Tax

Question 1

Name the assets that are not considered Capital assets

Answer 1

Inventory, depreciable property, copyrights, account receivable

Question 2

What are ordinary income assets

Answer 2

Inventory, account receivable, creations in the hands of the creator, copy rights in the hands of the creator

Question 3

What are section 1231 assets

Answer 3

Depreciable property or real property that are used in a trade or business

Question 4

When does the wash sale does not apply?

Answer 4

To gain and when dealing with index fund for a managed large cap fund

Question 5

What is a section 1231 asset ?

Answer 5

Real property and assets that are depreciable

Question 6

What are section 1245 assets
Wha is not a 1245 assets

Answer 6

Equipment, intangibles like copy rights, patents.
Not real property

Question 7

How do you calculate straight line depreciation

Answer 7

Value - salvage value= estarme depreciation
Estimate depreciation/ useful life years =
Annual depreciation deduction

Question 8

What are the Macrs depreciation categories

Answer 8

5 year term - Cars and computers
7 year term - office furniture
27.5 year term - residential property
39 year term- non residential property

Question 9

What is the exclusion ratio for basis of annuities and retirement accounts

Answer 9

Investment (cost or after tax) / expected total return or FMV of asset

Question 10

What are the 2 hurdles that taxpayer must not pass for their SS benefits not be taxed

Answer 10

Hurdle 1 MFJ not go over 32k and others 25k
Hurdle 2 MFJ not go over 44k and others 34k

Question 11

Hurdle 1 calculations to tax benefits are which ones?

Answer 11

Lesser of
1. 50% (benefits) = ?
2. 50% (MAGI + 50%(benefits) - Hurdle 1)

Question 12

Hurdle 2 calculations to tax benefits are which ones

Answer 12

The lesser of
1. 85% (benefits)
2. 85% (MAGI + 50%(benefits) - hurdle 2)

Question 13

Are employee meals and lodging provided by employer excludable from income to the employee

Answer 13

Yes, as long as it’s for the convenience for the employer and on employer premises for meals and the lodging is a requirement in order to do the job

Question 14

How much is excludable from income for Dependent care provided by employer?

Answer 14

$5,000

Question 15

Are cafeteria plan taxable provided by employer?

Answer 15

If chosen cash it is. If not chosen cash it is not.

Question 16

Are qualified moving expenses escludabke from employees income?

Answer 16

No, the reimbursement must be included in employees income. Only Exception is for the member of armed forces due to change of station.

Question 17

What are the conditions for claim foreign income exclusion of (112,000)

Answer 17

Us citizen that is a resident in other country for a full tax year. US resident who is citizen or national of a country that the US has income tax treaty and lived for a full tax year there.
Us citizen or resident who is physically present in other country at least 330 days of consecutive 12 months

Question 18

What is the breakdown for charitable dedication private va public charities

Answer 18

Públic: short term intangibles or tangible related property 50% of AGi, long term is 50% of AGI if basis or 30% of AGi if FMV, cash is 60% of AGi
Private: short term, intangible and cash 30% of AGi, long term tangible related or unrelated 20%

Question 19

Name all 9 tax credits

Answer 19

Earned income, adoption expenses, child tax credit, family credit, child dependent care credit, lifetime learning credit, American opportunity credit. Foreign tax credit. Credit for elderly/disabled

Question 20

What are the qualifications to claim earned income credit

Answer 20

Be employed or self-employed and have a qualifying child’s exceptions apply for not having child if you are between 24-64 of age

Question 21

What are the qualifications to claim adoption expenses tax credit

Answer 21

Have an eligible child of less than 18 years of age. and physically or mentally handicapped
Non refundable but can be carried forward up to 5 years

Question 22

What are the qualifications to claim the child tax credit

Answer 22

Child must be under age 17, can be stepchild or foster child but must be auS citizen. Must file MFJz the amount is $2000 per child, tax creyó FI refundable up to $1,400 per child

Question 23

What are the qualifications to claim the family tax credit

Answer 23

Must be a qualifying child or other dependent. The amount is $500

Question 24

What are the qualifications to claim the child dependent care credit

Answer 24

Costs must be incurred due to being employed. Cannot claim if caregiver is also a dependent. Child must be under age 13 or handicapped dependent or spouse. Must file MFJ
The amount is 20% of costs or the lesser of 3k per child or up to 6k for 2 children

Question 25

When is kiddie tax apply

Answer 25

After $2300 of unearned income wil be subject to parents tax rate for a child under age 19 or a full time student under 24

Question 26

How do you calculate a child standard decduction for kiddie tax purposes

Answer 26

Deduction is $1,150, the following 1,150 is taxed as child marginal tax rate. Total is $2300 not subject to kiddie tax

Question 27

How do you calculated earned income standard deduction for a child

Answer 27

Earned income under the Single standard deduction plus $400

Question 28

What is AMT

Answer 28

Alternative tax for those you take advantage of items of tax preference

Question 29

What are items of tax preference

Answer 29

1. Percentage depletion, taken in excess of adjusted basis 2. intangible drilling costs 3. Interest private activity bonds uses to digest interest income

Question 30

What if the basic formula for AMT

Answer 30

Taxable income - adjustments for preference items is AMTI which is subtracted by exemption then X AMT tax rates - any foreign tax credit and regular tax = AMT

Question 31

What are adjustments for AMT

Answer 31

SUBTRACT Accelerated depreciation Standard deduction Star and local taxes

Question 32

What are the at risk limitations

Answer 32

Excess losses of basis are suspended until you increase your basis then you can deduct

Question 33

Passive rental losses are only aplicable if

Answer 33

You are not an active participant

Question 34

What is considers an active participant in rental properties

Answer 34

Own at least 10% or do the day to day tasks, work 500 hours a year or 100 hours and you are the one who works the most in the property then you are able to deduct up to 25k against ordinary income

Question 35

How do you handle losses and gains of more than one Publicly traded LLP

Answer 35

You can only offset gains and losses of same publicly trade LLP. Any losses are carried forward

Question 36

On what schedule is rental income reported

Answer 36

Schedule E

Question 37

What is the rule for vacation home to exclude income from rentals

Answer 37

If rented for 14 days or less income is excluded and can deduct mortgage interest and taxes from AGI If rented for 15 days or more income is included but can deduct more expenses except for mortgage interest

Question 38

What if the statue of limitations for the IRS to audit a tax return

Answer 38

3 years

Question 39

What is the statue of limitations for the IRS to collect tax

Answer 39

10 years

Question 40

What is the status of limitation to collect tax if Income is understated by 25%

Answer 40

6 years

Question 41

What is the statue of limitations of there was fraud in filing the tax return to evade taxes

Answer 41

There is none

Question 42

When does the statue of limitations start?

Answer 42

When the return is filed

Question 43

What is the failure to pay penalty

Answer 43

.5% per month up to 50 months

Question 44

What is the failure to file penalty

Answer 44

5% per month up to 5 months

Question 45

If a taxpayer is subject to both failure to file and pay what is his per month charge

Answer 45

4.5%

Question 46

What is the penalty for fraud

Answer 46

75% of tax understated

Question 47

What is the penalty for negligence of understating income tax

Answer 47

If understatement is greater than 10% or 5k than 20% of understated tax

Question 48

What are the appropriate cost recovery methods for the following items : Desk Patent Oil well

Answer 48

Desk depreciation Patent amortization Oil well depletion

Question 49

True or false You can deduct inventory in your tax return since it’s for business purposes

Answer 49

False

Question 50

What is the convention period of placing and si paint of rental residential property and non residential property

Answer 50

Mid month

Question 51

What are the categories under the MACRS GDS

Answer 51

3 years for trucks, rent to own and race horses 5 years for cars, computers and office machinery 7 years for office furniture and fixtures 27.5 years for rental homes 39 years for non resential buildings

Question 52

What is the deductibility of dividends for shareholders owning the following of c corporation B John , 18% Clover 23% Alex 90%

Answer 52

John 50% Clover 65% Alex 100%

Question 53

What are the rules for deducting dividends for share holders

Answer 53

Less then 20% ownership may deduct 50% Between 20-80% ownership May deduct 65% At least 80% ownership may deduct 100%

Question 54

For an S corp to be eligible for this classification it must

Answer 54

Only have 100 employees Shareholders must be US citizens or resident Not be an insurance or financial company or domestic international corporation