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Flashcards in REG 10 Deck (15):
1

WHAT DOES ARTICLE THREE OF THE UCC COVER

UCC Article 3 applies to negotiable instruments. The article includes four kinds of negotiable instruments: drafts, checks, promissory notes, and certificates of deposit. Negotiable instruments are formal written contracts used extensively in business as a substitute for money and as a method to extend credit. Every negotiable instrument governed by Article 3 contains an unconditional promise or order to pay money. Other forms of negotiable contracts, such as bills of lading, warehouse receipts, and investment securities do not order or promise payment of money and are governed by UCC Articles 7 and 8, respectively, and not by UCC Article 3. A certificate of deposit (CD) is a specialized form of promissory note in which a bank acknowledges a receipt of money and promises to repay the money with interest in the future.

2

WHAT IS A NEGOTIABLE INSTRUMENT
WHAT ARTICLE OF THE UCC COVERS IT

Negotiable instruments are formal written contracts used extensively in business as a substitute for money and as a method to extend credit. Every negotiable instrument governed by Article 3 contains an unconditional promise or order to pay money.

3

MAXIMUM AMOUNT OF STUDENT LOAN INTEREST DECUTION

2500

4

SEPARATELY STATED ITEMS LIST

Answer (A) is correct.
Separately stated items include (1) Sec. 1231 gains and losses, (2) net short-term capital gains and losses, (3) net long-term capital gains and losses, (4) dividends, (5) charitable contributions, (6) taxes paid to a foreign country or to a U.S. possession, (7) tax-exempt interest and related expense, (8) investment income and related expense, (9) amounts previously deducted, (10) real estate activities, (11) Sec. 179 deductions, (12) credits, and (13) deductions disallowed in computing S corporation income. Therefore, only the $5,000 of dividend income is separately stated from business income.

5

IS SECTION 179 EXPENSE A SEPARATELY STATED ITEM?

YES

6

Social Security Benefits Rules for Taxability %

Up to 85% depends on provisional income in relation to base amount
Just remember 85% max
Then the next question says 50% of the excess over the base amount
I'm not learning this

The guy in question has about $28,990 in income and $5,890 in SSI and $2,900 was taxable

7

Dividend reinvestment plan, is the difference between the FMV and the reduced purchase price of the stock ordinary income or short term capital gain income

At least for the dividend reinvestment plan it's ordinary income

8

Is paving a parking lot an expense or a capital expenditure. What do you do with it.

Capital expenditure, capitalize and depreciate. If the tenant does it for you, you still recognize the rental income in full, but the expense side is capitalized.

9

Which of these are dividend income?
Dividend received in a dividend reinvestment plan - reinvested at MV of stock
Dividend received in a dividend reinvestment plan - discount on MV of stock purchased
$ reported as a return of capital distribution on FORM 1099-V

Dividend income
Dividend income = dividend plus the break you got on the stock
Not dividend income = must be a liquidating dividend and it reduces the basis of the stock

10

Where is a liquidating dividend reported?

On 1099-V, but it's identified as a capital distribution.
Watch out for these, only dividends that represent distributions of accumulated earnings and profits are taxable.

11

Note if it asks about amoritizing discount to recognize interest income, you cannot just use the Straight Line Method. So never pick that.

It's basically multiplying what you have invested times the effective rate and then recognizing the difference between that and what you got in interest payments as additional interest. Then you add that onto the basis and multiply that by the effective rate for next year.

12

How much investment interest is deductible each year and where does it go.

It's deductible up to the amount of investment income.
It is deductible on schedule A as an itemized deduction in the interest section along with other types of interest.

13

What's the rule for high income earners as far as limited itemized deductions?

If it's over $309,900 - 154,950
Lesser of:
80% of deductions or 3% of excess over AGI
I am not learning this

14

Misc. itemized subject to 2% floor
Life Insurance here?
Union Initiation Fees?
Jeans and Flannel Shirts used for Work?
Mgt Fees on taxable income producing investments
Legal expenses for a will

Life Insurance - no
Union - Yes
Clothing - not if it's not work specific
Investment mgt fees - yes
Legal Fees - No

15

High income taxpayer phase outs on itemization. What are the three exceptions?

Investment interest (surprising)
Non-Business Casualty losses
Medical

What is subject?
Charitable - surprising.