Study sheet 2 Flashcards
(41 cards)
Listed property is used by taxpayers in a business but also frequently used more than _____% for personal purposes (i.e. automobile, cameras, etc).
50%, (Listed property cannot take Section 179 or bonus depreciation.)
__________ refers to the exhaustion of a natural resource as a result of production, such as mining, quarrying, or cutting timber.
Depletion
The 2 methods of depletion are _______ depletion and _______ depletion.
Cost depletion and percentage depletion
_______ assets include personal use assets, collectibles, and investment property.
Capital
_________ assets include inventory, market livestock, depreciable property used in business, real property used in business, self produced copyrights or artistic compositions, stocks and bonds held by professional securities dealers.
Noncapital
Section 1231 is depreciable property held for_________ AND used in a business, where a net loss is treated as ordinary loss (deductible from taxable income and not limited), and a net gain is treated as long-term capital gain.
over one year
Depreciation recapture is when a business sells previously depreciated or amortized property at a gain (They’ve received tax benefits from it). For Section 1250 property (real estate) the unrecaptured depreciation is taxed at a max _______% capital gains rate, while the rest is taxed at long-term capital gain (max _____% tax).
For Section 1250 property (real estate) the unrecaptured depreciation is taxed at a max 25% capital gains rate, while the rest is taxed at long-term capital gain (max 20% tax).
Installment sales to a related party have a mandatory _______ year holding period. Otherwise, the taxpayer loses the benefit of the installment sale (unless in the case of death, involuntary conversion, etc) and must report the entire amount of gain.
2 year
501c3 organizations must be a corporation or ________, or an unincorporated association.
Trust
Applying for tax-exempt status step 1 is __________________.
preparing an organizing document
Section 179 is a deduction that allows for a full deduction in the first year placed into service, rather than depreciating over the useful life. (Up to $_________).
$1.22 million. For businesses with assets that exceed $3 million, the 179 deduction is phased out (up to $4.27 million).
The __________ method depreciates an equal amount of expense each year.
straight line
Modified Accelerated Cost Recovery System (MACRS) divides depreciable assets into separate classes. Nonresidential real property are depreciated over 39 years. Residential buildings are depreciated over _________ years.
27.5 years. Computers, office equipment, etc are depreciated over 5 years. Furniture is 7 years. Farm equipment is often 15 year.
Casualty losses are deductible when?
In the tax year during which the casualty occurred.
De Minimis Election for Materials and Supplies is for property that is less than $_________, or has a useful life of 12 months or less, is a component to maintain or repair a unit, or consumables.
$200
Routine Maintenance Safe Harbor is for costs that are required more than once within a _______ year period for buildings. They can be deducted as expense rather than counted as an improvement that needs to be depreciated.
10 year
Small Taxpayer Safe Harbor for Real Property is for businesses with gross receipts of $____ million or less. They can expense (rather than counting as an improvement) repair amounts less than $10,000 or 2% of unadjusted basis of a building (less than $1 million).
10 million
The distinction between public charity or private foundation is __________.
The source of financial support. Charities must receive the majority of their support from the general public.
The penalty for an exempt organization not filing or filing incorrect information is _______.
$20 per day (up to 5% of gross receipts).
Exempt status can be revoked for an organization that doesn’t file for _____ years.
3
Unrelated business income is considered if it is a trade or business, if it is regularly carried on, and if it is not substantially related to furthering the exempt purpose of the organization. The UBIT tax is ______%.
21%
SEP IRA requirements for employees are: at least 21 years old, worked for employer at least _____ years, and has at least $750 in compensation. Union employees or nonresident aliens with no income from employer may be excluded.
3 of last 5
The betterment, restoration / rehabilitation, or adaptation of a property is an improvement and does what to basis?
Increases basis.
Demolition costs does what to basis of the land?
INCREASE the basis of the land. They are NOT an expense.
