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REG > Round 2 - New Wiley version > Flashcards

Round 2 - New Wiley version Flashcards

1
Q

What must one receive in order to defer a gain on the contribution of appreciated property to a corp

A

the SH must receive stock in exchange for the property

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2
Q

is gain/loss recognized when a corp exchanges its own stock for property?

A

no

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3
Q

On a corporation formation ,what gain is recognized ?

A

gain is recognized to the extent the liabilities assumed exceed the basis in the assets contributed by the SH

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4
Q

if a pharmaceutical company received unsolicated samples that they normally sell in inventory, what amount should be included in gross income for these samples

A

FMV

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5
Q

Can partnerships use the cash method?

A

yes, regardless of the amount of gross receipts as long as none of the partners are C corps.

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6
Q

what are deductible organizational expenditures?

A

Organizational expenditures include fees for accounting and legal services incident to incorporation (e.g., fees for drafting corporate charter, bylaws, terms of stock certificates), expenses of organizational meetings and of temporary directors meetings, and fees paid to the state of incorporation. However, the costs incurred in issuing and selling stock and securities (e.g., professional fees to issue stock, printing costs, underwriting commissions) do not qualify as organizational expenditures and are not tax deductible.

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7
Q

What are some adjustments for AMT for corps

A

Gains from installment sales
Accelerated portion of depreciation
Adjustment for adjusted current earnings

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8
Q

What is the income test to determine a Personal Holding Co.

A

Passive income is 60% of Adjusted ordinary gross income

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9
Q

what is a consent dividend?

A

It is not actually paid to shareholders; shareholders consent to be taxed as if a dividend (identified in the consent) were paid.

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10
Q

Describe the personal holding company ownership test

A

It is met if more than 50% of the value of the stock is owned directly or indirectly by five or fewer individuals in the last half of the year.

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11
Q

What deductions should be made to taxable income for the purpose of determining a personal holding company tax?

A

Accrued income tax
Excess charitable contributions
Net capital gain (after tax)

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12
Q

What additions should be made to taxable income for the purpose of determining a personal holding company tax?

A

Dividends‐received deduction

Carryover for net operating losses from the year prior to the previous year

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13
Q

List the reductions that should be made to taxable income for the purpose of determining the accumulated earnings tax.

A

Accrued income taxes
Excess charitable contributions
Net capital loss
Net capital gain after tax

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14
Q

Can deficiency dividends be used to reduce the AET and the PHC tax

A

no

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15
Q

Can consent dividends be used to reduce the AET and the PHC tax?

A

yes

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16
Q

The AETax cannot be imposed on a service corp that has undistributed earnings and profits of less than how much?

A

$150k

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17
Q

What steps can a corp take to reduce any accum earnings tax?

A
  • pay dividends by April 15
  • demonstrate that the reasonable needs of its business require the retention of all or part of 2017 accumulated taxable income
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18
Q

What kind of companies can the personal holding tax not be imposed on?

A

Partnerships

small business investment companies licensed by the small business admin.

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19
Q

If more than 50% of a corp stock is owned by five or less individuals, can the PHC tax be imposed?

A

yes

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20
Q

What is a PHC?

A
  • if five or fewer individuals own more than half of the stock during the last half of the year; and;
  • at least 60% of its AGI is derived from PHC income (investment sources)
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21
Q

How much is the accumulated earnings credit?

A

the greater of:

  • the earnings/profit of the tax year retained for reasonable business needs OR
  • $150k less the accumulated earnings/profit at the end of the preceding year.
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22
Q

Can the AET be imposed on PHC?

A

no

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23
Q

what is the minimum accum earnings credit for non service corp?

A

$250k

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24
Q

what is the minimum accum earnings credit for service corp?

A

$150k

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25
Q

In order to have a brother‐sister controlled group of corporations, five or fewer common shareholders must own in aggregate ____ or more of the stock of each corporation within the group.

A

80%

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26
Q

Can brother-sister corp file a consolidated return?

A

no

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27
Q

If both current and accumulated E&P are negative, then a distribution is a tax‐free return of capital.

A

True

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28
Q

How is gain measured on property distributed to a SH?

A

if there is a liability on the property that is assumed by the shareholder and the amount of liability exceeds the property’s fair market value, then the amount of liability is used to measure the gain

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29
Q

Can loss be recognized on nonliquidating corp distributions to SH?

A

no

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30
Q

When a wholly owned subsidiary is liquidated and the assets distributed within the tax year, is any gain/loss recognized by either the parent or the sub corp?

A

no (if it is owned 80% or more)

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31
Q

In a “C” reorganization, the acquiring firm must acquire substantially all of the assets of the target in exchange for solely voting stock of the acquiring firm.

A

True

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32
Q

In a “B” reorganization, the stock of the acquired firm must be acquired solely in exchange for voting stock of the acquiring firm.

A

True

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33
Q

Type F

A

A mere change in identity, form, or place of organization of one corporation

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34
Q

What is a private foundation

A

A tax‐exempt organization that receives less than one‐third of its annual support from its members and the general public

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35
Q

General partner

A

Can participate in mgmt and have joint and several liability for the partnerships debts. Must have at least one general partner

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36
Q

Limited partners

A

are only liable up to their investment, but they cannot participate in mgmt w/o losing their limited status

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37
Q

Do partners recognize gain/loss on contributions of property?

A

No

38
Q

when a partner provides services in exchange for partnership interest, are they taxed on that interest?

A

Yes

39
Q

What decreases a partners interest?

A

Distributions, expenses, debt decreases

40
Q

What is a partnerships basis in property contributed?

A

the same as the partners adjusted basis

41
Q

What is schedule K-1 used for?

A

to report shared to each partner

42
Q

on what form does a partnership report taxable income?

A

form 1065

43
Q

What is included in a partnerships ordinary income

A

income from operations

44
Q

What are losses in excess of the at-risk amount treated as?

A

the excess of the at-risk amount is suspended and carried forward w/o expiration and are deductible against income in future years from that activity.

45
Q

what amount of loss is allowed to be deducted by a partner

A

only to the extent of their basis in the partnership

46
Q

Pre-contribution property

A

property that has appreciated (depreciated) in value at the time of its contribution to the partnership

47
Q

If two sisters are equal partners of a partnership and the one sister sells stock to the partnership, what is her loss?

A

a loss is disallowed if incurred through a transaction if a partner owns more than a 50% capital interest (directly or constructively). The sister only owns 50% but she constructively owns her sisters 50% interest as well. so since she owns more than 50%, her loss is disallowed.

48
Q

if a person sells stock to the partnership that they have an interest in, as a transaction other than as a partner, is gain recognized?

A

yes

49
Q

What is the general gain recognition rule in partnership liquidations?

A

Distributions do not create gain or loss unless a partner receives cash (or deemed cash) in excess of his/her adjusted basis.

50
Q

what conditions must exist for the recognition of loss on a liquidating distribution

A
  • distribution consists of only cash and pro rata distribution of inventory and unrealized receivables
  • outside basis of the partner’s interest exceeds sum of cash plus inside basis of receivables and inventory
51
Q

Can loss be recognized as a result of a current distribution to a partner?

A

No

52
Q

Can gain be recognized as a result of a current distribution to a partner?

A

only if the amount of cash received exceeds the basis for the partners partnership interest.

53
Q

If a partner receives more than their basis how is their basis in the property received calc?

A

the lower of the partnerships basis in the property or the remaining basis in the partnership interest

54
Q

what are hot assets

A

unrealized receivables or inventory. (assets that generate ordinary income)
If a partnership has hot assets at the time a partnership interest is sold, the selling partner must allocate a portion of the sale proceeds to these assets and recognize ordinary income

55
Q

A shareholder’s adjusted basis in S corporation stock is adjusted ____ for contributions to capital before it is adjusted _____ for the shareholder’s share of corporate income.

A

upwards, upwards

56
Q

A shareholder’s adjusted basis in S corporation stock is adjusted ______ for distributions before it is adjusted ________ for the shareholder’s share of corporate losses.

A

downwards, downwards

57
Q

when does the built in gains tax apply

A

only when an existing C corp makes an S corp election.

58
Q

what is income in respect of a decedent

A

income that was earned by the decedent but not constructively received before death.

59
Q

distributable net income

A

the max amount that the entity can use as a distribution deduction for the year and on which the beneficiaries can be taxed.

60
Q

what is the fiscal year of an estate

A

may be either a calendar year or a fiscal year beginning on the date of the decedents death

61
Q

what kind of trust is required to distribute all of its income to designated beneficiaries each year?

A

a simple trust

62
Q

what is a complex trust

A

any trust that is not a simple trust

63
Q

what is a simple trust

A

(1) is required to distribute all of its income to designated beneficiaries every year, (2) has no beneficiaries that are qualifying charitable organizations, and (3) makes no distributions of trust corpus (i.e., principal) during the year.

64
Q

who is taxed on the trusts income?

A

if the grantor retains substantial control over the trust, such as the power to revoke the income and remainder interests, the trust income will be taxed to the grantor and not the to trust or beneficiaries

65
Q

Ordinary and necessary administration expenses paid by the fiduciary of an estate are deductible

A

On the fiduciary income tax return only if the estate tax deduction is waived for these expenses.

66
Q

what type of trust is it when the individual creating it retains interest in the trust

A

grantor trust

67
Q

how are excess foreign tax credits carried

A

back one year and forward 10 years

68
Q

how is the foreign tax credit calc. the lower of:

A

the lower of:
-foreign tax paid or
- the proportion of US tax allocable to foreign source income calc:
US tax X foreign taxable income/worldwide taxable income

69
Q

what type of entities are entitled to the NOL deduction?

A

Trusts and estates

70
Q

are S corps subject to the AMT?

A

No

71
Q

what is an advantage of forming a LLC as opposed to a partnership?

A

the owner may participate in mgmt while limiting personal liability

72
Q

what entities are subject to passive activity limits?

A 
Individuals
estates
trust
personal service corps
closely held personal service corp
73
Q

What portion of charitable contributions are deductible for C corps?

A

100% deductible up to 50% of AGI

74
Q

what portion of charitable contributions are deductible for sole proprietorship

A

100% deductible as an adjustment to AGI

75
Q

what portion of Reasonable payments to owners for services rendered are deductible for C corp?

A

50% deductible w/o any limitation

76
Q

what portion of Reasonable payments to owners for services rendered are deductible for sole proprietorship?

A

100% deductible on Schedule C up to 50% of AGI

77
Q

what portion of pmts for health insurance premiums for owners of a C corp are deductible?

A

100% deductible up to 50% of taxable income without regard to this deduction

78
Q

what portion of pmts for health insurance premiums for owners of a sole proprietorship are deductible?

A

100% deductible w/o any limitation

79
Q

what kind of interest is tax exempt?

A 
Municipal interest (bonds owned by state/local gov)
Interest earned from mutual funds is tax-free to the extent that the funds own municipal bonds.
80
Q

is gain from the sale of municipal bonds taxable?

A

yes

81
Q

are state income tax refunds included in gross income?

A

no if the TP always uses the standard deduction, no tax benefit is received when the state income taxes are paid.

82
Q

are the value of whole life insurance premiums paid by the employer included in a TPs gross income?

A

yes

83
Q

are the value of health insurance premiums paid by the employer included in a TPs gross income?

A

no

84
Q

are EE death benefits (which do not represent the proceeds of life insurance) included in income of the widow and child of the deceased?

A

yes

85
Q

At what age of the beneficiary can contributions no longer be made to an education IRA

A

18 or over

86
Q

How much is a TP allowed to deduct for contributions to an IRA if they are covered under their ER’s qualified pension plan

A

Nothing

87
Q

what is the max allowable contribution amount a self employed TP can contribute to a defined contribution qualified retirement plan

A

the lesser of $53,000 or 100% of self-employment income

88
Q

What are some examples of above the line deductions to arrive at AGI?

A 
Alimony payments
Trade or business
Rent or royalty expenses
Losses
50% of self‐employment tax
100% of medical insurance for self‐employed
Moving expenses
IRA and Keogh contributions
Student loan interest
Higher education tuition
Classroom expenses for certain teachers
89
Q

can one deduct a forfeiture penalty for making a premature withdrawal from a CS?

A

yes, can be deducted from gross income in arriving at AGI in the year in which the penalty is incurred

90
Q

how much is the standard deduction for 2017?

A

$6,350

91
Q

Is interest on auto loans deductible?

A

no

92
Q

Are legal and agency expenses paid for an adoption, deductible?

A

no they are treated as nondeductible personal expenses. However, one can claim a nonrefundable tax credit of up to $13,570 for qualified adoption expenses.

REG (20 decks)

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