Property Transactions Flashcards

Question

Personal holding company

Answer 1

“Personal holding company” is a term used in relation to federal income tax to denote a corporation that is majority-owned by a small group of natural persons. It is commonly called an “incorporated pocketbook.” A personal holding company is defined by IRC Section 542 as a corporation that is as follows: Derives at least 60% of its gross income (after certain adjustments) from investments (dividends, interest, rents, royalties) and from certain personal service contracts With stock that is more than 50% owned by five or fewer individuals. They are allowed a deduction for both actual paid dividends and consent dividends.

Answer 2

In computing the taxable estate for estate tax purposes, a deduction is allowed for bequests to charitable organizations, and there is no percentage limitation. A deduction is also allowed for funeral expenses, reducing the taxable estate.

Answer 3

Long-term capital gains are taxed at a maximum of 15% for sales after May 5, 2003, except that individuals in the 39.6% bracket would be taxed at a maximum of 20%. (For taxable years 2007 to 2015, for long-term capital gains that would otherwise be taxed in the 10% or 15% bracket, the maximum rate is 0%.)

Answer 4

The earned income tax credit (EIC) is a refundable credit available to qualifying low-income taxpayers. The amount of the EIC is based on a percentage of earned income and the number of qualifying children the taxpayer supports (0, 1, 2, or 3 or more), with the income limits changing depending on how many qualifying children a taxpayer has. When determining whether a child is a qualifying child for purposes of computing the EIC, the support test is not included, and the relationship, residency, and age tests are modified (see Dependent). The refund decreases as earned income rises after reaching a given amount. In order to be eligible for the earned income credit, a taxpayer must have an AGI below a certain level, a valid Social Security number, a filing status other than married filing separately, a U.S. citizen or resident alien designation, no foreign income, and limited investment income.

Answer 5

An unlimited charitable contribution deduction is allowed for an estate if the contribution is provided for in the will of the decedent, the charity is a qualified charity, and if the contribution is paid in the year of deduction or the year following the deduction. There are no other limits on the charitable contribution deduction of an estate.

Answer 6

5% for Mining Clay 10% for Mining Coal 15% for Gold, Silver, copper and iron ore.

Answer 7

Income earned by an estate is subject to income tax. Generally, income of the decedent up to the date of death is reported on the final Form 1040. Income earned after death is reported by the estate's fiduciary on Form 1041. An estate may adopt either a calendar year or fiscal year. Trusts, on the other hand, must use a calendar year. (IRC Section 644)

Answer 8

is the extreme, flagrant, or reckless departure from the standards of due care and competence in performing or reporting upon professional engagements. There need not be actual intent to deceive (scienter). Ordinary negligence is a lesser offence than gross negligence. There is no necessity to identify any third-party users.

Answer 9

* (unified) tax credit—the maximum amount is $2117,800 for 2015, which is equivalent to $5,430,000 worth of property in 2015. The estate tax was reinstated in 2011 by the Tax Relief Act of 2010 and made permanent by the Taxpayer Relief Act of 2012. * federal gift taxes paid on gifts included in the donor-decedents' taxable estate. Only taxable gifts made before 1976 are added to the donor's taxable estate. * A credit is allowed against the federal estate tax if a person inherits from someone who also paid a federal estate tax and died within the prior 10 years (credit for tax on prior transfers). * A credit is allowed for foreign death taxes paid.

Answer 10

The maximum annual contribution allowed has been increased to $5,500 for 2015 with an additional $1,000 contribution allowed for taxpayers age 50 and over.

Answer 11

An express trust is created when funds or property are distributed to a trustee. The trustee holds the funds or property for the recipient. The express trust must generally fulfill the requirements within the legal trust.

Answer 12

The people or organizations that receive the property at death of original person that inherited the property

Answer 13

is a simplified and informal option that is available to a taxpayer within the structure of the Tax Court. The taxpayer can request and, with the Tax Court's approval, have the case conducted under the simplified small tax case procedures. To qualify for this appeal procedure, the tax dispute cannot exceed $50,000 for any one tax year.

Answer 14

the partnership and may be any method approved by the IRS.

Answer 15

if their total assets at the end of the taxable year and the corporation's total receipts for the tax year are more than $250,000

Answer 16

Corporations with assets of $10 million or more must use Schedule M-3 instead of M-1.

Answer 17

It is defined as a credit that allows donors and decedents to transfer a limited amount of property without being subject to the gift or estate tax. For 2015 the unified credit is $2,117,800, which exempts $5,430,000 in 2015 in transfers from the gift or the estate tax.

Answer 18

These may be amortized over 60 months or longer. However, the taxpayer can choose to deduct the cost in the first year in which they are paid or incurred.

Answer 19

paying at least 90% of the tax shown on the current year's return, paying 110% of the tax shown on the prior year's return (for individuals with AGIs of more than $150,000 in the previous year), or paying installments on a current basis under an annualized income installment method. An individual may not use the 100%-of-prior-year's-tax safe harbor if the prior year was not a 12-month period or if the individual did not file a return for such preceding taxable year.

Answer 20

*A corporation may deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the distributing domestic corporation. * A corporation may deduct (within certain limits) 80% of the dividends received if it owns 20% or more, but less than 80%, of the paying domestic corporation. A corporation may deduct (within certain limits) 100% of the dividends received if the corporation receiving the dividend owns more than 80% of the distributing domestic corporation.

Answer 21

The 2012 American Taxpayer Relief Act provides permanent alternative minimum tax (AMT) relief. The AMT exemption amounts (retroactive to January 1, 2012) are in the table below. For tax years beginning after 2012, these exemptions are indexed for inflation. 2015 ------- Corporate taxpayers $40,000 Ind: MFJ $83,400 Ind: S & HOH $53,600 Ind: MFS $41,700 Estates and trusts $23,800 The AMT exemption is phased out for taxpayers with high amounts of alternative minimum tax income (AMTI).

Answer 22

The alternative minimum taxable income (AMTI) is used to arrive at the alternative minimum tax (AMT). Generally, AMTI starts with the taxpayer's taxable income. To this amount, the individual taxpayer adds preference items and adds or subtracts adjustments to arrive at AMTI. A corporate taxpayer adds preference items, adds or subtracts adjustments, and subtracts any alternative minimum tax net operating loss (AMTNOL) deduction to arrive at AMTI. Example The amount of the reduction of the maximum $40,000 exemption is $15,000. The $40,000 exemption must be reduced by 25% of the excess of AMTI over $150,000

Answer 23

occurs when the board of directors passes a dissolution resolution. The officers do not have the authority to dissolve a corporation—only the board of directors does. Amending a certificate of incorporation will not result in the dissolution of the corporation. The stockholders may vote on dissolution, but unanimous consent is not required

Answer 24

Indirect expenses of a trust such as trustee fees are considered to apply to all income. The ratio of taxable income to total income (not including income allocated to corpus) is used to determine the deduction. For example, if a trust had total income of $20,000, of which $15,000 was taxable and $5,000 was tax-exempt interest, then 75% of the trustee fees would be deductible ($15,000 taxable ÷ $20,000 total = 0.75).

Answer 25

The uniform capitalization rules applicable to resellers require that certain indirect costs be capitalized. The indirect costs most often incurred by resellers are purchasing, handling, and storage costs. Handling costs include repackaging costs, and storage costs include off-site storage costs.

Answer 26

Upon filing a Chapter 7 bankruptcy proceeding, certain property becomes part of the estate if it is received (or entitled to be received) within 180 days of the filing. This type of property includes gifts, inheritances, various forms of property settlements (including divorce property divisions but not alimony) and life insurance proceeds. Notice the answers included most all of the included items, but had a different time schedule for their receipt. Notice that the time line alone is not controlling. Via statute, various exemptions exist (up to certain dollar amounts), including such items as limited interests in homeowners equity, motor vehicles, household goods, tools of the trade, health aids, personal injury claims, alimony, and certain pension benefits. Finally, the bankruptcy statute specifically excludes Social Security payments.

Property Transactions Flashcards

(51 cards)