Review Mods 23-39 Flashcards Preview

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Flashcards in Review Mods 23-39 Deck (33)
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1
Q

Interest income derived from a temporary investment must be classified as…

Therefore it will not be…

A

Portfolio income

Not be included in passive activity loss

2
Q

MACRS for furniture and fixtures

A

200% declining balance over 7 years

3
Q

Property taxes that buyer of house pays on May 31st are…

A

Deductible on a pro rata basis

4
Q

A cash basis tax payer who writes off uncollectible accounts receivable for their accounting practice. How is this treated on the tax return?

A

Not deductible, because cash basis tax payer

5
Q

If a payor makes alimony payments of $40,000 in 2011 and pays nothing in 2012 and 2013, what is the recapture for 2013?

A

$25,000 ($40,000 - $15,000)

6
Q

If a payor makes alimony payments of $60,000 in 2011, $25,000 in 2012 and nothin in 2013. What is the recapture for 2012? 2011? 2013?

A

2012 = $10,000 = $25,000 - $15,000

2011 = $37,500 = $60,000 - (($15,000 + ((25k-10k + 0)/2))

2013 = $47,500 = 2011 recapture + 2012 recapture

7
Q

How do you calculate basis of new property acquired in a like kind exchange?

A
Basis of old real estate transferred
\+ liability assumed 
\+ gain recognized
- liability given
= basis
8
Q

A partner contributes property with an adjusted basis of $5,000 to and a loan of $7,000 that is assumed by the partnership, what is the partner’s basis?

A

$0 = $5,000 - $7,000

9
Q

If a partner with a 50% interest in the partnership received $20,000 in guaranteed payments through December 31, 2013 and the partnership had ordinary income of $40,000 for fiscal year June 30, 2013 and $55,000 for fiscal year June 30, 2014. How much income is included in the partner’s return?

A

$40,000 =
guaranteed payments for entire year
+ 50% 2013 partnership fiscal year payments

10
Q

If partnership book income is $90,000 and guaranteed payments are $50,000, what amount should be reported as ordinary income on the partnership’s 2013 return?

A

$90,000

11
Q

On the U.S. Return of Partnership Income, where does advertising expense go?

A

Line 20 other deductions

12
Q

What type of entity is the partner (on partnership return)?

A

Individual

13
Q

Current year increase in capital account, how do you calculate it on partnership schedule K-1?

A

Add and subtract lines 1 through 13

14
Q

How do you calculate net earnings from self-employment on line 14A of schedule K?

A

Net earnings from self employment =

Ordinary business income + guaranteed payments

15
Q

Gross nonfarm income on schedule K equals…

A

Gross profit on form 1065

16
Q

Self employment earnings line 14A on schedule K-1 is calculated by…

A

Self-employment earnings =

Ordinary business income (schedule K-1) + guaranteed payments

17
Q

Self employment earnings line 14C on schedule K-1 is calculated by…

A

Guaranteed payments

+ (gross profit - guaranteed payments) x partnership %

18
Q

Portfolio income includes all interest income other than interest income…

A

Derived in ordinary course of trade or business

19
Q

In determining the NOL for 2013, given that deductions in the tax return exceed gross income, DRD would…2

A

1 Be allowed

2 does not need to be added or subtracted

20
Q

In determining the NOL for 2013, given that deductions in the tax return exceed gross income, NOL deduction (carryover from 2012) would…2

A

1 not be allowed

2 must be subtracted from excess deductions on the tax return

21
Q

Distributions of property to shareholders reduce earnings and profits by…

A

The greater of property’s adjusted basis

or FMV at date of distribution

22
Q

If there is a distribution to shareholders to reduce E&P, a gain must be recognized and is calculated by…

A

Gain recognized =

FMV distributed property - basis of distributed property

23
Q

What is the net change in E&P if FMV of property distributed is $13,000, basis of property distributed is $6,000 and a liability on the property is $4,000?

A

Gain recognized (FMV - basis). $6,000
Distribution FMV property. (13,000)
Distribution of liability. 4,000
Net Decrease in E&P (before tax). $3,000

24
Q

A series of adjustments must be made in arriving at a corporation’s undistributed personal holding company income (UPHCI), these adjustments include…

A

Deduction of federal income taxes

25
Q

A manufacturing company is entitled to a minimum accumulated earnings credit of…

A

$250,000

26
Q

When an S-Corp earns $20,000 in net income what 2 items are affected?

A

1 shareholder’s basis increases by $20,000

2 AAA increases by $20,000

27
Q

A distribution of an S-corp will reduce both…

A

Shareholder’s basis and AAA simultaneously

28
Q

What is the order of how distribution of an S-corp is treated? 4

A

1 AAA (non taxable)
2 C-corp E&P (dividend)
3 return of basis (nontaxable)
4 capital gain

29
Q

When built in gain is treated as a LT capital gain, built in gains tax is treated as…

A

A LT capital loss

30
Q

On schedule M-1 how are dividends treated?

A

Dividends received deduction is not included on schedule M-1

31
Q

How do you calculate net business income per share when a company has net business income of $16,300 , 400 shares outstanding and there are 360 days in the calendar year?

What is net business income of a shareholder that owns 50 shares on schedule K-1 and acquired the shares on January 16th?

A

Net business income = ($16,300/200 shares)/360 days per share

Net business income x 350 days x 50 shares

32
Q

A purchase of an S-corporation stock for $3,000. The $3,000 is the shareholder’s…

A

Beginning basis

33
Q

What 4 items that don’t not result in an adjustment in computing AMTI or ACE?

A

1 DRD 70%
2 tax exempt interest
3 real property in service from 1999 on
4 charitable contributions

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