Review Mods 23-37 Flashcards Preview

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Flashcards in Review Mods 23-37 Deck (65):
1

A blank endorsement converts...

Order paper to bearer paper

2

Use of special endorsement converts...

Bearer paper into order paper

3

A qualified endorsement that does not specify any payee converts...

Order paper into bearer paper

4

To qualify as a holder in due course, an individual most be...3

1 holder of properly negotiated negotiable instrument

2 give value for instrument

3 take instrument in good faith without problems

5

How do you calculate the gain realized, in a like kind exchange? 5 steps

FMV prop received
+ boot received
= amount realized
- basis of property exchanged
= gain realized

6

Recognized gain in a like-kind is the lesser of...2

Boot received or amount realized

7

A corporation's net capital loss...

Cannot be offset against ordinary income

8

Net capital loss is generally carried back...

2) And carried forward...

3 years

2) 5 years

9

Tax basis on involuntary conversion where $10,000 is destroyed and $13,000 is received with $11,000 reinvested?

$10,000 ($11,000 cost - $1,000 deferred gain)

10

With an involuntary conversion, if $10,000 of property is destroyed and $14,000 is received by the county. And $16,000 is reinvested what is the realized gain? How much is recognized?

Realized gain = $4,000

Recognized gain = $0

11

Fees received for jury duty represent compensation for services and must...

Be included in gross income

12

Jury duty fees are taxable as...

Other income on page 1 of Form 1040

13

Accounts receivable resulting from services rendered by a cash basis tax payer have...

Zero tax basis

14

A loss sustained from a Nonbusiness bad debt is always...

Classified as a short term capital loss

15

Non business bad debt is deductible on...

Schedule D

16

Rental property including parking lots is reported on...

Schedule E

17

Schedule E- Supplemental Income and Loss is used to report on income and loss from...5

1 royalties
2 partnerships
3 S-corporations
4 estates
5 trusts

18

Loss resulting from sale of personal residence is...

Why?

Not deductible

Because property held for personal use

19

When alimony payments of $2,000 are reduced by $300/month due to divorce decree, when a child reaches age 21. What is the tax treatment of these payments?

$300 of the $2,000 per month will be treated as child support

20

What is the installment method formula for the amount reported each year?

Gain from sale =
(Gross profit/total contract price) x Amount received in year

21

How do you calculate contract price for the installment method formula?

Contract price = selling price - mortgage assumed

22

How do you calculate gross profit for the installment method formula?

Gross profit = selling price - basis

23

For farm income, soil and water conservation expenditures are $20,000 for the year and gross income from 2 farms is $40,000, the deduction is limited to...

$10,000 = ($40,000 x 25%)
Gross income x 25%

24

Feed and planting seed expenses can be deducted up to...

50% x other expenses

25

A retiree's pension contribution is...

Excluded from income on a pro rata basis

26

For a two-family rental apartment, where one is lived in and one is rented out, depreciation would be...

Subtracted by 50% against rental income

27

Passive activity loss calculation

Passive activity loss = (Ownership %) x operating loss

28

When the midquarter convention is used in the last quarter, you should...

Multiply by 1/8

29

Emergency room fee cannot be deducted for a family member that...

Provides more than half their support

30

2 expenses that are not deductible relating to adoption of a child?

1 legal expenses

2 agency fee

31

Delinquency taxes not paid by the seller and paid by the buyer are...

Not deductible

32

2013 property taxes, for property bought on July 1st, 2013 and paid in full by the buyer are...

Deductible on a pro rata basis

33

For a deduction for a qualified residence, what are 2 examples of Nondeductible personal expenses?

1 utilities expense

2 insurance expense

34

All unreimbursed business expenses of an outside salesman are deducted as...

Miscellaneous itemized deductions subject to a 2% floor

35

In determining net self-employment income, estimated income taxes on self-employment income are...

Excluded from its computation

36

Guaranteed payments go on...

Line 4 of schedule K

37

Net earnings from self employment on schedule K is calculated by...

Net earnings = ordinary business income + guaranteed payments

38

Where is gross income reported on schedule K?

Line 14C gross nonfarm income

39

How is ordinary business income on schedule K-1 calculated?

(Ordinary business income from line 1 schedule K) x partnership %

40

How is self-employment earnings on line 14A of schedule K-1 calculated?

Self-employment earnings =
(ordinary business income on K-1) + guaranteed payment

41

How is self-employment earnings on line 14C of schedule K-1 calculated?

Self employment income C =
Guaranteed payment
+ (gross income - guaranteed payment) x partnership %

42

What is the IRS center where the partnership filed the return?

Ogden, Utah

43

For the partnership return SIM, was any capital contributed during the year?

No

44

How do you calculate the current year increase in partner's capital account? 2 steps using items from schedule K-1

1 Add all income items (except guaranteed payments)

2 subtract all deductions and losses

45

Tax exempt interest is included when calculating...

Current year increase in partner's capital account

46

Guaranteed payments are deducted in computing...2

1 partnership book income

2 partnership ordinary income

47

If an item is deductible in computing both partnership book income and partnership ordinary income, when computing partnership ordinary income from book income...

The item is not added back

48

Charitable contributions are deducted in...

Arriving at partnership book income

49

Charitable contributions must be separately passed through to partners on schedule K-1 and cannot...

Cannot be deducted in computing partnership ordinary income

50

A deduction that is included in book income, but not ordinary income for a partnership is...

Added to book income

51

When there is a guaranteed monthly payment and ordinary income for the fiscal year is given, in regards to ordinary income assume that...

Guaranteed payments have already been subtracted

52

Although, the sale of a partnership interest generally results in a capital gain or loss, ordinary income must be recognized to the extent of selling partner's share of...2

1 unrealized receivables

2 appreciated inventory

53

If there are $800,000 in unrealized receivables and the partner sells their 1/4 interest in the partnership, what is recognized?

$200,000 ordinary gain (800k/4)

54

A current distribution is also known as...

A nonliquidating distribution

55

No loss can be recognized as a result of a...

Current (nonliquidating) distribution

56

In a nonliquidating distribution, a gain will be recognized only if...

Cash received exceeds the basis for the partner's partnership
Interest

57

If both cash and noncash property are received in a single distribution, the basis for the partner's interest is...

first reduced by the cash, before noncash property

58

Since $30,000 cash does not exceed the $31,000 basis of Andrew's partnership interest...

No gain is recognized

59

When there is a cash and noncash (land) nonliquidating distribution, where cash reduces the partner's interest basis to $20,000. Land distributed with a basis of $35,000 will...

Have its basis limited to $20,000 (partner's basis after reduction
Of cash)

60

In a complete liquidation of a partner's interest in a partnership, the property distributed will have a basis equal to...

Adjusted basis of partner's partnership interest - money received

61

Generally, in a liquidating distribution, the basis for a partnership interest is first reduced by...

Amount of money received

62

In a liquidating distribution, the basis for partnership interest is first reduced by amount of money received, it is then reduced by unrealized receivables and inventory...

Received

63

A distributed partner can recognize loss only upon...

Complete liquidation of the partner's interest

64

A distributed partner can recognize loss only upon complete liquidation of the partner's interest through receipt of...3

1 money

2 unrealized receivables

3 inventory

65

If there is a basis of $20,000 and the partner received a liquidating distribution of $2,000 cash and inventory with a basis of $4,000 and FMV of $10,000, what is the gain or loss recognized? (Show calculation)

$14,000 loss ($20,000 - cash - basis of inventory)

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