deduct up to $25k If AGI is between 100-150 deduction is on 2 for 1 basis

Answer 20

Not deducted if owners use exceed longer of 14 days or 10% of rental period

Answer 21

Not passive exempt from PAL rules Losses deducted from active portfolio income

Answer 22

Closely held c corp NOT Personal c corp Passive losses to offset active income not portfolio income

Answer 23

Rentals Royalty income Limited partnerships Partnerships Scorp LLC

Answer 24

Can file jointly after spouse passes away for two years if maintain home for dependent children Can also file married separately The year spouse dies Can file as a widow the following year if she meets one of the following: 1. Maintains a home 2. Has dependent child 3. Filed joint return year prior 4. Does not remarry

Answer 25

Payments must be in cash OR payments to third parties to pay for spouses mortgage, rent, tax or tuition or payee your ex owns life insurance on your life Not qualified Non cash items including services or use of property or payments to maintain property

Answer 26

Cash is max 60% of AGI Carry forward for five years Longterm property: 30% of AGI If basis is used then 50% of AGI Short term property: 50% of AGI use basis Non use related: same as short term Use related - 30% of AGI Can’t deduct more than FMV

Answer 27

If value exceeds $500 must have handwritten proof of donation If the charity doesn’t improve the car then max deduction is gross proceeds if sold

Answer 28

May not deduct more than 10% of taxable income If a corp makes a gift of inventory to The ill, needy or care of infants they can deduct its basis for property plus 1/2 of property’s unrealized appreciation. It can’t exceed twice the basis

Answer 29

40 what were of coverage No more than 4 credits per year Currently insured is 6 credits in 13 quarters Not covered: fed employees, Americans working abroad, tribal members, railroad workers, child under 18 etc

Answer 30

5 months waiting period Fully insured worker 62 or older Disability benefits if under 62 and have been disabled for 12 months and expect to be disabled for another 12 months or die

Answer 31

Spouse of disabled or retired worker qualifies if: Age 62 or older At any age if has child under care below 16 or has older child but disabled before 22 Divorce spouse receives spouses exs benefits if they were married for at least 10 years and did not remarry Or divorced spouse age 62 who had been divorced for 2 years

Answer 32

Qualifies if insured deceased worker qualifies and surviving spouse is 60 and older or at any age if caring for child under 16 or child who became disabled before 22 Gets deceased’s spouse’s full benefits

Answer 33

Qualifies if dependent is under 19 and full time student or 18 and older and is disabled before 22

Answer 34

Full retirement age: keep all benefits of working Younger than full retirement age: income above $19,560 deduct $1 for every $2 of benefits Reaching full retirement age that year: above $51,960 deduct $1 for every $3 of benefits

Answer 35

Provisional income = earned income plus muni bond income plus 1/2 of social security income 50% of social security income is included in tax calc if provisional income is higher than $25k single; $32k more married 85% is included if income is $34k or more for single; $44k married

Answer 36

You have the onetime right to withdraw from receiving benefits within 12 mos of initial claim. You MUST pay back all payments without interest. Delay means payments may be greater in the future.

Answer 37

Covers both social security and Medicare Employee and employer each pay 6.2% social security tax plus 1.45% Medicare tax for w-2 earnings of $147k After $147k each pays Medicare taxes of 1.45% so if employee earns $150k They individually pay 6.2% on 147k and 1.45% on $150k People earning $200k or more pay additional .9% totaling to 2.35% of Medicare tax

Answer 38

Profit divided by total contract price = % Take the percentage and multiple it by the installment payment to get your LTCG

Answer 39

Only applies to the first million dollars of stock Loss of $100k per year jt or $50k per year single is ordinary loss not cap loss

Answer 40

NONE!! Can’t claim anybody

Answer 41

Household employee

Answer 42

Take the total amount paid subtract $37,500 that amount will be recaptured

Answer 43

A deduction is worth more to a high bracket tax payer A credit is worth more to a low bracket taxpayer

Answer 44

Individuals who earn income through pass through businesses may qualify to deduct up to 20% of their qualified business income Based on tiers 1. Single less than $170k and joint making less then $340k may claim full 20% 2. Single less than $220k or joint more than $440k NO DEDUCTION 3. For those in between the threshold receive partial

Answer 45

Automatically use related 30% AGI fmv

Answer 46

A dated receipt is necessary For purposes of income tax deduction More than $250 need written acknowledgment from charity

Answer 47

ELIMINATED

Answer 48

Refund from mistake on previous return Can file this to waive excess tax from over contributing to retirement plan or forgetting to complete RMD if: 1. Missed distribution due to reasonable error 2. Appropriate steps are being taken to remedy the situation.

Answer 49

supplemental executive plans Informally funded Called top hat plans

Answer 50

Not a public or private charity

Answer 51

Rentals Enable depreciation deduction to offset rental income

Answer 52

Unearned income triggers kiddie tax NOT earned Unearned = interest, non qualified dividends and short term gains qualified dividends and LTCG are taxed at different rates and not subject to kiddie tax

Answer 53

If you pay AMT related to exercise of ISOs basis increases Basis + AMT tax

Answer 54

For low to moderate income tax payers and matches % based on AGI of tax payers IRA, retirement plans or ABLE contributions. Credit is for $2k single or $4k MFJ and AGI must be under $33k single and $66k MFJ

Income Tax Flashcards

(80 cards)