Other Taxation Topics

Question 1

Tax based on property transferred uring an individual’s lifetime

Answer 1

gift tax

Question 2

Tax based on property transferred at an individual’s death

Answer 2

Estate tax

Question 3

Tax taht ensures that proepty does not skip a generation without a transfer tax being assessed

Answer 3

Generation-skipping transfer tax

Question 4

Act that reinstated the federal estate tax and generation-skipping transfer taxes to the estates of decedents dying and GSTs made after December 31 2009, and before Jan 1, 2013
-Higher applicable exclusion amt of $5 M and lower max tax rate of 35%

Answer 4

Tax Relief Act of 2010

Question 5

A transfer for less than adequate consideration in money or money’s worth–occurs when the transfer is complete and is measured at FMV on that date

Answer 5

Gift

Question 6

An interest in a gift that is an unrestricted right to the immediate use, possession, or enjoyment of property or the income from property; annual exclusion of $13,000 allowed

Answer 6

Present interest

Question 7

An interest in property that includes reversions, remainders, and other interests that are limited to commence in use, possession, or enjoyment at some future date or time; annual exclusion NOT available for these interests

Answer 7

Future interest

Question 8

A gift by either spouse to a third party may be treated as made one-half by each, if both spouses consent to election; has hthe advantage of using hte other spouse’s annual exclusion and unified transfer tax credit

Answer 8

Gift-splitting

Question 9

Deduction allowed without limitation for gifts to a donor’s spouse if gift is not terminable (i.e. doesn’t end with spouse’s life) or the donor elects a Qualified Terminable Interest Property (QTIP)

Answer 9

Marital deduction

Question 10

Property placed in trust with income to donee spouse for life and remainder to someone else at donee spouse’s death–will qualify for the marital deduction if the income is paid at least annually to spouse and the property is not subject to transfer during donee spouse’s lifetime

Answer 10

Qualified terminable interst property (QTIP)

Question 11

The FMV of all property in which the decdent had an interest at the time of death

Answer 11

Gross estate

Question 12

United States Estate (and Generation Skipping Transfer) Tax Return that must be filed if hte decedent’s gross estate exceeds $5 M in 2011 ($5.12 M for 2012)
–must be filedw/in 9 months of death unless an extention is tranted

Answer 12

Form 706

Question 13

Must be filed by an estate if it has gross income of $600 or more, or has a beneficiary who is anonresident alien
-Must be filed for a trust if gross income of $600+, ANY taxable income, or a nonresident alien beneficiary

Answer 13

US Income Tax return for Estate or Trust (Form 1041)

Question 14

A trust that is required to distriute all of its income to beneficiaries each year, cannot make charitable contributions, and makes no distribution of trust corpus (pricnipal) during the year

Answer 14

simple trust

Question 15

Trust other than a simple trust

Answer 15

complex trust

Question 16

The maximum amount of deduction for distriubtions to beneficiaries in any taxable year and also determines the amounts and character of hte income reported by the beneficiaries

Answer 16

Destributable net income (DNI)

Question 17

Trusts over which the grantor (or grantor’s spouse) retain substantial control–income is generally taxed to the grantor, not to the trust or beneficiaries)

Answer 17

Grantor (revocable) trust

Question 18

Organizations that generally serves some common good, is operated as a not-for-profit, has net earnings that do not inure for hte benefit of specified individuals, and does not exert undue political influence; to achieve this status must be an org specfically identified in the code and generally must apply for an exemption

Answer 18

Tax-exempt organization (IRC Sec. 501)

Question 19

Test under IRC 501 to determine if an entity qualifies as a tax-exempt organization that requires the articles of organization to limit the organization’s purposes to one or more exempt purposes

Answer 19

Organizational test

Question 20

Test under IRC 501 to determine if an entity qualifies as a tax-exempt org that requires hte org to be operated exclusively for an exempt purpose

Answer 20

Operational test

Question 21

Private benefit provided to insiders who have the institutional opportunity to direct the organizaiton’s resources to themselves, to entties in which they have an interest, or to family members

Answer 21

Inurement–if occurs cannot be a tax-exempt organzation

Question 22

An organization is said to be this if it normally receives at least 1/3 of its total support from governmental units and the general public

Answer 22

Publicly supported

Question 23

Organizations (other than churches, educationaorganizations, hopsitasl, etc) that operate for the benefit of certain state and municipal colleges and universities, governmental units, and publicly supported organizations

Answer 23

Private foundations

Question 24

An organization that carries on a trade or business for the benefit of an exempt organzation and remits its profits to the exemp org–does NOT qualify for tax-exempt status

Answer 24

Feeder organization

Question 25

Most tax exempt organzations must file this (except churchases, federal agencies, or orgs whose gross receives do not exceed $50,000, and private foundations)

Answer 25

Form 990 (Return of Organization Exempt from Income Tax)

• -due by 15th day of 5th month (May 15)
• if fails to file 3 consecutive years, will lose its tax exempt status

Question 26

Income from a business that is (1) regularly carried on and (2) is unrelated to the organizations’ exempt purose
–taxed to the extent in excess of $1,000 and must be filed on Form 990-T

Answer 26

Unrelated Business Income (UBI)

Question 27

The presence or activity required within a state before hte state may tax a nonresident

Answer 27

nexus

Question 28

Provides rules for allocating and apportioning a multistate or multinational enterprise’s nonbusiness and business income among states and foreign countries

Answer 28

Uniform Division of Income for TAx Purposes Act (UDITPA)

Question 29

A factor some states use in apportioning business income that is the ratio of total sales to in-state customers divided by total sales from all sales made by the taxpayer

Answer 29

Sales factor

Question 30

A factor some staes use to apporiton business income that is the ratio of compensation paid to employees owrking in a state divided by the toal compensation paid by the taxpayer

Answer 30

Payroll factor

Question 31

A factor soem states use in apportioning business incoem taht is the ratio of average cost of real and tangible personal property owned or rented and located in a state divided by total average cost of all such property owned/rente dby the taxpayer

Answer 31

Property factor

Question 32

Section of IRS that allows the IRS to allocate income from a US Corp that the corp has distributed to its foreign subsidiary to evade US income tax back to US corp to more accurately reflect income

Answer 32

Sec 482

Question 33

The basic foundation of ofederal tax law and represents a codification of the federal tax laws of hte United States

Answer 33

Internal Revenue Code (IRC) –not written by IRS

Question 34

The IRC gives this the department the authority to issue Regulations to provide administrative interpretation of hte tax law, which may be separated into legislative and interpretive categoreis

Answer 34

Treasury Department

Question 35

Regulations issued by the IRS under a specfic grant of authoirty to prescribe the operating rules for a statute and have hte force and effect of law

Answer 35

Legislative regulations

Question 36

Regulations issued persuant to the general ruel-making authoirty granted to the IRS and provides guidance regarding the IRS’s interpretaiton of a statute–do nto have effect of law

Answer 36

Interpretive regulations

Question 37

Regulations allowing interested parties a period of time of at least 30 days to comment and suggest changes

Answer 37

Proposed regulations

Question 38

Regulations generally issued following recent tax legislation to provide interim guidance until final regulations are adopted

Answer 38

Temporary regulations

Question 39

Regulations issued after public comments on proposed regulations are evaluated

Answer 39

Final regulations

Question 40

Guidance on tax issues that have less force and effect than regulations, but are second to regulations as important administrative sources of federal tax law

Answer 40

Revenue rulings

Question 41

Announce administrative practices followed by the IRS and are published in the Internal Revenue Bulletin that provide guidelines that taxpayers must meet in order to obtain a revenue ruling

Answer 41

Revenue procedures

Question 42

A written statement issued to the taxpayer who requested advice conerning a specific transaction

Answer 42

Private letter ruling