Exam (elaborations)
TAX 4001 Final Exam
Exam of 12 pages for the course TAX 4001 at TAX 4001 (TAX 4001 Final Exam)
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TAX 4001 Final Exam6 netting possibilities - ANS-Net long term gain (different signs with LT greater)
Net short term gain (different signs with ST greater)
Long term and short term gain (opposite signs)
Net long term loss (different signs with LT greater)
Net short term loss (different signs with ST greater)
Long term and short term loss (opposite signs)
Active income - ANS-- Wages/salary
- Profit from trade and business
- Gain from sale or disposition of asset used in active trade of business
- Income from intangible property created by the taxpayer
Adjusted basis - ANS-cost + addition + recovery
- Original basis adjusted to date of disposition
Alternate valuation - ANS-FMV 6 months after
- Tax return filed
- Not distributed before date
Amount realized - ANS-Money + FMV of the property
- Economic value received from property given up
- Selling expenses are deducted so it equals the net amount received
AMT is - ANS-An indirect calculation that starts with taxable income
At risk limitation reason - ANS-Designed to prevent deduction from loss in excess of
economic investment
- Limit the tax payer deduction to the amount they are "at risk"
- Created to limit loss in excess of investment
At risk limitation rules - ANS-Can deduct losses from activity only to extent the taxpayer
is at risk
- Any losses disallowed due to at risk limitation are carried forward and at risk amount
must increase in order to deduct later
- Previously allowed losses must be recaptured to extent they fall below zero
Basis for loss also = - ANS-Basis for depreciation
, - Prevent taxpayer from recovering loss indirectly
- Adjust gain and loss basis for depreciation deductions from conversion date to
disposition date
By employers - ANS-Withholding - income taxes and employee FICA
Paid - FICA match and FUTA
Calculation of non corporate capital gain/loss - ANS-Net capital gains and losses
- short term and long term seperate
If opposite signs for each = stop, if same sign net again
- 6 possibilities
Capital gain - ANS-Full recognition
Capital gains are - ANS-- Personal use assets
- Investment assets
Capital gains are not - ANS-- Inventory
- A/R and N/R for goods and services
- Depreciable property of real estate in business
- Property for business
- Copyrights
- Government publications
- Supplies
Capital gains use _________ rates - ANS-Preferential
Capital loss - ANS-3,000 max
Change of employment - ANS-- Location of new employment is at least 50 miles further
from old residence than old residence was to old job
- Must become principal residence when move
- Regradless of employer situation
Child and dependent care expense - ANS-Mitigate inequality felt by working taxpayers
who must pay child care to work outside the home
- Specified percentage of expenses incurred to work or seek employment
Child and dependent care expense calculation - ANS-Expense (%) - max being 3,000
- limited by individual earned income
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