Tax - Miscellaneous

Question 1

Estimated taxes

Answer 1

Individuals, estates and trust:

– Must pay estimated taxes if expect to owe more than $1000 in tax

Question 2

Exempt organization: unrelated business income

Answer 2

Not taxed on unrelated business income of less than $1000.
Imposition of tax does not affect exempt status

Includes:
– Rent from debt-financed building

Question 3

Timing of charges for deduction calculation

Answer 3

Credit card charges considered paid when chart.

So if expense occurred in prior-year in charge this year by card, and counts as this year

Question 4

Goodwill from purchase of business

Answer 4

= dollars paid – total FMV of assets

Question 5

Netting capital gains and losses

Answer 5

– First net STCG and STCL
– Then net LTCG and LTCL
– Then net ST and LT

• If no G to offset L, carry L back 3 years, forward 5 years
  – If G offsets some L, then L can only offset up to G’s amount

STCL cannot offset ordinary income!!!
Only $3000 of LTCL can offset.
No CL can offset for corporations.

Question 6

Cash basis taxpayer: prepayment

Answer 6

Pre-payment of expenses for over one year is not cash basis.

– Deduct first year in current and amortize balance over appropriate years

Question 7

Amortize organizational costs

Answer 7

If under $50,000:
$5000 deductible
Remainder amortize over 180 months

If over $50,000:
$5000 reduced by excess
Remainder amortize over 180 months

Question 8

IRC Section 267

Answer 8

Rule for related party sales unpaid at end of year for cash basis seller to accrual basis buyer:
– Fire can’t deduct expenses until seller reports income

Question 9

Sales of shares in stock of corporation

Answer 9

Shares of stock of corporation or capital assets
Shareholders selling stock gets capital gains and losses

Gain/loss = sales proceeds - tax basis

100% redemption of shareholder stock qualifies as sale or exchange instead of distribution of E&P taxed as dividend

Question 10

Sales of shares in stock of corporation

Answer 10

Shares of stock of corporation or capital assets
Shareholders selling stock gets capital gains and losses

Gain/loss = sales proceeds - tax basis

100% redemption of shareholder stock qualifies as sale or exchange instead of distribution of E&P taxed as dividend

Question 11

Worthless asset

Answer 11

Eg: stock where a company declare bankruptcy and with the cleared insolvent

Asset is deemed worthless all last day of the year, not date of incident.
this means holding period may be more than one year, making the asset have long-term loss, not short-term.