Taxes

Question 1

Are hobby losses deductible?

Answer 1

No, they are not deductible

Question 2

What are the penalties for a frivolous return?

Answer 2

$5000

Question 3

What is the penalty for negligence on a tax return?

Answer 3

20% of the portion of the tax under payment attributed to negligence

Question 4

What are the penalties for civil fraud on a tax return?

Answer 4

75% of the portion of the tax underpayment attributable to fraud

Question 5

What are the failure to file a tax return penalties?

Answer 5

5% of the tax due per month with a maximum of 25%

Question 6

What is the failure to pay penalty on a tax return?

Answer 6

.5% per month each month the taxes unpaid with a maximum of 25%.

Question 7

Itemized deductions are on what tax form

Answer 7

Schedule A

Question 8

Interest and ordinary dividends are put on what tax form

Answer 8

Schedule B

Question 9

Profit or loss from a business are on what tax form

Answer 9

Schedule C

Question 10

Capital gains and losses are on what tax form

Answer 10

Schedule D

Question 11

Supplemental income and loss

From rental real estate, royalties, partnerships, S corporations, states, trust, REMICs, etc. are put on what tax form

Answer 11

Schedule E

Question 12

Profit or loss from farming is on what tax form

Answer 12

Schedule F

Question 13

Household employment, taxes for Social Security, Medicare, withheld income, and federal unemployment (FUTA) taxes are put on what tax form

Answer 13

Schedule H

Question 14

Self-employment tax is put on what tax form

Answer 14

Schedule SE

Question 15

A work of art created by the taxpayer and given to charity is valued at what

Answer 15

Basis

Question 16

Charitable gift deductions for cash from AGI

Answer 16

60% public charity

30% private charity

Remember five year unused carryover

Question 17

What is the charitable gift deduction from AGI for short term gain property, ordinary, income property?

Answer 17

LESSOR of adjusted basis or FMV (No Choice!!!)

50% public

30% private

Remember five year carryover of unused deduction

Question 18

What is the charitable gift deduction for long-term capital gain property from AGI?

Answer 18

You get to CHOOSE to use the adjusted basis or FMV

Public: 30% FMV, 50% basis

Private: 20% for both FMV or basis

Remember five year carryover for all unused charity deductions

Question 19

What is the deduction from AGI when gifting unrelated use property?

Answer 19

LESSOR of the adjusted basis or FMV no CHOICE

Public 50%

Private 20%

Remember five year carryover for all unused charity deduction

Question 20

Does the built in gains tax apply to S corporations or C corporations?

Answer 20

Built in gains tax applies only to S corporations that were formally C corporations

Built in gains taxes paid by the corporation entity and not the shareholders. Corporate tax rates apply to the built-in gain rate not a shareholders individual tax rates.

Question 21

Is the day of disposition or the day of acquisition included in the holding period for determining whether the gain is long-term or short-term?

Answer 21

The day of disposition, but not the day of acquisition

Question 22

Are worthless securities treated as long-term or short-term losses?

Answer 22

They are treated as becoming worthless at year end and treated as a long-term loss no matter how long they are held

Question 23

In a gift loan the amount of the imputed interest constitute a gift from the lender to the borrower. What are the rules?

Answer 23

Gift loans greater than $10,000 and less than or equal to $100,000, no interest is imputed if the borrowers investment income for the year does not exceed $1000

For a gift loan of more than $100,000 the prevailing federal rate of interest will be imputed

Question 24

Section 179 property what qualifies

Answer 24

Depreciable tangible personal property that is purchased by the taxpayer for business or trade

Property that is held for the production of income (inventory and other specified assets do not qualify for section 179 treatment)

A new office desk generally would qualify

The cost of the property is expensed for the current year rather than capitalized and appreciated overtime

Question 25

How do you calculate the annual depreciation using the straight line method in the first year?

Answer 25

The annual depreciation deduction under the straight line method is the adjusted basis of the property at the beginning of the tax year, less the salvage value divided by the remaining useful life of the asset However, you must remember to use the half year convention which would be half of a full year (if bought in the last quarter you may have to use the quarter convention)

Question 26

How long must you hold 1202 stock for it gain to be excluded from your taxable income?

Answer 26

Five years Section 1202 allows capital gains from qualified small business stocks to be excluded from federal tax.

Question 27

What is a voluntary employee benefit association (VEBA)?

Answer 27

It’s a type of organization (trust or corporation) established by an employer or through a collective bargaining agreement to hold funds used to pay benefits under an employee benefit plan. Income is exempt from regular income income tax if the VEBA meet the requirements of section 501C

Question 28

Under the passive activity rules if a rental is 30 days or less and significant personal services are provided is the activity a service or a rental activity?

Answer 28

A service

Question 29

When calculating insurance coverage from an employer above the $50,000 that is tax-free to the employee always use what premium rate?

Answer 29

The IRS rate per $1,000 never the employer cost rate

Question 32

Is theft, a covered casually loss for tax purposes?

Answer 32

No, it is no longer a covered casualty loss

Question 33

Net operating losses are not allowed for what business entities and are they still available?

Answer 33

Not allowed for partnerships and S corps Starting in 2018, net operating losses are not allowed

Question 34

Alimony and separate maintenance payments are they deductible

Answer 34

Yes, both are deductible if before 2019

Question 35

Our private schools public charities for charitable contributions?

Answer 35

Yes, all schools and churches are public charities

Question 36

Can you recognize a loss in a transaction to a related party?

Answer 36

No, but the related party can use your loss, but any unused loss is than gone forever

Question 37

Are incidents to a divorce like a qualified domestic relations, orders, subject to the early withdrawal penalties, if not put into another 401(k) or an IRA?

Answer 37

No, not subject to the 10% early withdrawal penalties, but is subject to ordinary income tax

Question 38

Our fines or penalties that result from a law violation deductible?

Answer 38

No

Question 40

When taking the home office business deduction can u take a depreciation deduction as well?

Answer 40

Yes, a 10% depreciation deduction is also allowed based on the cost of the home It should be noted that in order to take this deduction gross income from the business must be sufficient to cover all of his other operating expenses in addition to the home office deduction, home office expense cannot create a loss

Question 41

What is a capital asset?

Answer 41

It is defined by what is not considered a capital asset A capital asset is any asset that is not a copyright or creative work, accounts, or notes receivable, depreciable property used in a trade or business or for production of income (such as a computer) or inventory

Question 42

When can an S Corp. be terminated?

Answer 42

When earnings are more than 25% of gross receipts for three consecutive years come from certain types of passive income and the corporation has accumulated earnings and profits from its operations prior to the S election Only a majority vote by shareholders is needed to terminate Failure to meet any requirement of an S corporation can cause termination; there is no minimum number of violations that need to be met

Question 45

What is capitalization?

Answer 45

Is an accounting method in which a cost is included in an asset value and expense over the assets useful life, rather than expense in the period cost was incurred.

Question 46

A Partners basis in a Partnership is increased by what?

Answer 46

Increased by his or her capital contributions, his or her distributive share of partnership income, and his or her share of liabilities assumed

Question 47

A nonbusiness bad debt (Personal bad debt) is treated how?

Answer 47

Regardless of holding period, it is treated as a short-term capital loss, and the $3,000 limit offset against ordinary income limit applies.

Question 48

Section 1231 recapture losses that are not recaptured from previous sales have how long of a look back period?

Answer 48

5 years

Question 49

Are Fringe benefits deductible for an S corporation?

Answer 49

No and they are not tax free for the greater than 2% shareholders.

Question 50

If you own or purchase company stock, how are the dividends treated and what happens if you recieve a tax-free distribution from them?

Answer 50

You will pay taxes on the dividends and you will reduce your basis on the stock in the amount of the distribution.