10/18 Notes

Question 1

State tax refunds are taxable if you itemized in the PY. The Amount taxable is the LESSER of the Refund or the excess of Itemized deduction over Standard

Answer 1

State tax refunds are taxable if you itemized in the PY. The Amount taxable is the LESSER of the Refund or the excess of Itemized deduction over Standard

Question 2

Remember you can exclude up to 250k gains from the sale of personal property

Answer 2

Question 3

Under chapter 7 bankruptcy, the person must surrender to the bankruptcy trustee any inheritance received within 180 days after filing bankruptcy petition

Answer 3

Under chapter 7 bankruptcy, the person must surrender to the bankruptcy trustee any inheritance received within 180 days after filing bankruptcy petition

Question 4

Substantial authority for a tax position DOES NOT include a affirmative statement from a revenue agents report on a tax payers prior year

Answer 4

Substantial authority for a tax position DOES NOT include a affirmative statement from a revenue agents report on a tax payers prior year

Question 5

Adaption makes the property for a different use. Costs to alter equipment used for R&D now used for manufacturing is ADAPTION

Answer 5

Question 6

Workers compensaiton IS NOT taxable. But Damages for SLANDER IS TAXABLE

Answer 6

Question 7

Majority courts hold accountants liable for negligently preparing repots for: Any third party whose reliance on the report was REASONABLY FORSEEABLE

Answer 7

Question 8

When given a IRS 30 day letter proposing an Aadjustment, Accept propose changes pay any deficiency. Filing an amended return not necessary

Answer 8

Question 9

Money damages are imposed on an accountant who breaches a contract duty.

Answer 9

Question 10

An Scorp can have a bankrupty estate as a stockholder

Answer 10

Question 11

Offeror offers to sell land, but if offeror dies, the offer will automatically terminate prior to exceptance

Answer 11

Question 12

Individuals can deduct up to 3K of Capital losses against ordinary income and carry it the rest forward. CANNOT CARRY BACK

Answer 12

Question 13

A contract modification under common law is unenforceable unless both parties provide new consideration — a promise to perform an existing duty is not sufficient consideration.

Answer 13

Question 14

IndividualS CANNOT carryback capital loss deductions. Only 3K deductible and carry forward indefinately.

Answer 14

Question 15

If no shipping/terms, and seller is a merchant, risk of loss remains with merchant until buyer picks up goods

Answer 15

Question 16

After reducing basis by distributions. S Corps and Partnerships can only record passthrough losses up until basis reaches 0.

When Distributions reduce basis to 0, any excess distribution amounts are capital gains

Answer 16

Question 17

For chapter 7 bankruptcy:

Individuals: debts discharged

Partners: Dissolution and partners liable

Corpoarations: Dissolution and debts uncollectible

Answer 17

Question 18

Coverdell Education Savings accounts

Contribute 2k annually
Tax deductible
AGI Phase outs
18 and under (NOT 21 and under)

Answer 18

Coverdell Education Savings accounts

Contribute 2k annually
Tax deductible
AGI Phase outs
18 and under (NOT 21 and under)

Question 19

Disclosure can be made to any party on consent of the client

Answer 19

Question 20

Carrybacks/Carryforwards are always SHORT TERM for corporations

Answer 20

Question 21

The CPA is only required to inquire further if the information provided appears wrong or incomplete

Answer 21

Question 22

FUTA is fully paid by the employer.

Tax is a % of the first 7000k of each employee gross

Credits available

Answer 22

Question 23

Despite following GAAP/GAAS - negligence can still be present

Answer 23

Question 24

ULTRAMARES = MINORITY RULE.
The CPA is only liable to inteded third parties, (privity). NOT FORSEEN.

Only RESTATEMENT (MAJORITY) rule includes forseen third parties.

Answer 24

Question 25

**Active participation** is a special rule that applies only to **rental real estate activities**.

Answer 25

Question 26

For MACRS questions, generally use half year table rates **UNLESS 40% or more of property is placed into service in Q4**, then use **mid quarter rates** for each asset according to its quarter placed in service. (**PERSONAL** PROPERTY ONLY) **Dont forget for assets sold**, **divide** its final year depreciation in **half**

Answer 26

Question 27

FICA taxes – Fully deductible by the employer. Group-term life insurance – **Deductible if employee is beneficiary**; **not deductible if corporation is beneficiary.** CEO/top-paid compensation – Partially deductible (limited to $1M per covered employee). Employee moving reimbursements – Fully deductible.

Answer 27

Question 28

2. Interest on tax refunds is **fully** taxable as ordinary income. 5. Life insurance proceeds are **partially** taxable only to the extent they exceed the debt owed.

Answer 28