REG Random Deck Flashcards

Question

Life Insurance Premiums

Answer 1

Expense: Paid on behalf of employees where someone other than company is the beneficiary - DEDUCTIBLE Paid on behalf of Officer who's beneficiary is the company - NOT DEDUCTIBLE Income: Received from death of officer when company is the beneficiary - NOT INCLUDED AS INCOME

Answer 2

Corp - No excess is allowed in current year, but is carried back 3 or forward 5 Individual - 3,000 for current year

Answer 3

Average annual income of over 29 million Tax Shelter Manufacturers

Answer 4

Gifted - typically carryover Inherited - FMV at time of death or at alternate valuation date if chosen.

Answer 5

Maximum of 1,160,000.00 deduction. Is reduced by the assets value OVER 2,890,000.00 Example: 3,000,000 asset would be 1,050,000 since 3 mill is 110,000 greater than 2,890,000 so that reduces the 1,160,000 deduction to 1,050,000.00

Answer 6

Return on capital (Distributions NOT in excess of basis) is not taxed as income but portion of income is. If partner takes out loan from partnership, that is NOT included but is seen as a liability. Guaranteed Payments ARE income Separately stated items ARE included

Answer 7

At least 1/3 from the governmental units and general public

Answer 8

Maximum of 6,000 for two or more dependents. Can be 20-35% of the lesser of the expenses up to 3,000 each child or the lowest income for the parents. Child must be 13 years or younger Also can apply to a disabled spouse

Answer 9

The dependent must have lived with the parents/guardians for the FULL year and not have provided half of their living expenses.

Answer 10

When someone sells stock at a loss before OR after 30 days of buying the same or substantially identical stock. The loss is deferred and not recognized at the sale It is ADDED to the basis of the newly purchased stock and is recognized once that stock is sold at a later date.

Answer 11

Non depreciable assets not used in trade or business. Investments in treasury bonds would be an example. Land, when not owned and sold by a developer as "inventory", is also a considered a capital asset.

Answer 12

If a spouse is NOT an active part in a retirement plan, then total AGI phase out begins at 218,000. If under, than that spouse can deduct the full 6,500. If spouse IS an active part, then total AGI phase out begins at 116,000 for that spouses portion. Lets say couples AGI is 124,000. For the non part spouse, 6,500 is deductible. For part spouse, the 124,000 - 116,000 phase out must be included. This is 8,000 of the 20,000 range (116,000 to 136,000) so 40%. This 40% is applied to the 6,500 max deduction and reduces it by 2,600 (40%) resulting in 3,900. Total deduction is 3,900 + 6,500 = 10,400 AGI over 218,000 disqualifies the deduction entirely.

Answer 13

preparing a substantial portion of a return for a client FOR compensation Not required when doing a return for an employer.

Answer 14

The term "reportable transaction" is any transaction that the Secretary of the U.S. Treasury Department has determined as having a POTENTIAL for either tax AVOIDANCE or tax EVASION

Answer 15

Uses the Mid-Month convention which uses only half of the month that it is acquired in the calculation of depreciation regardless of when it was put in service during the month 39 year life straight line

Answer 16

Shipment Contracts - "FOB Seller's Loading Dock" Title Passes to buyer once they the supplier successfully delivers to common carrier, even if the goods are non conforming.

Answer 17

Mortgage Interest, Sales Tax, and medical expenses are itemized IRA contribution and Alimony (prior to 2019) are FOR AGI deductions.

Answer 18

Tax Court District Court US Court of Federal Claims

Answer 19

Partnerships are taxed on their share of income NOT distributions

Answer 20

Stock is inc/dec by share of income/loss. Debt inc/dec by debt issue/payment Guarantee of debt does NOT affect debt basis, only direct loans

Answer 21

S Corps basis INCLUDES tax exempt interest.

Answer 22

Personal holding company deducts federal income taxes when computed undistributed personal holding company income.

Answer 23

are deductible up to gambling income for the tax year Shown as a FROM AGI deduction in itemized

Answer 24

have one type of stock for the purpose of voting on matters such as a termination. Must have a total of 50%

Answer 25

Annuity return of capital is NOT taxable

Answer 26

cost recovery - expenses full purchase price up to 1,160,000 in first year for qualified depreciable property NOT land.

Answer 27

Death will terminate contracts UNLESS the acceptance is made before the death. Then it is still binding

Answer 28

Only claimed as credit IF by two or more employers

Answer 29

Commercial are 39 years straight line HALF month depreciable If put in service August 1, still only count as half of the month for depreciation Residential is 27.5 years Salvage value is IGNORED

Answer 30

over 15 years or 180 months Start amortization when assets are put into service NOT when deal is made.

Answer 31

Needs to be in the year after death, since the current year will be married filing jointly. Is two years following the event assuming no remarriage. Ex: died in 2022, 2023/2024 qualify but 2025 does not. Requires maintaining 50% home of a dependent child for FULL year (can't move to grandparents) Can NOT be taken if no qualifying child Married filing jointly rates

Answer 32

Filer must be unmarried Must maintain more than half of the home of a qualifying person including a relative, parent, dependent child for at least 6 months out of the year. Not required to live with the qualifying person IF a parent/relative

Answer 33

Must either live with taxpayer ALL year or be a close relative (RELATIVE) Cannot be someone else's qualifying child Must provide at least half of relatives total support for year (SUPPORT) Must make GI less than personal exemption amount (4,700) (INCOME)

Answer 34

Must be child, sibling or step sibling - or a descendent of any of these (grandchild) (RELATIVE) Under 19 at EOTY or 24 and full time student for at least 5 months of year (AGE) Scholarships do NOT count towards income for PARENTS but does count for other assuming relatives Must have lived with taxpayer over half of year and had costs provided of over 50%. (RESIDENCY and SUPPORT) For full time students, it is assumed that their primary residence is the parents home unless otherwise stated.

Answer 35

Multiple people supporting one dependent. All those who contribute over 10% can claim as dependent.

Answer 36

Who has custody or more time supporting the dependent If equal, who has more AGI but can be waived

Answer 37

Purchases must be sole owner or joint with spouse Must be used for tuition/book expenses Must be acquired after age 24 Any scholarships or nontaxable income must reduce the exemption benefit received by the purchaser, spouse or dependent.

Answer 38

Under the tax benefit rule, an itemized deduction recovered in a subsequent year is included in income in the year recovered A deduction from a prior year that is then refunded would be benefiting twice, so that amount is taxed as income. Only takes effect if taxpayer itemized deductions, NOT if they did the standard since they technically did not deduct for the state income tax amount.

Answer 39

Guaranteed payments made to partners. These are deducted by the business since it is technically salaries paid (expense). This then flows to the individual partners and they have to report it as income to be taxed ordinarily.

Answer 40

Only 50% is deductible

Answer 41

Any income received is taxable but any expenses incurred are NOT deductible. Must be an activity that is not for profit and qualifies as a hobby.

Answer 42

Must have rented out his PRIMARY residence for at least 15 days during the year. Any income/expenses are not reportable. Taxes and interest can be if itemized

Answer 43

Must be married at least by the end of the year Cannot be legally separated but MAY live apart.

Answer 44

S Corps shareholders are treated as employees so their salary is deductible for the entity. They will be treated as W2 employees and get a W2 Partnerships partners cannot be employee and receive guaranteed payments which are Schedule K1 items, NOT W2

Answer 45

Max of 85% of SS benefits are taxable regardless of income. For High income (modified AGI of 34K MFJ 44k) - 85% Middle (25-34K or 32K-44K MFJ) - 50% Low (less than 25K or 32k MFJ)- 0%

Answer 46

Not contingent on anything. Paid out regardless of income Flows through via K1 to partners

Answer 47

This is a nontaxable fringe benefit up to 50,000. Then the rest is taxed as income

Answer 48

Gross Income +/- Adjustments = Adjusted Gross Income - Greater of Standard or Itemized Deductions - QBI Deduction =Taxable Income * Tax Rate = Income Tax Liability + Other Taxes - Tax Credits - Payments = Net Tax Due or Refund

Answer 49

Is limited to 2,500 per year Can be deducted as long as interest is paid Has a phase out

Answer 50

Lesser of 66,000 or 20% of Net earnings (shown below) Net self-employment income 50,000 (3,532) [$7,064 × 50%] 50% of self-employment taxes Self-employment earnings before SEP IRA = 46,468 × .20 Times 20% Calculated SEP IRA Deduction = 9,294

Answer 51

Only applies to qualified business income. 20% with phaseouts and thresholds.

Answer 52

Must be in a federally declared disaster area Deductible in year of loss The loss is the difference between the property's before and after value. Is the loss minus 10% of AGI minus $100 per casualty.

Answer 53

Itemized deduction is the value of the FMV at the time of donation but limited to 30% of AGI.

Answer 54

Normally carryover basis unless FMV is less than carryover If sold at a gain, then the original basis is used to reduce the gain. If sold at a loss, the lesser of the original basis and the FMV at the date of the gift is used to reduce the loss If the selling price is less than the original basis but more than the FMV, then no G/L is reported.

Answer 55

If Sales price when sold is greater than the adjusted cost basis at time of sale, then the adjusted cost basis is used.

Answer 56

Is a FOR AGI deduction or above the line Must not be above the threshold. Is the lower of interest paid OR 2,500

Answer 57

Adjust basis minus insurance proceeds minus 100 minus 10% of AGI

Answer 58

Alimony is deductible for payor and charged as income for receiver. Only cash or cash equivalent is reportable. Settlements, child support and other misc amounts are NOT reportable.

Answer 59

If one spouse is an active participant in a company plan, then there is a phase out for them at 116,000 and complete at 136,000 For a spouse is not an active part but is married to one who is, phase out begins at 218,000 and complete at 228,000

Answer 60

Amount taxed at parent's marginal rate is the unearned income minus 1,250 standard deduction for dependent minus an additional 1,250 which is taxed at the dependent's rate. The rest is taxed at parents

Answer 61

Capital Gains or Losses unless attributable to unrealized receivables or inventory

Answer 62

includes amounts received by the corporation under a contract to furnish personal services to a third party where the third party can specify the individual who is to perform those services and where that individual owns 25% or more of the corporation

Answer 63

Activities UNRELATED to tax exempt purpose.

Answer 64

If the use for personal purposes is, the greater of 14 days or 10% of days rented out, the unit is considered a home. If a home is rented out for less than 15 days during the year, it is treated as a personal residence and the rental income is excluded from taxation. If a home, or personal residence, then utilities, insurance and other expenses are NOT deductible nor is income reportable. RE Taxes and interest are schedule A itemized deductions regardless.

Answer 65

Corp must own investee stock for more than 46 days during the 91 day period beginning on the date 45 days BEFORE the ex-dividend date. DRD not available to S Corps

Answer 66

Stays collection action from secured and unsecured creditors Does not need to show liabilities are greater than FMV of assets

Answer 67

enforceable state by state makes conversations between the two confidential unless subpoenaed. Applies for civil and criminal cases. Confidential, NOT privileged in most settings

Answer 68

In general gain/loss not a taxable event

Answer 69

May be disclaimed explicitly Implied warranties can be disclaimed by only by specific language UNLIKE "as is" or "all warranties". Implied warranty is that the goods sold have a clean title and are good to sell.

Answer 70

Up to $25,000 of passive losses from rental real estate can be offset by individuals against active and portfolio income in any one year. The $25,000 maximum is reduced by 50% of the difference between the taxpayers modified adjusted gross income (adjusted gross income before any IRA deduction, taxable social security benefits, or passive activity losses) and $100,000. When the taxpayers modified AGI reaches $150,000, the offset is eliminated. Since Cobbs modified AGI for the current year exceeds $150,000 ($200,000 > $150,000), no amount of the loss attributable to the rental real estate can be used as an offset against income from nonpassive sources. (The rental loss could be used against nonpassive sources if Cobb was a qualified real estate professional.)

Answer 71

property owned by debtor and must have rights to it must have a security agreement with description of collateral secured party must give value for PERFECTION, a financing statement must be issued, not for creation of security interest

Answer 72

Deductible by partnership and income to partner on individual tax return.

Answer 73

Cannot have other corps or partnerships be shareholders. Can have estates, qualified profit sharing plans.

Answer 74

An S election made by the 15th day of the third month of the taxable year is retroactively effective on the first day of the taxable year. All shareholders must give written consent.

Answer 75

For Roth, principal invested is never taxable. Earnings are at the appropriate tax rate if not distributed properly. For trad, if contributions were deducted, the proportion of those are taxed and other contributions that were NOT deducted are not taxed.

Answer 76

CPA liable to all parties who use info - no provity allowed, assuming they can prove the elements (intent, damages, misrep of facts, reliance on facts)