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tax 4001 comprehensive final exam
tax 4001 comprehensive final exam
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tax 4001 comprehensive final exam20 percent recapture - ANS-20% of the excess of section 1245 recapture over section
1250 recapture for buildings owned by corporations
2020 maximum deduction - ANS-$1,040,000
a deduction listed as an above-the-line deduction has what effect on taxable income? -
ANS-always reduces taxable income
a deduction that must be itemized has what effect on taxable income? - ANS-may have
limited or even no effect on taxable income
a partners tax basis in his/her partnership interest is adjusted annually to reflect: -
ANS-share of partnership items and changes in investment
a tax credit is a direct: - ANS-dollar-for-dollar reduction in tax liability
-as a result, the value of a credit is greater than the value of a deduction of the same
amount
above-the-line deduction - ANS-an allowable deduction for an individual taxpayer that
can be subtracted from total income to compute AGI
activity based tax - ANS-tax imposed on the results of an ongoing activity in which
persons or organizations engage
ad valorem tax - ANS-a tax based on the value of property
adjusted basis - ANS-the initial tax basis of an asset reduced by cost recovery
deductions allowable with respect to the basis
adjusted gross income equals - ANS-total income less specific above-the-line
deductions
adjusted net capital gain - ANS-net long term capital gain (reduced by any 28% rate
gain or any unrecaptured section 1250 gain) plus qualified dividend income
all events test - ANS-the test for determining if an accrued expense is deductible
, allowance method - ANS-the GAAP method for computing bad debt expense; the exp is
based on the estimated loss from current year receivables
alternative minimum tax (AMT) - ANS-a second federal tax system parallel to the
regular tax system; congress enacted to ensure that every individual pays at least a
minimal tax every year
an accrued expense for compensation payable is not deductible in: - ANS-the year of
accrual, but in the year the liability is paid
any nondeductible expense resulting from the taxable income limitation carries foward: -
ANS-to succeeding taxable years
any remaining section 1231 gain is combined with Section 1231 losses as: - ANS-part
of a year-end netting process
because of the excess property limitation, a firm that purchases more than $3,630,000
of qualifying property in 2020: - ANS-cannot benefit from a section 179 election because
its limited dollar amount is reduced to zero
because tax credits reduce the regular tax on business income, they are: -
ANS-equivalent to a preferential tax rate
-thus, tax credits utilize the character variable to reduce tax liability
benefits of passthrough losses - ANS-generally deductible in the year the loss is
generated, producing a tax benefit at the individual's marginal tax rate (immediate tax
savings)
book/tax permanent difference(s) - ANS-loss on related party sale
book/tax temporary difference(s) - ANS--disposition of asset with different book/tax
basis
-seller-financed sale eligible for installment sale method
-net capital loss
bunching - ANS-if itemized deductions are close to standard deduction each year,
taxpayer should bunch deductions in alternate years
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