Tax Flashcards
(343 cards)
1
Q
Gross income is all _______________ from whatever__________
A
all income from whatever source derived
2
Q
Is gross income only cash?
A
NO - whatever form received, money, property, services
3
Q
Business purpose doctrine is :
A
transaction will not be effective for income tax purposed unless it is intended to achieve a genuine business purpose other than tax avoidance
4
Q
Substance over form doctrine:
A
allows the IRS to look at the real substance of a transaction instead of just the form as basis for taxation (e.g. a CEO taking out a loan instead of comp is still comp)
5
Q
Assignment of income doctrine:
A
“fruit and tree”; if you earned the income you can’t assign it to someone else (if you’re the tree, has to be your fruit)
6
Q
Tax benefit rule or doctrine
A
converts nontaxable receipts into taxable income; most common is receiving reimbursement for medical expenses year after you deducted them - those then are taxable
7
Q
Constructive receipt doctrine or rule:
A
if there isn’t any substantial limitation on taking control of funds, then they are treated as taxed (think check in the mail you didn’t cash, dividends, matured and payable bond interest, etc.)
8
Q
In personal services, the employer pays _____ compensation to the employee who receives ____ compensation
A
deductible compensation and the employee receives taxable compensation
9
Q
Income from property is included in gross income, examples are:
A
interest from bonds, dividends from stocks, rental income, etc.
10
Q
Qualified dividends may be taxed at the _____
A
lt capital gains rates of 0/15/20
11
Q
Phantom income is income that has not yet been received in _____
A
cash
12
Q
For phantom income, your basis is increased each year by the amount of ______ required to be recognized on the taxpayers income tax return
A
interest income
13
Q
The income-producing property must be _____ for the income to be taxed to the assignee
A
assigned
14
Q
Partnerships and S corps are _____ entitites
A
pass through
15
Q
Partnership taxation entails:
A
- income from parternships taxed to partners at individual rates
- must file informational return (form 1065)
- each partner receives a K-1
- typically it will be self-employment income
- income for a limited partner is considered passive activity income
16
Q
S Corp taxation entails:
A
- shareholders, rather than corp, pay the tax
- S corp files form 1120S
- each shareholder receives K-1 and it is considered passive activity income
- employee-shareholder receives W-2 for earned income and material participation rules apply
17
Q
Income in respect of a decedent (IRD) means that income generated by assets of ______ that is ditributed from the _____ to the ______ is generally taxable
A
assets of an estate distributed by the estate to the benes is generally taxable
18
Q
Examples of IRD:
A
- accrued rents
- salary earned before death
- distributions from qualified plan or IRA
- deferred comp, deductible contributions, and tax-deferred earnings in tax-advantaged accounts
- installment notes and annuity payments after death
19
Q
For IRD, the character of the income to the decedent is the same as it is to the ______
A
recipient (i.e. if it was ordinary income to the decedent, it would be ordinary to the recipient)
20
Q
For IRD, there is no _____ of tax basis at the date of death
A
no step up - no adjustment to FMV at date of death
21
Q
A misc. itemized deduction (not subject to the 2% AGI floor) is _____ for the portion of any _____ attributable to the IRD on the tax payers income tax return when income is reported
A
allowed for any portion of estate tax attributable to IRD on the tax payers income tax return
22
Q
Income distributed from a trust to beneficiaries is generally ______
A
taxable
23
Q
Undistributed income from a trust is generally taxed to the _____
A
estate or trust
24
Q
In community property states, _____ of earnings of each spouse during marriage is considered to be owned by the ______
A
one half of earnings owned by the other spouse during marriage
25
In CP states, if spouses living apart, then only taxed on your portion if the following conditions are met:
- lived apart for entire year
- did not file joint return
- no portion of earned income was transferred between the spouses
26
THe idea of "conduit for others" is that if say, a professor conducted a seminar, the fees would go to the university because he is an _____ of the university; he obtained _____ of the income, but he is a _____, so he isn't taxed on that money
employee; he obtained possession of the income but he is a conduit for the university
27
For interest on laons below market rates, the lender may be required to _____ interest income
impute (recognize)
28
For below market loans, imputed interest is calc'd using _____ compounded ______ and adjusted _____
fed borrowing rates, compounded semi annually, adjusted monthly
29
Imputed interest rules apply to the following types of below market rate loans:
- gift loans (essentially a "gift" is made that is the amount of the imputed interest to the borrower)
- compensation related loans
- corporation-shareholder loans (loan to a non-employee shareholder)
- tax avoidance loans (loans that significantly affect the vborrorwer or lenders federal tax liability)
30
Exceptions and limitations to the imputed interest rule
- no imputed interest on loans less than $10k unless used to buy income producing property (also for compensation or corporation loans)
- On loans $10k to $100k, imputed interest cannot exceed borrower's net investment income from all sources for that year
- if the purpose is tax avoidance, none of those exceptions apply
31
Cash and FMV of prized and awards are _____ in gross income
included
32
Employee achievement awards paid in _____ and less than ___ per year are excluded
paid in personal tangible property and less than $400 per year
33
If a winner of a prize chooses an annuity option, income is recognized each year but has to be for a term longer than _____
10 years
34
If winner gets a prize for nonprofit reasons, and turns proceeds over to another nonprofit, then income is ____
excluded
35
For annuities, withdrawals (including loans) on contracts issued after 8/13/1982 are included in _____ up to total _____
included in gross income up to total earnings (LIFO)
36
Exclusion amount for annuity payments =
(investment basis/expected return) x annuity payment
37
Annuity payments beyond the ____ expectancy are _____
annuity payments beyond the projected life expectancy are fully taxable
38
If annuitant dies before life expectancy, then unrecovered basis is _____ on the annuitants final income tax return
deductible
39
Employees can exclude premiums paid by their employers on the first _____ of group term life insurance
$50k
40
Partners, proprietors, and greater than 2% S Corp owners are _____ for the group term life insurance exclusion
ineligible
41
If group term is more than $50k, then have to use the monthly uniform premium table to calculate _____ of the benefit
taxable amount of the benefit
42
For discriminatory plans, key employees and highly compensated employees lose the _____ exclusion for group term
$50k
43
Are unemployment comp benefits included in gross income?
YES
44
For SS, what percent can be included in gross income?
85%
45
Amount of SS benefit subject to tax is based on taxpayers _____ income
provisional
46
Provisional income is AGI from all sources plus ____ of SS benefits received, foreign income previously excluded, and any tax-exempt interest income
50%
47
FICA tax consists of the _____ and the _____ taxes
SS tax and medicare tax
48
OASDI stands for:
old age, survivors, and disability insurance program
49
OASDI is ____ to wages for the employer share and ______ for employee share
6.2% and 6.2%
50
Self-employed people pay _____ in OASDI tax
12.4% (double)
51
The ceiling for OASDI tax is ____ in 2017
$127,200
52
Medicare tax is ____ for both employer and employee with no ____
1.45% for both, no cap
53
Self employed people pay ____ in medicare tax
2.9%
54
When calculating self-employment tax, taxpayer multiples net self-employment earnings by
92.35%
55
Self employed people can deduct the ____ share of tax paid as a deduction from AGI
employer's share
56
The additional medicare tax of ____ applies to self employed individuals if they make over _____ single or ____ MFJ
0.9%; $200k or $250k
57
Is there an employer part of the additional medicare tax?
NO
58
What income is the additional medicare tax taxed on?
Incremental over the thresholds
59
Net investment income tax of _____ is imposed on unearned (investment) income of certain higher-income taxpayers
3.8%
60
Death benefits paid by an employer to an employee's benes are ____ in the beneficiaries' gross income
fully includable (NOT life insurance proceeds)
61
For windfalls, even if winner accepts prize money in form of annuity, full amount of the annuity must be included in income ______
immediately
62
There must be a _____ prize option with annuity over 10 year period - then income taxed as received
qualified
63
Structured settlement payments are generally ____
tax free (if compensatory damages)
64
Exception to structued settlement tax free payments are:
age, sex or racial discrimination
65
Punitive damages for structured settlements are generally ______
taxable, except if wrongful death
66
Earnings on lump-sum payments for damages are ____ taxable
ARE YES
67
Inheritances, gifts and bequests are _____ from gross income
excludable (except for IRD or income from income producing property)
68
In order for a scholarship to be excludable from gross income, recipient must be a ____
candidate for degree
69
If you get a scholarship in one year and dont spend all of it until the next, you do NOT have to include the excess above year 1 ______ expenses as income
qualified expenses
70
Employees of nonprofits are allowed to exclude a tuition waiver from gross income is the the waiver is pursuant to a ______ reduction plan
qualified tuition reduction plan
71
Payments by a donor directly to an educational institution are ____ payments, and not includable in students ____; also not subject to ____
qualified payments, not includable in students income, not subject to gift tax
72
Life insurance proceeds to the bene are generally ______ from income tax
exempt
73
If life insurance proceeds are received in installments, then interest is generally ____
taxable
74
Dividends from a life insurance policy are ____ taxable income unless the aggregate dividends received exceed the taxpayer's ____ in the contract
not taxable unless they exceed the basis in the contract
75
Businesses cannot deduct life insurance premiums if that insurance covers the life of an _____ , ___ or ____ if the business is directly or indirectly a _____ under the policy
owner, officer or employee if business is directly or indirectly a bene of the policy
76
If you surrender a life insurance policy and receive lump sum cash value, must recognize the difference between the ____ and your ____
CV and your basis
77
Basis for a life insurance policy is generally ____ plus ____
premiums paid plus dividends
78
Are losses from a life insurance policy deductible?
NO
79
Withdrawals or loans from life insurance use the _____ accounting method
FIFO
80
If you transfer your life insurance contract for something of value, then the transferee must include the ____ in their _____
proceeds in their income if they are above the basis
81
Five reasons when a transfer-for-value will not be included in income for the transferee (who gets the policy) (for life insurance):
- transfers to the insured
- transfers to a partner of the insured
- transfers to a partnership in which the insured is a partner
- transfers to a corp in which the insured is an officer or shareholder
- transfers to a transferee whose basis is determined by reference to the transferor's basis (tax-free exchange or gift)
82
Are viatical settlements included in gross income for the recipient?
NO
83
Terminally ill patient means they are expected to die within _____
24 months
84
Chronically ill means can't perform at least ___- of ADL for at least _____ days; if receiving benefits, can only be excluded if they use them for _____
2 of 6 ADLs, 90 days, can only exclude if using for longterm care
85
Under the transfer-for-value rule, purchaser of a life insurance policy will be taxed on any benefits received in _____ of the purchaser's _____
in excess of the basis
86
If you simply surrender a life insurance contract and receive cash, then taxable is the difference between the cash value received and investment in the contract (basis) T/F
T
87
If you make a nonviatical sale, then the proceeds are taxed as follows:
- adjusted basis is reduced by cost of insurance
- basis for purchaser will be deducted from death benefit received
- has to be sold to person who is unrelated and will suffer no economic harm at insured's death
88
Modified endowment contract (MEC) is a life insurance policy after 1988 that fails the ___ test
7 pay test
89
7 pay test means that the total premiums paid in the first ____ years is more than the net level premiums if they offered a paid-up benefit option after the seventh year
7 years
90
Each time a policy undergoes a material change, has to pass the _____ test
7 pay test
91
Which accounting method is used for withdrawals from a MEC?
LIFO
92
Are MECs subject to a an early 10% withdrawal penalty before 59 1/2?
YES
93
Are MEC death benefit proceeds collected tax free?
YES, if no transfer-for-value applies
94
Premiums paid by the employer for accident and health plans are ____ by the employer and not ____ for the employee
deductible for employer and not included in gross income for employee
95
When are benefits paid for employer accident or health plans not taxable as income for the employee?
if for medical care of employee, spouse or dependent, or if for permanent loss or loss of use of function or body part for employee, spouse, or dependent (other benefits are included in gross income)
96
If a taxpayer pays for disability insurance with after-tax dollars, are benefits taxable?
NO
97
Are employer contributions to a medical or health savings plan included in employee income?
NO
98
Employees can exclude up to _____ in child care expenses paid by their employer
$5k
99
Employer paid education assistance is capped at _____
$5,250, both for undergrad and graduate, cannot discriminate for HCEs
100
For cafeteria plans, if you select the cash benefits, then those are ____
taxed
101
If there are "no additional cost" services given to employees, must meet criteria that:
- employee receives services, not property
- employer does not incur substantial cost or loss of revenue to provide
- services are offered to customers in ordinary course of business
- nondiscrimination, can't just be for HCEs
102
Employee discounts can be _____ from income
excluded
103
Can't exclude employee discount if discount is related to:
- can't be real or investment property
- if isn't for product/property that is in same line of business
- limited to gross profit if sold to a customer
- limited to 20% of customer price
- can't be discriminatory to HCEs
104
Can you exclude employer payments or reimbursement for adoption expenses?
YES
105
TO exclude adoption assistance, must meet:
- employer has written adoption assistance plan
- non discriminatory
- 5% or less of total payments made each year by plan for to shareholders owning more than 5%
- employees are given adequate notice of eligibilty
- payments are traceable to qualified employee adoption expense
106
Total adoption excludable amount in 2017 was
$13,570
107
Personal auto use from an employer is typically ____
taxable
108
Can you exempt interest income from Series EE or Series I governemtn savings bonds if used for qualifying higher ed expenses?
YES
109
To exclude EE or I interest income for higher ed expenses, must:
be issued after 1989
| issued to individual at least 24 years old
110
If married couple files separately, can they exclude EE or I higher ed expenses?
NO
111
QSBS stands for
qualified small business stock
112
noncorporate investors can exlude up to 50% of gain they realize on _____
QSBS, any remaining taxed at 28%
113
QSBS stock must be issued after ____ and held for at least ___
1993 and held for at least 5 years
114
If you forgive debt, does the borrower have to report that as income?
YES
115
To avoid double taxation of foreign income, make sure to claim the _____
credit for foreign taxes paid
116
You can exclude up to _____ for foreign earnings from US gross income
$102,100
117
Foreign earned income is for _____ provided
services
118
To qualify for the foreign exclusion, must be a ____ resident or present in foreign country for ____ days during any consecutive 12 month period
bona fide resident or present for 330 days
119
Foreign exclusion is capped at calculation of:
max exclusion x (number of days present/365)
120
CESA max contribution is ____ per beneficiary excluded
$2k
121
Can you contribute to a CESA and QTP in same year for same bene?
YES
122
Must distribute CESA funds before age ___ otherwise 10% penalty
30
123
Can you rollover a CESA to non family member taxfree?
NO, must be same family
124
Can you rollover a QTP to a non family member tax free?
NO
125
When can you deduct expenses from gross income in arriving at AGI?
- when expense incurred in carrying on trade or business (for sole proprietors, schedule C)
- when incurred in connection with property held for production of rents or royalties
126
Farm income and expense are reported on schedule ____
F
127
unreimbursed business expenses of an employee are deductible as misc itemized subject to ____ AGI floor
2%
128
Self-employed individuals can deduct the 6.2% OASDI and ____ medicare with no earnings limit
1.45%
129
If self-employment income is less than $400/year, then _____ is payable
no self employment tax is payable
130
Alimony paid to an ex-spouse is a _____ for AGI
deduction
131
If you receive alimony is it taxable?
YES
132
A viable, enforceable premarital agreement must be
- in writing,
- signed by both parties
- include net worth
- nothing about future alimony or child support
- some states require notarization and may be requried to be signed before wedding day
133
Payments to Keogh and SEP plans are deductible if established and funded by _____
extension due date
134
Moving expense are generally deductible if:
- incurred in conjunction with starting a new job
- distance between new job and old residence is at least 50 miles
- must be full time at new job for 39 weeks out of next 52 weeks
- if self-employed, must be 78 weeks out of 104 weeks
135
Deductible moving expenses include:
- moving of household goods and personal effects
- travel and out of pocket travel
- no meals, house hunting or temporary living arranagements
136
If reimbursed for moving expense, then they aren't even on your ____ as income
W-2
137
Commuting expenses are generally _____
non deductible
138
If you forfeit a CD before maturity, then forfeited interest is ____
deductible
139
Capital losses can offset capital gains without ____
limit
140
Capital losses can offset ordinary income up to _____
$3k
141
Any capital losses unused after filing a final fed income tax return are ____ and _____ be reused
are lost and may not be reused
142
A corporation can only use capital losses to offset _____
capital gains
143
Self-emloyed people and 2%+ shareholders in S Corps can take a ____% deduction for health insurance
100%
144
Employees of small cos (50 employees or less) and self-emplyed people can deduct contributions to Archer _____
medical savings accounts
145
Archer MSA distributions not for medical expenses are taxable and subject to ____ penalty
20%, unless 65 or upon death or disability
146
Can you open a new Archer MSA?
NO
147
HSAs have a penatly of ___% for non healthcare costs
20%, except if over 65
148
Interest for qualified educational loans is generally ___-
deductible
149
Can you be a dependent and claim educational loan interest deduction?
NO
150
Max deduction for student loan interest is _____
$2.5k
151
Charitable deductions can only be up to ____ of AGI
<= 50%
152
Medical deductions can only be up to ____ of AGI
10%
153
Casualty losses can only be deductible up to ____ of AGI
>10%
154
Misc. itemized dedcutions have to be ____ fof AGI
> 2%
155
AGI also serves as a benchmark for limiting passive rental real estate _____
losses
156
Alimony must meet all the following conditions;
- must be in cash
- agreement does not specify that payments are not alimony
- payee and payor are not members of same household
- no liability to make the payments after death
- payments are made direct to payee spoouse or to a third party for direct benefit of payee spouse
157
Alimony may be recaptured if it decreases more than _____ in any of the first three years
$15,000
158
Shortcut alimony recapture calc is:
P1 + P2 - 2P3 - $37,500
159
Alimony recapture is included in the gross income of the _____
payor
160
Property transfers between divorcing spouses must
- occur withing one year after marriage ceases
- no gain or loss recognized by transferor
- no deduction recieved for transferor
- not included in gross income of transferee
- basis is the same between the two
- if tranferee is nonresident alien, transferor must recognize gain/loss
- if liability recieved is greater than basis, then gain has to be recognized by transferor
161
Child support is ____ as taxable income by recipient, and ____ by payor
not included in taxable income and not deductible by payor
162
Kiddie tax applies to a dependent child who has not attained age _____ or a full time student who has not attained ____
19 or 24
163
Full time student counts as _____ out of the taxable year
5 months
164
Kiddie tax not applied if individual is 18 years old and earned income exceeds _____ of their support
50%
165
Unearned income above _____ is taxed at parents highest marginal rate
$2,100
166
Standard deduction for kiddie tax income is $350 + amount of _______ income, up to _____ limit
unearned income, up to $6,350 limit in 2017
167
Caring for an elderly parent or adult child depends on whether you can claim that person as a ______
dependent
168
Investment expenses are deductions for or from AGI
from
169
Deductions from AGI are reported on schedule ____
A
170
To be deductible, expenses must be ____ and ___
ordinary and necessary
171
If compensation paid by a corp is deemed "unreasonable", excess amount is considered a ____
dividend, double taxed
172
Two methods of taxpayer accounting are ____ and ____
cash and accrual
173
Cash-basis taxpayer receives deduction when expense is ___, accrual when expense is ____
paid, incurred
174
Disallowed deductions:
- criminal stuff
- political contributions
- lobbying activities
- capital expenditures related to buidling betterment, improvements, etc.
- personal expenditures
- expenditures made on behalf of others (except for medical expenses)
- tax-exempt income related expenses
175
Hobby expenses must be ____ in order to be deducted (and meet 2% floor)
itemized
176
Rental income is excluded from gross income if it is a primary personal use residence, meaning only rented out for less than ____
15 days
177
Primarily rental use is greater than ___ days rented and no more than ___ days personal use
15 days rented, no more than 14 days personal use
178
If rental property is between primary and rental usage definitions, expenses can only be deducted up to extent of ____
income, and can't take a loss
179
Related party losses are generally _____ for deduction purposes
not allowed, some exceptions
180
Attribution rules mean that a taxpayer is treated as having contstructive owernship of stock if owned _____ or ____ by related parties
directly or indirectly
181
Other deductions and losses include:
- legal and accounting fees (from AGI)
- worthless securities
- small business stock (limited to $50k annually)
182
Section 1244 allows small business stock losses to be treated as ____ losses, up to $50k annually - the rest get treated as _____
ordinary losses, rest get treated as capital losses
183
For bad debt to be a deduction, must use the ______ method
specific charge off method - can't be for bad debt reserves
184
Business bad debt can only be written off if previously included in _____
reported income
185
To be a loan, there must be a _____ obligation to pay a specific amount
enforceable
186
Loss of deposits may be deducted as casualty losses but subjec tto ____ AGI limit and ___ floor
10% AGI limit and $100 floor
187
For businesses, casualty losses are not subject to the ____ AGI limit or $100 floor
10%
188
If property for rentals is completely destroyed, a business can deduct the _____; if partially destroyed, it is the lesser of the ______ or the decline in ____
adjusted basis; lesser of adj basis of decline in FMV
189
NOLs can be carried back ____ years preceding the loss or forward ____ following the year of the loss
2 years back, 20 years forward
190
Old NOLs are completely ____ before _____
old completely written off before more recent NOLs
191
Can elect to forego carryback for NOLs, but it is _____
irrevocable
192
What kind of employee unreimbursed expense are not subjec to 2% AGI floor?
handicapped individuals
| moving expense are above the line
193
Can you use MACRS after using standard mileage rate for unreimbursed travel expenses?
NO
194
Deductions for employee travel must be away from ____
tax home
195
In order to deduct employee travel, must be an _____ trip
overnight
196
Meals are deductible, when allowed, up to ____
50%
197
For a foreign trip, if more than ___ of time was used for personal vacation then must allocate some of transpo costs to personal use
25%
198
To deduct education expense for employees, must be related to ____ or _____ existing skills, or to meet legally imposed requirements to ____ the job
maintaining or improving, to retain the job
199
Education employee deduction items include:
- direct expenses (books, tuition, typing/photocopy)
| - indirect expenses (transpo, travel, lodging, laundry, 50% of meals)
200
Meals and entertainment are fully deductible for employees if
it is a company event
de minimus
transportation
included in comp
201
Cover charges, parking, and entertainment room rentals are ___ deductible for employees
50%
202
Is a deduction allowed for gifts to superiors at work
NO
203
Home office expenses are deductible if it is
- principal place of business
- used exclusively and regularly as place of business to meet clients or patients or in normal course of business
- separate structure not attached to dwelling
204
Home office expenses require that you allocate _____ of household expenses
allocate portion of total household expenses, cannot exceed net income of business
205
Home office expenses for self-employed individuals is ____ AGI, for employees is ___ AGI
for SE is for AGI, for employees is FROM AGI
206
Simplified home office deduction is ___ per square foot, max is ____
$5/sq ft, max is $1,500
207
Can a home office expense deduction create a loss?
NO
208
Job hunting expenses in the same _____ is deductible, whether or not you get the job
trade or business
209
Job hunting expenses for different trade of industry is _____ deductible
never
210
Major itemized deductions include:
```
medical
taxes
interest
charitable contributions
casualty losses
```
211
Misc. itemized deductions NOT subject to AGI 2% floor are
impairment related work expenses
gambling losses up to net winnings
annuity contract basis recovery
pro rata portion of estate taxes paid with respect to IRD
212
Itemized medical expense deductions are subject to ____ AGI floor
10%
213
What medical expenses are NOT deductible?
cosmetic
| funerals
214
Deductible taxes include:
- state, local and foreign real property tax
- state and local property taxes
- state local and foreign income taxes
- state and local sales tax
215
Assessments are usually added to the ____ of the property
basis of the property
216
Interest on funds borrowed to acquire investment assets are ____
deductible
217
Investment interest deduction capped at ____ income
net taxable investment income
218
Investment expenese may be deducted but must be:
directly connected to producing income
do not include interest expense
does not include commissions
219
Net investment income =
gross investment income - deductible investment expenses above 2% AGI floor
220
Qualified residence interest is _____
deductible
221
Can you deduct interest from HELOCs not used for home improvements?
NO
222
Interest paid as points is ____ in year paid
deductible
223
Borrower who uses points can deduct points up to ____ provided plus seller-paid points
funds provided
224
For seller-paid points, it reduces the ____ of the property for the owner
reduces directly
225
you can deduct a prepayment penalty on your loan, T/F
True
226
If interest is paid for a business use or production of income, it is deducted ___ AGI, if for personal use, deducted ___ AGI
business is for AGI, personal is from AGI
227
Casualty losses must meet three criteria:
identifiable event
property damage
event is sudden, unusual, unexpected
228
Events that don't count as casualty loss:
termites
drought-related
loss from deliberate act of taxpayer
if no insurance claim is made
229
Theft losses are deducted in year of ____
discovery
230
Deduct casualty losses, except theft, in year that losses were ______
incurred
231
Amount of loss for casualty deductions is lesser of
adjusted basis
| decline in FMV
232
Casualty losses are reduced by _____ received, whether received or not
insurance recovery
233
Casuatly losses reduced by ____ floor and reduced by ___ of AGI
$100 and 10% of AGI
234
Personal use property losses are _____ deductions
itemized
235
For higher income taxpayers, itemized deductions are reduced by ____ of excess AGI above thresholds
3%
236
Qualifying organizations for charitable deductions include
public charities
| private foundations
237
Deduction for charitable giving is in year paid for both ____ and ___ taxpayers
cash and accrual
238
If donation includes right to buy athletic tickets, only ____ of contribution is deductible
80%
239
THere is no deduction for volunteering services, but ____ are deductible
related personal expenses (mileage, rental value of property donated for use)
donating blood is a nondeductible expense
240
Overall ____ of AGI limit for charitable contributions
50%
241
Charitable contributions caryover is for ___ years
5
242
Max deduction of ___ of AGI for public charities, ___ of AGI for private charities
50% public, 30% private
243
Basis of property sold to charity in bargain sale is
(amont realized in sale/fmv of entire property) x adj basis of entire property
244
For partnerships and S Corps, charitable contributions are deducted by the ____ on their ____
partners on their individual tax returns because they are pass through entities
245
C corps can deduct the ____ of ordinary income property donated to charity
basis
246
C corps can deduct the ____ of capital gain property donated to charity
FMV
247
Max charitable deduction a C Corp can make is limited to ____ of the corporations taxable income
10%
248
Under at-risk rules, the maximum deductible loss is limited to the amount that the investor had _____
at risk!
249
The amount "at risk" is the total of the _____ and _____ , as well as the ___ for which the investor is _____
cash and property, as well as debt for which investor is personally liable (recourse debt)
250
For recourse debt, an investor cannot be allocated recourse liabilities in excess of _____
capital contribution and future contribution obligations
251
Passive activity losses may only be deducted against _____
passive activity income
252
Passive activity loss rules apply to all the following:
```
individuals
estates
trusts
closely held C corps
personal service corporations (PSCs)
```
253
Three types of income and losses are
passive
active
portfolio
254
Closely held C corps may offset passive losses against _____ income but not ____ income
can against active, but not against portfolio
255
An oil and gas activity that involves a working interest in any oil and gas property that a taxpayer owns directly, is ____ a passive activity
NOT
256
Passive activity loss rules apply to limited partnerships, which are _
publicly traded partnerships (PTP)
master limited partnerships (MLP)
and
nonpublicly traded or privately offered limited partnerships
257
An MLP is traded on ____
a publicly traded exchange
258
Losses from nonpublicly traded parternships (such as RELPS), can only be offest against income from other ____
nonpublicy traded partnerships
259
If you have multiple sources of passive activity losses and income, the net losses are distributed _____
pro rata amongst the different activities
260
Passive activities are defined as the taxpayer not having materially participated (except O&G) or rental activity ______
even if they did materially participate
261
Material participation for passive activity is a yes response to
500 or more hours in the year partiicpation
is your participation effectively ALL of the participation for all individuals
materially participate in 5 of last 10 yeasr
is it a personal service activity, particpate materially in last three yeras?
participate on a regular, continued, and substantial basis?
262
Losses from publicly traded partnerships can only be offset by income from the _____ publicly traded partenrship
the SAME
263
Losses from publicly traded partnerships can only offset income from the same publicly traded partnership, but can be carried forward until that PTP has ____
income or is disposed of
264
Real estate losses are NOT conidered passive if
real estae is greater thatn 50% of personal services in all trades of business for the year
performs more than 750 hours of service in real property trades of businesses in which they materially participate
265
Individuals can deduct up to _______ of rental real estate losses against active and portfolio income
$25,000
266
You get an additional standard deduction if you are ____ or ____
over 65 or blind
267
You can claim a personal exemption for yourself and for your _____
spouse
268
Can you claim a dependency exemption for someone who died during the year?
YES if all test are met
269
For parents of a child, if the child lived with each parent for the same amount of time, then child will be claimed as qualifying child for parent wit the highest _______
AGI
270
If niether person is the parent of a child who is being designated as a qualifying child, then they go to the person with the highest ______
AGI
271
The standard deduction for a person who can be claimed as a depended is the greater of the _____ or _______ plus $
$1,050 or earned income plus $350 (may not be the same for 2018 laws)
272
If you are claimed as a dependent on someone else's returns, you cannot claim a _______
personal exemption
273
The personal and dependency exemptions ______ at certain _____
phase out at certain levels of AGI
274
The five filing statuses are:
```
single
mfj
mfs
head of household
qualifying widow with dependent child (surviving spouse)
```
275
Abandoned spouses who live apart may be able to file a __________ return
head of household
276
When is marriage status determined during th year?
last day of the tax year
277
Can MFS take advantage of the credit for child and dependent care expenses, earned income credit, or any education credits?
NO
278
To file head of household, have to be an ______ individual who maintains a household for a ______ for more than one half the tax year
unmarried, qualifying person
279
HOH filers must pay more than _____ the cost of maintaining the household for a qualifying person
half
280
You can use the widow filing status for _____ after death of spouse
2 years
281
To file for 1040EZ, must have less than _____ in income, no dependents claimed, no adjustments to income, and income is solely derived from wages, salaries and tips
$100k
282
What is a tax credit?
a dollar for doallar reduction of the income tax liability of the taxpayer
283
Refundable tax credits create a _______ even if the amount exceeds the taxpayer's tax liability
refund
284
Personal tax credits include:
- credit for the elderly or disabled
- foreign tax credit
- child and dependent care credit
- adoption credit
- child tax credit
- american opportunity tax credit
- lifetime learning credit
285
If you don't take all the depreciation allowed, do you still have to reduce the basis of the property by the allowable amount?
YES
286
MACRS is ____ declining basis for 10yr and less and _____ declining basis for 15 and 20 yr property
200% declining basis and 150% declining basis
287
Under MACRS, residential real estate has a _____ life and nonresidential a ____ life
27.5 years residential, 39 year life non residential
288
Section 179 allows for an annual write-off of the cost of tangible personal property used in a trade or business up to ______
$510,000
289
The basis of tangible personal property, after a section 179 deduction is made, is reduced by the _______
amount of the deduction
290
Are repairs to business property deductible?
YES
291
For intangible drilling and development costs, the two options are to _____ or to ________________
expense in current year or capitalize and deplete
292
The two depletion methods are ____ and ____
cost and percentage
293
Can use the cash-method of accounting for partnerships that don't have ____ as partners, for C corps that have less than ____ in gross receipts, for certain farming businesses, and for qualified PSCs
don't have c corps as partners, and c corps with less than $5M in gross receipts
294
Prepaid income for accrual taxpayers is taxed in the year of _____, not when incurred
year of receipt
295
For manufacturing contracts, must involve manufacturing something that is not normally in _______ and normally requires more than ______ to manufacture
not normally in inventory and more than 12 months to manufacture
296
Portion of completion method is used for _______ and is :
used for contracts and is total contract price x (cost incurred during current period/total estimated cost of contract)
297
Capital assets are ____ and most ____ assets
personal use and most investment assets
298
Are losses from personal-use assets deductible?
NO
299
The following are NOT capital assets (ACID)
accounts and notes receivable
copyrights and creative works
inventory
depreciable property or real estate
300
Ordinary assets, if sold, produce ______
ordinary income
301
Examples of ordinary assets are (IAWC)
inventory
accounts or notes receivable
works of art in the hands of the creator
copyright for the person who applied for and received it
302
Section 1231 assets include depreiable personal or real property and specifically____,___,___,___
timber coal and iron ore
livestock
unharvested crops
goodwill and intagibles
303
For those in the highest marginal bracket, capital gais are _______
20%
304
Adjusted basis in a property =
cost + capital additions - capital recoveries
305
Most common "capital recoveries" are
depreciation, theft, and casualties
306
Are realized losses from personal use assets recognized? Apart from casualty or theft
NO
307
For the recipient of appreciated property, the basis is calculated as
donor's adj basis + (unrealized appreciation/(FMV-donor's annual exclusion amount used for the gift)) x gift tax paid
308
If a person receives a gift of loss property, then the basis isn't determined until the donee _____ of the property
disposes of it - the donor's holding period transfers to the donee if sold again at a gain, does not transfer if sold for a loss
309
Alternate valuation date is _____ after the date of death, unless the property is disposed of before that
6 months
310
For deathbed gifts, the basis is the FMV at the ______ if they die within one year
date of the gift
311
Losses from sales between related parties are ____
disallowed
312
If a related party subsequently sells property acquired ina related party transaction for a gain, they can use the disallowed ______ to offset the gain
disallowed loss
313
The double basis rules means that you use the donor's basis for _____ and the FMV of the acquired property for _____
gains, and FMV for losses
314
For wash sale, the new basis is the renewed acquisition price of the stock plus the _____
postponed loss
315
the general rule is that all gains are recognized in the year of _____ or ______, except for installment sales
sale or exchange
316
Worthless securities are considered disposed of on the last day of the _____
tax year
317
The following are not considered like-kind
```
personal use assets
ordinary assets
securities
personalty exchange for realty
livestock of different sexes
real estate for domestic real estate
```
318
Boot in a 1031 exchange includes
cash
liabilities assumed by the other party
other non-like-kind property
319
A section 1033 involuntary conversion allows a taxpayer to _____ the recognition of gain realized from the involuntary conversion
postpone the gain
320
Section 1033 re involuntary conversions and postponing gains only applies to ______
gains
321
Partial exclusion for the section 121 sale of personal residence exclusion only comes into effect if you are moving for _____ or ____
a new job or health reasons
322
If you sell your house within two years of your spouses death, then you can get the full ______ amount on any gain
full exclusion amount of $500k
323
If a corporate bond is bought at a premium, taxpayer will reduce the basis by the amount of ______ taken (if elected)
amortization
324
OID bonds generate _____ income
phantom
325
NQSOs will create income recognition when the options are _____
granted
326
For NQSOs, the taxpayer will be taxed on the bargain element when the option is _____
exercised
327
The bargain element for NQSOs is considered _____ and taxed at _____ rates
compensation income and taxed at ordinary income rates
328
For ISOs, no income is recognized when the option is ______
granted
329
for ISOs, no regular tax is due when the option is _____
exercised
330
Tax is due for ISOs when the stock is _______
subsequently sold
331
Advantages of sole props:
no separate entity
not costly to establish
can respond quickly to business opps
easy to terminate business
332
Disadvantages of sole props
not easy to raise capital
unlimited liability
ends at death or incapacity
333
In liquidating a partnership, order of distribution is
```
creditors
LPs shares of profits
LPs return of capital
Advances and loans made by GPs
GPs share of profits
GPs return of capital
```
334
A C corp will be considered a personal holding corp if it meets the ______ and the ______
ownership test (50% owned by 5 or fewer people) and the passive income test (60% of corp income consists of personal holding company income)
335
S corps do or do nothave the same flexibility to allocate income and deductions as partnerships?
DO NOT
336
Principal advantage of S corps is to avoid _____ like c corps have
doubel taxation
337
Built in tax may need to be paid by _____ that once were C corps
s corps
338
An llc can be taxed as
a SP
partnership
corporation
s corp
339
Are charitable donations allowed in a simple trust?
NO
340
Trusts are allowed a _____ for distributions made to beneficiaries
deduction
341
A trust is NOT entitlted toa ______
standard deduction
342
Accuracy related penalty for IRA is _____%
20%
343
Can a CFP represent you in a court case against the IRS?
NO
