REG Deck 2 Flashcards by Isaac Hammet

What are the three situations for receiving property as a gift when it comes to the basis?

If property is sold for a gain: Basis = Donor’s Basis
If property is sold for a loss: Basis = FMV on the Date of the gift
If property is sold for a price in between donor’s basis and FMV on the date of gift there is neither a gain nor a loss

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What is the rule for gifted property basis for depreciation

Lesser of
The donor’s adjusted basis at the date of the gift
The fair market value at the date of the gift

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What is the rule for holding period when it come to gifts?

Same as the donor’s if the donor’s basis is used
If the FMV on the date of the gift is used (loss basis) then the holding period starts as of the date of the gift

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What is the rule for inheriting property from a decedent?

FMV at the date of gift or the alternate valuation date (6 months later) is the basis of the asset

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A taxpayer with an applicable financial statement (AFS) can deduct the amount paid for items costing up to __________. For a taxpayer who does not have a n (AFS), the amount is ________ per item.

5,000
2,500

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The depreciable basis of property converted from personal use to business use is the lesser of: (1) ____________________________________________; or (2) ________________________________________________

the original cost basis, as adjusted for any improvements to the property
the FMV of the property on the date of conversion.

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What happens when the selling price is greater than both the FMV on the gifted date/donor’s basis and the donor’s basis is greater than the FMV on the date of gift?

The donor’s basis is still used to calculate the gain/loss

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Charitable contributions subject to the 60-percent limit that are not fully deductible in the year made may be:

carried forward 5 years

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What is the phase out for Roth IRA single/MFJ?

Unmarried: 146,000-161,000
MFJ: 203,000-240,000

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If somebody were to find cash of $400 in a desk purchased at $30, what amount if any would be included in the individual’s gross income?

The whole gross amount of $400

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What is the rule for the gain or loss on personal use assets?

A gain on the sale of a personal use asset is a taxable capital gain
A loss on the sale of a personal use asset is a nondeductible personal loss

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What are included as capital assets?

Investment: stock, bonds, virtual currency
personal use: personal car, home, furniture

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What are included in noncapital assets?

inventory
a/r
real property or personal property

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Only ___________ of that loss is currently deductible against ordinary income. The remaining loss of __________ is _______________

3,000
carried forward indefinitely

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A nonbusiness bad debt is treated as a short-term capital loss in the year the debt becomes _________ _____________.

totally worthless

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What is the procedure to net short term/28 percent tax group/long term capital gains/losses?

Net STCL is offset against net LTCGs, starting with the 28 percent tax rate group, then the 0/15/20 percent tax rate group

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How are capital losses treated for businesses?

Capital losses can be carried back three years and forward five years to be used against net capital gains

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What is the rule on the loss on disposal of a personal use asset?

no deducted is allowed

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What are the two conventions for personal property when it comes to depreciation?

Half-year convention
Mid-quarter convention

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What is the convention when it comes to real property for depreciation?

Mid-month convention

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Under the MACRS method of depreciation for property placed in service after 1986, _______ __________ is ignored for purposes of computing the deduction.

salvage value

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What is the recovery period for computers, printers, copy machines, vehicles?

five year class

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What is the recovery period for office furniture and fixtures, desks, and chairs?

seven year class

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What is the recovery period for leasehold improvements, land improvements, fencing, landscaping?

15 year class

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What is the recovery period for residential rental property(apartment buildings & rental homes)?

27.5 years

What is the recovery period for nonresidential real property (office buildings & warehouses)?

39 years

If more than __________ percent of depreciable personal property is placed in service in the last quarter of the year, a ___________, rather than a half-year, convention applies.

40 mid-quarter

Under the Section 179 election to expense certain depreciable business assets, the taxpayer may expense the cost of qualifying depreciable property up to the annual limitation amount, which is ____________ in 2024

1,220,000

Customer lists, trade names and goodwill are purchased intangible assets, which taxpayers amortize over __________ using the full-month convention beginning with the month of acquisition

180 months

Section 179 election is limited to ____________ for the tax year 2024 and cannot exceed ______ ________ before the deduction.

1,220,000 taxable income

What types of assets are ineligible for Section 179 expensing?

Intangible assets land and improvements elevator or escalator real property that is not qualified as real property property acquired from a related party

What are things to keep in mind when it comes to section 179?

Is the asset eligible for section 179? Are section 179 deductions below max amount of 1,220,000 for 2024? Do qualified purchases exceed 3,050,000 for the year? Is section 179 deductions below taxable income?

When can property qualify for bonus depreciation?

Personal property with a recovery period of 20 years of less Not previously used the acquired property Acquired from unrelated party

What is the process to calculate bonus depreciation?

Basis of property * Bonus Depreciation Percentage = Bonus Depreciation Basis of property - Bonus Depreciaiton = New Basis New Basis * Recovery Percentage = MACRS Depreciation Bonus Depreciation + MACRS Depreciation = Total Depreciation

In a multiple support agreement, all must be qualifying relatives who together contribute more than _____ of the support of the dependent. In addition, a contributor must have provided more than _____ of the individual's support to claim the individual as a dependent.

50% 10%

How to calculate the dividend received deduction?

Percentage Ownership: Dividends-Received Deduction 0% - 20%: 50% 20% - 80%: 65% 80% or more: 100%

What is the Dividend Received Deduction Taxable Income Limitation

lessor of: 50 percent (or 65 percent) dividends received 50 percent (or 65 percent) of taxable income

What is the general rule when the accrual method of accounting will be required

tax shelters large C corporations: average gross receipts of $30 million in the prior 3 years manufacturers

How is rental revenue recognized for tax purposes?

It is all recognized in the year that the company receives the payment

What is the rule on life insurance premiums/proceeds for key man life insurance?

Premiums are not a deductible expense Proceeds are not taxable income

How are bonus accruals treated for corporations?

They are deductible in the tax year when all events have occured that establish a liability with reasonable accuracy They also have to be paid within 2.5 months of the taxpayer's year-end

Expenses owed by an accrual-basis corporation to a cash-basis shareholder who owns at least __________ of the corporation's stock are not deductible by the corporation until the expense is actually paid in cash to the shareholder.

50%

Allowable organizational costs and start-up costs

legal fees to obtain the corporate charter necessary accounting services expenses of temporary directors incorporation fees paid to the state

What is the rule for expensing/amortization of organizational costs?

5,000 decuduction is allowed in year 1 if the total expenditure amount is less than $50,000 The remaining amount is amortized over 180 months

The charitable contribution deduction is limited to _________ of taxable income before the ____________________________ and the _________________________________________.

10% dividends-received deduction charitable contribution deduction

How long can charitable contributions be carried forward for both individuals and corporations?

5 years

Business gifts are deductible up to a maximum deduction of _____ per recipient per year.

$25

What is the rule for capital losses for corporations?

Capital losses can only offset capital gains Capital losses may be carried back three years or forward five years to offset capital gains

The corporate dividends-received deduction is affected by a requirement that the investor corporation must own the investee's stock for a specified minimum holding period of more than _____________

45 days

Both a ______________________ and a ____________________________ must include 100% of the dividends received from unrelated taxable domestic corporations in gross income in computing regular taxable income.

personal service corporation personal holding company

How to recognize net income per books to taxable income for federal income taxes?

Add it back to arrive at taxable income

Foreign income taxes paid by a domestic corporation may be claimed ______________________________, at the option of the corporation.

either as a deduction or as a credit

What method must a company use to make estimated income tax payments if they didn't have a tax liability in the previous year?

Annual income method Preceding year method can only be used if they had a tax liability

No underpayment of estimated tax penalty will be imposed if the total underpayment of tax for the year is less than ______.

$500

Corporations not classified as large corporations are required to pay the ________ of: _________ percent of the tax show on the return for the current year or ____ percent of the tax shown on the return for the preceding year

lesser 100 100

Regular C corporations are entitled to ________ of (lifetime) accumulated earnings.

$250,000

corporations set up by high tax bracket taxpayers to channel their investment income into a corporation and shelter that income through the lower regular tax rate (________ percent) of the corporation, instead of paying their higher individual tax rates on that income

personal holding companies 21

Personal holding company status applies if a corporation is owned more than ________ by ________ or fewer individuals at any time during the last half of the tax year and if at least _______ of adjusted ordinary gross income for the tax year is personal holding company income (which would include income from investments in stocks and securities).

50% five 60%

Taxable income must be reduced by ______________________________-- and _______________________ to determine the undistributed personal holding company income prior to the dividend paid deduction

federal income taxes net long-term capital gain

Net operating losses occurring in tax years 2018, 2019, and 2020 can be ___________________________ and ___________________________ to offset taxable income in other years.

carried back five years carried forward indefinitely

A C corporation's net capital losses are

carried back 3 years and forward 5 years

What is the rule for net operating losses for tax years ending after December 31, 2020

No carry back Can be carry forward indefinitely

What is the rule for net operating losses for tax years before December 31, 2017?

Carry back: 2 years Carry forward: 20 years

When are certain prizes and awards excluded from taxable income for an individual?

The individual did not enter into a contest The entity assigns the award to a governmental unit or charitable organization

What happens when somebody gifts another person a stock, the FMV is greater than the basis, then the giftee goes on to sale the stock when the FMV is less than both the FMV on the date of transfer and the basis?

The loss would be computed using the lesser of the basis or FMV on the date of transfer

What are related parties when it comes to personal holding company and owning shares?

Parents Children Grandchildren Brothers/Sisters

What is the form to file to IRS to elect to be an S corp?

Form 2553

For a calendar year corporation, an S election filed by ___________ is effective on January 1 of that year. If filed after then on _______ of the following year.

March 15 January 1

Shareholders holding more than ________ percent of the stock consent to a voluntary revocation with terminate the S-Corp status.

Termination of S election will happen if more than _______ percent of the corporation's gross receipts are from passive income for ______ consecutive years ( but only if the corporation has prior C corporation E&P)

25 three

An S corporation can have as many as _______ shareholders.

100

What is the rule for fringe benefits paid by an S corporation for non-shareholder employees and employee-shareholders?

Fringe benefit are deductible by the S-corp for non-shareholder employees and employee shareholders owning 2 percent or less of the S Corp They are also deductible if the individual receiving the benefits includes them as a part of gross income

S corporations are permitted to have only _______ class of stock.

one

In order for an S corporation election to be valid, it must be agreed upon, in writing, by ________ shareholders. If ________ shareholders do not give their written consent, the election is invalid.

all all

Eligible shareholders of an S-Corp include

individual, estates, types of trusts resident aliens corporations nor partnerships can be shareholders

The rule is that an S corporation that terminates cannot reelect S status until the ______ year from the current year.

fifth

What are separately stated items

Rental real estate income or loss Interest Income Dividend Income Royalties Net short/long-term capital gain(loss) Net Section 1231 gian or loss Charirtable contributions Section 179 expense deduction

Owners of an S corp are responsible for claiming the taxable income based on what?

percentage of ownership

What are things that increase a shareholder's basis in an S Corporation?

additional contributions income or gains items (taxable and tax-exempt)

What are things that decrease a shareholder's basis in a S Corp?

distributions to shareholders nondeductible expenses loss or deduction items

How much of a loss can an owner of an S-Corporation deduct?

The amount equal to the ending stock basis and debt basis combined

How to calculate depreciation for a 39 year life?

Basis of Property/39 years Straight line basis Mid-month convention so how ever many month plus 0.5

Where is QBI deduction reported?

Below the line(AGI) but not part of itemized deductions

How does an increase in a loan for a partnership affect a partner's basis?

It increases a partner's basis

What is included in a partner's income?

Ordinary business income Guaranteed payment

How is investment interest expense treated?

Separately stated item

What is the rule for organizational expenditures and start-up costs?

Can deduct 5,000, if expenditures don't exceed 50,000 The rest is amortized over 180 months

What is the concept for adjusted basis for tax purposes?

A partner's adjusted basis cannot go below $0

How is a shareholder's basis affected by tax exempt income

Tax exempt income increases a shareholder's basis

To qualify as publicly supported, at least ___________ of the organization’s total support must come from _____________________ and the _____________________.

1/3 governmental units general public

Income from which of the following sources is taxable income to the political organization?

Investments

What is the phrase used for assigning nonbusiness income to different states?

Allocation

What is the phrase used for assigning business income to different states?

Apportionment

What are the three main categories for apportionment?

Property Payroll Sales

What is the formula to calculate the kiddie tax for a child under age 18? This is the number that will be taxed at the parent's marginal tax rate

Interest Income Less Standard deduction ($1,300) Less $1,300 tax at child's marginal rate

What is the required annual estimated tax payment for a C Corporation?

The lessor of these 3 100 percent of the tax liability of the prior year's return 100 percent of the current year tax liability 100 percent of estimated current year tax liability according to the annualized income method

How do nondeductible expenses affect a partner's basis if any?

Nondeductible expenses reduce a partner's basis

How do guaranteed payments affect a partner's basis?

They don't affect a partner's basis

How is a gain on the sale of a muni bond treated?

It is taxable

How long do real or depreciable business property have to be held to qualify for section 1231?

more than one year

What are assets that could be section 1231 assets?

real estate machinery equipment

A preparer is allowed to accept a taxpayer's representations as a preparer is not required to obtain supporting documentation unless the preparer has reason to suspect the accuracy of the information provided by the taxpayer. However, a preparer must make _________ _____________ if the information provided by the taxpayer appears incorrect or incomplete.

reasonable inquiries

Who can practice before the IRS?

Attorneys CPAs enrolled agents enrolled actuaries enrolled retirement plan agents registered tax return preparers

Under circular 230 paperwork prepared __________________ is not required to be returned.

by the practitioner

What are the limits for QBI Category 1 for 2024?

Single: Taxable Income below 191,950 MFJ: Taxable Income below 483,900

REG Deck 2 Flashcards

(105 cards)