Income Tax Live Review

Question 1

can be cited as precedent

Answer 1

revenue ruling and revenue procedures

Question 2

primary source of all tax law

Answer 2

IRC - internal revenue code

Question 3

Dates for paying estimated taxes

Answer 3

April 15th
June 15th (+2)
September 15th (+3)
January 15th (+4)

Question 4

extension for taxes

Answer 4

to file, but not to pay

Question 5

if you need to share information what type of person should you look for?

Answer 5

a privileged person like an attorney or doctor

Question 6

frivolous return

Answer 6

$5k penalty

Question 7

Negligence

Answer 7

penalty is 20% of the UNDERPAYMENT

Question 8

Civil fraud

Answer 8

penalty is 75% of the UNDERPAYMENT

Question 9

failure to file

Answer 9

5%/month - 25% max

Question 10

failure to pay

Answer 10

.5%/month - 25% max

Question 11

estimated tax penalty avoidance

Answer 11

lessor of
90% of the current year’s tax liability
100% of the prior year’s tax liability (110% if AGI>$150k)

Question 12

schedule for real estate

Answer 12

schedule E

Question 13

main adjustments FOR AGI

Answer 13

IRAs
KEogh or SEP
1/2 self employment tax
alimony (pre 2019)
self employment health insurance
2500 student loan interest
HSA

Question 14

investment interest deduction

Answer 14

max deduction allowed is limited to the taxpayer’s net investment income

Question 15

what qualifies as “investment income”

Answer 15

income from property held for investment
interest
dividends
royalties
short term gains

Question 16

are dividends included in investment income

Answer 16

ONLY if the taxpayer elects not to use th reduced rates

Question 17

Deductible loss

Answer 17

FEDERALLY declared disaster
1. use the lesser of basis or FMV
2. subtract any insurance coverage
3. subtract $100 (floor)
4. Subtract 10% of AGI

Question 18

itemized miscellaneous deductions

Answer 18

repealed

Question 19

home office

Answer 19

for SELF EMPLOYED persons only
deduction limited to income derived from the activity
essentially, can’t create a loss

Question 20

home office deduction requirements

Answer 20

Exclusively and regularly used for business
no other fixed location

Question 21

entertainment expenses

Answer 21

non deductible

Question 22

what meals are deductible

Answer 22

for the convenience of the employer and employee meals while traveling
50% deductible

Question 23

personal and dependency exemption

Answer 23

SUBSPENDED

Question 24

kiddie tax applies when?

Answer 24

all net UNEARNED income of a child who has not attained age 24 and who has at least one parent alive is taxed at the parent’s rate

Question 25

standard deduction kiddie tax unearned and earned income

Answer 25

The greater of $1,300 unearned income or earned income plus $450 NEVER more than a single persons standard deduction

Question 26

self employment includes

Answer 26

net schedule C income genearl partnership income board of directors fees part time earnings (1099)

Question 27

taxable wage base given in test questions shouldn't exceed....

Answer 27

$168,600

Question 28

credit for child and dependent care expense

Answer 28

UNTIL AGE 13 Non refundable $3k for one dependent or $6k for two or more multiply by 20% on the exam

Question 29

child tax credit

Answer 29

child under age 17 $1,600 per child is refundable $2k/child

Question 30

what is the "family credit"

Answer 30

nonrefundable credit dependents in your household that do not meet the definition of qualifying child

Question 31

earned income credit

Answer 31

refundable

Question 32

calculation of gain on an installment sale

Answer 32

cash received multiplied by gross profit percentage

Question 33

gross profit percentage calc for an installment sale

Answer 33

profit/total contract price

Question 34

related party tax trap for installment sales

Answer 34

if a related party sells the property within to years of the original purchase date the installment sale collapses all gain is taxed retroactively in the first year

Question 35

net operating losses

Answer 35

NOL can be sued to reduce the taxable income in future years CANNOT be carried back to prior years can be carried forward indefinitely

Question 36

if a business is profitable it should be?

Answer 36

C corporation personal service corporation

Question 37

if a business has losses and is risk free it should be?

Answer 37

sole prop partnership

Question 38

if a business has losses and is risky

Answer 38

S corporation LLC LLP

Question 39

C corporation tax rates

Answer 39

flat 21%

Question 40

taxation of a PSC

Answer 40

personal service corporation 21% flat tax

Question 41

what types of businesses are PSC?

Answer 41

Health Accounting, Architectural, Arts, Law Engineering

Question 42

Section 1244

Answer 42

qualified small business stock only applies to the first million dollars of stock loss of $100k/year is ordinary (not capital)

Question 43

Sole prop and interest paid

Answer 43

if money is borrowed for business purposes the interest paid (without limit) is deductible on Schedule C

Question 44

General partnership filing

Answer 44

conduit entity file a 1065, but it's for informational purposes only partners get a K1

Question 45

losses and partnerships

Answer 45

losses up to basis

Question 46

Subchapter S corporations

Answer 46

1120S conduit entity 100 shareholder limit

Question 47

basis for S corporation

Answer 47

conduit of income/loss to owner losses are deductible up to basis NO BANK LOANS

Question 48

QBI

Answer 48

deduction of up to 20% of QUB from pass through entities service related businesses have a QBI phaseout

Question 49

QBI for nonservice businesses

Answer 49

if taxable income is over the top thresholds QBI can still be available Reduced by one half of the amount of wages paid by the business

Question 50

limited partnership

Answer 50

must have one general partner

Question 51

5 year property

Answer 51

computers autos light duty trucks

Question 52

7 year property

Answer 52

office equipment except computer

Question 53

179 deduciton

Answer 53

election to expense up to $1,220,000 of qualifying property in the year of acquisition CANNOT create a loss

Question 54

What numbers to use with 1031 exchanges

Answer 54

FMV of property received Adjusted basis of property given up Boot

Question 55

gains and losses on the schedule D

Answer 55

net short terms net long terms net if a loss remains after netting capital gains and losses, only $3,000 of net losses can be used to offset ordinary in a specific tax year

Question 56

long term capital gains of collectibles

Answer 56

28%

Question 57

Section 121 exclusion

Answer 57

principal residence for an aggregate time period of 2 years out of the 5 year period immediately preceding the home's date of sale

Question 58

preference items for AMT

Answer 58

Excess INTANGIBLE drilling costs Private activity muni bond Oil and gas PERCENTAGE depletion Depreciation (not straight lien)

Question 59

AMT add back items

Answer 59

ISO bargin element property, state, and city/income taxes

Question 60

how can we avoid or postpone AMT?

Answer 60

- Accelerating the receipt of taxable income -deferring payment of property taxes -deferrign the exercise of an incentive stock option to a later date or disqualifying the ISO -purchasing public purpose munis instead of private purpose bonds

Question 61

passive activities

Answer 61

trade or business in which the taxpayer does not "materially participate"

Question 62

rental of the principal residence

Answer 62

<15 days rental income is excludible from the taxpayer's gross income NO deductions allowed

Question 63

Renting your vacation home (normally a business)

Answer 63

personal use cannot exceed the longer of 14 days or 10% of the rental use