Becker REG Mnemonics

Foreign Tax Credit

Limited to lesser of 1.) foreign taxes paid 2.) Taxable Income from all foreign operations/ Total taxable worldwide income X U.S. tax = Foreign tax credit limit Excess is carried back 1 year, forward 10 years

Child and Dependent Care Credit

Max Expenditures covered: One dependent - $3,000 Two or more - $6,000 Use lesser of: 1. spouse w/ lower income 2.child care expenditures 3. max amount above Expenditures are limited to % of above (lowest amount) based on AGI: $15,000 or less: 35% decrease by 1% for each $2,000 over $15,000: 20%-35% $44,000 or more: 20%

General Business Credit

Max is of net income tax minus greater of... 1.) 25% of regular tax liability above $25,000 2.) ($0-25,000) x 100% + Excess x 75% =Max Credit Permitted Excess carried back one year, forward 20 years

Medicare vs Medicaid

Medicare - federal ran - part of SSI Medicaid - state run

WRaP

Non deductible losses: WASH sale losses RELATED party losses losses (family, >50% owned) and PERSONAL losses

HIDE IT

Non taxable gains: HOMEOWNER exclusion (500,000 MJF, 250,000 single) INVOLUNTARY exchange (no gain recognized/loss recognized) DIVORCE property settlement EXCHANGE of like-kind (business/investment real estate ONLY) INSTALLMENT sale (GP% x cash collections = amount recognized, rest is nontaxable) TREASURY capital and stock

FIB

Nondeductible Taxes FEDERAL taxes (including Social Security) INHERITANCE taxes for states BUSINESS (on Schedule C) and rental property taxes (on Schedule E)

CHRIST

Not Required to file Form 990: CHURCHES HIGH schools - religious RELIGIOUS orders INTERNAL support auxiliaries SOCIETIES - missionary related TAX exempt organizations by congress

LAM

To sue under Section 11 (not on purpose) under the 1933 Act (they blew off the 1933 act as an IPO - no registration with SEC or was wrong) you need to show: LOSS suffered ACQUIRED stock MATERIAL MISTATEMENT

Taxpayer wants to litigate tax position without paying tax in advance

U.S. Tax Court Pros- don't pay before Cons- tax expert judge

WH (required time period for different filing status)

Widow/widower - principal residence for dependent child for WHOLE year Head of household - principal residence for qualifying person for more than HALF the year

FACCEE

can reduce AMT liability by full amount of nonrefundable tax credits: Foreign Adoption Child Contribution IRA Earned income Energy

Former government employee conflict of interest rules

former gov't employee who had personal and substantially participated and now switching sides - *NEVER* assist the other party with this matter official responsibility - cannot represent other party within *TWO* years of leaving government Cannot appear before IRS within *ONE* year of leaving government about any matter regarding a rule he participated in the development of

SWAP

four exceptions to the statute of frauds mnemonic (MYLEGS) where you don't need writing even though it is goods over $500 or other MYLEGS items SPECIALLY manufactured goods merchant send a merchant WRITTEN confirmation of a contract binding sender, it will bind recipient if not objected within 10 days even ifs they didn't sign ADMITTED in court contracts that have been PERFORMED

Section 1231 Property

trade or business held for more than one year, as classified in Section 1231 of the Internal Revenue Code (includes depreciable personal property(1245), depreciable real property (1250) and land)

Earned Income Tax Credit Formula

*USE TABLE* Earned Income Max Income eligible for credit x 7.65% = Max credit Earned Income - Phase-out threshold x 7.65% = Phase out amount Max credit - Phase out Amount = Earned Income Credit

Include in articles of incorporation

- name of corporation - names and addresses of corporation's registered agent and incorporators - number of shares authorized to be issued

Complex trust

-can accumulate current income -can distribute principal -makes charitable contributions (& can deduct for it)

Simple trust

-only makes distributions out of current income -must distribute all current income -cant make charitable contributions

After U.S. Tax Court/U.S. District Court... After U.S. Court of Federal Claims...

...Court of Appeals ...U.S. Circuit Court of Appeals/Court of Appeals for the Federal Circuit

Additional Deductions to standard for 65 or older and/or blind - Married

1 Qualified 65 or blind - $1,300 Both 65 and blind - $2,600 (double above) 2 Qualified 65 or blind - $2,600 Both 65 and blind - $5,200 (double above)

Best Practices for Tax Advisors

1) Communicating with the client regarding the *terms of the engagement* to deterring the client's purpose & use for advice 2) Establishing the *facts* and conclusion *supported by the law and the facts* 3) Advising the client about the *importance of the conclusion reached* (whether able to avoid penalties) 4) Acting *fairly & with integrity* 5) Taking reasonable steps to ensure everyone is consistent with the above

Three basic categories of claimants of distribution of assets of the estate:

1. Secure claimants (claims over collateral treated like general, back of the line) 2. Priority claimants (9 subcategories - SAG WEG CTI) 3. General creditors

Standard Deduction - Single

12,200

5% TIP

1934 Reporting requirement 10K,10Q,8K (3 period reports) Other required reports: 5% or more owners TENDER offers to buy 5% or more INSIDER trading (>10% shareholder, accountants, attorney, directors, officers) PROXY solicitations (written request for permission to vote a shareholder's shares at a shareholder meeting)

Keogh Net Earnings formula

20% of (Net business income MINUS half of self-employment tax)

Tax return preparer must retain copies

3 years

Additional Deductions to standard for 65 or older and/or blind - Single

65 or blind - $1,650 Both 65 and blind - $3,300 (double above)

Partnership basis formula (in more detail on R5-22)

Beg. Capital Accounts + % All Income - % All Losses -Withdrawals = Ending Capital Account + % Liabilities = Year-end basis

Income Distribution Deduction

LESSER OF: 1) Actual distribution OR 2) DNI (doesn't include capital gains, taxed at estate, trust) minus tax exempt interest

Standard Deduction - MFS

$12,200

Standard Deduction - Head of Household

$18,350

Standard Deduction - MFJ or surviving spouse

$24,400

3 year average gross receipts must be under "THIS AMOUNT" to be exempt from Uniform Capitalization Rules

$25 Million

AMT exemption amount (PHASEOUT FORMULA)

*Full Exemption* MINUS (AMTI-*Threshold*) x 25% =AMT exemption Single: exemption amount: $71,700 threshold: $510,300 MFJ: exemption amount: $ 111,700 threshold: $ 1,020,600 MFS: exemption amount: $ 55,850 threshold: $ 510,300

PANICTS

AMT Adjustments PASSIVE activity losses added back ACCELERATED depreciation (post-1986 purchase) NET operating loss recomputed INSTALLMENT method may not be used by dealer for property sales CONTRACTS - % of completion (AMT req.) vs. completed contract...difference is added or subtracted TAX "deductions" - add back state income, sales and property tax (itemized deductions) STANDARD deductions used?....add back to taxable income for AMT (Itemized deductions always "adds" to regular taxable income, charity and home mortgage interest = NOT add back for AMT)

PPP

AMT Tax Preference Items (Always "Add-Backs") PRIVATE activity bond tax-exempt interest (most important, excluded form regular income, add back to increase taxable income for AMT) PRE-1987 accelerated depreciation on real property and leased personal property "PERCENTAGE depletion" deduction (excess over adjusted basis of property)

Accrual vs Cash Basis

Average gross receipts for 3 year period ending with prior tax year Over 25M - Accrual Under 25M - Cash

HIMDEAD

Avoid 10% penalty tax if premature distribution used to pay (taxable but no penalty) HOMEBUYER first time buying $10k max INSURANCE (unemployed or self employed) MEDICAL expenses in excess of 10% of AGI DISABILITY EDUCATION (AND) DEATH

Elderly/Permanently disabled credit calculation (formula)...65 years of age or older OR under 65 and retired due to permanent disability

Base Amount (5k - Single/ 7.5k - MFJ and both qualified/ 5k - MFJ and one qualified) <ALL Social Security pymts received> <1/2 of Excess AGI over>...(Single - 7.5k/MFJ - 10k) =Balance x15% (Rate) =Credit

FFAT WED

Certain debts under for an individual under Ch. 7 & 11 bankruptcy that are not discharged: debts incurred by FRAUD, embezzlement, larceny FINE and penalties ALIMONY, maintenance, support, settlements from martial separation (child support too) TAXES due within 3 years of filing WILLFUL and malicious injury (must have intent other than DUI) EDUCATIONAL loans DEBTS undisclosed in bankruptcy petition

RISE

Common law rules apply: REAL estate INSURANCE SERVICES EMPLOYMENT

IBM

Cost Recovery Deductions (Order) Internal Revenue Code Section 179 BONUS Depreciation MACRS Depreciation

3 ways to pierce corporate veil

Court holds shareholders, officers or directors personally liable when privileged is abused... 1. commingle personal funds with corporate funds 2. inadequately capitalized (under capitalized) at time of formation 3. formed to commit fraud on existing creditors

CPRS

Defense of Surety (discharge surety and don't have to pay creditor): CREDITOR acts in bad faith (lied, duress, illegal) PAID or tender of payment (by debtor/3rd party) and creditor refuses to accept RELEASE of principal debtor SURETY'S incapacity or bankruptcy

Peter And I Eat

Defenses that make a contract void: duress (PHYSICAL force) ADJUDICATED incompetency ILLEGALITY fraud in the EXECUTION (signing something you don't know is a contract)

BRINGS

Don't have to go through registration process with SEC under 1933 act: BANKS RAILROADS (common carriers) INSURANCE policies NOT-for-profit orgs. GOVERNMENTS (state and local municipal bonds) SHORT term commercial paper (9 months or less maturity is short)

LORA

Duties of fiduciaries (agent to principal): duty of LOYALTY (no self dealing, no competing) duty of OBEDIENCE (obey all reasonable directions) duty of REASONABLE care (don't be negligent) duty of ACCOUNT (make sure principal's $ and agent's $ are separate, no commingling)

MAIDS

Five Elements of Fraud (also applies for 1934: 10b-5 antifraud rule): MATERIAL MISREPRESENTATION of fact ACTUAL & justifiable reliance by plaintiff on misrepresentation Intent to INDUCE plaintiffs reliance on misrepresentation DAMAGES SCIENTER (intent to deceive while knowing stmt was false)

Credits that reduce AMT liability by their full amount

Foreign Adoption Child Contribution IRA Earned Energy

DAMS

Fundamental Corporate Changes that require shareholders' approval after board approval: DISSOLUTION AMENDMENTS to the articles (not bylaws) MERGERS SALE of substantially all corp's assets outside regular course of business

Individual Income Tax Formula

Gross Income <Adjustments> =AGI <Std. deduction> OR <Itemized deduction> =Taxable Income before QBI deduction <QBI deduction> =Taxable income Federal income tax <Tax credits> +Other taxes <Pymts> =Tax due OR Refund

Net rental income/loss formula

Gross rental income Prepaid rental income Rent cancellation payment Improvement-in-lieu of rent <Rental expenses> =Net rental income OR Net rental loss

HIPPE

Interest Expense (Itemized Deductions) HOME mortgage interest - deductible with restrictions INVESTMENT interest expense - like gambling loss rules PERSONAL (consumer) interest - not deductible PREPAID interest - deduct when both incurred and paid EDUCATIONAL loan interest - adjustment/not itemized deduction

Dividend Received Deduction

Percentage Ownership...% of Dividend Received Deduction 0% to 20% (unrelated)....50% 20% to < 80%....65% 80% or more (Consolidated)...100% limit of deduction is lesser of the % of dividend received deduction and that same percent of taxable income if DRD creates Net Operating Loss, don't need to take lesser (losers don't have to follow that rule)

NIRD

Personal Holdings Company (PHC) income includes: NET rent (if <50% ordinary income) INTEREST - taxable portion ROYALTIES (no mineral, oil/gas, copyright royalties) DIVIDENDS (from unrelated domestic corp) PHC has 5 ore fewer people (own more than 50%) and 60% (of gross income) are NIRDS.

SAG WEG CTI

Priorities for distribution of debtor's estate: SUPPORT to spouse and children ADMINISTRATIVE fees involuntary GAP caims WAGES claims up to ($12,850) EMPLOYEE benefits up to $12,850 (cumulative with wages) GRAIN farmers & fishermen up to $6,325 CONSUMER deposit up to $2,850 TAX claims personal INJURY claims from INTOXICATED driving

Deductible medical expense formula

Qualified medical expenses <insurance reimbursement> =Qualified medical expense "paid <10% AGI> =Deductible medical expenses

CARES

Qualifying Child Requirements: easier option to pass CLOSE relative (son, daughter, step kid, bro, sis, step sibling or descendant of those) AGE limit (19 or under 24 and in college, permanently disabled waives age limit) RESIDENCY and filing requirements (same principle residency as taxpayer for more than half the tax year) ELIMINATE gross income test SUPPORT test (not contributed more than half of his or her own support)

SUPORT

Qualifying Relative Requirements: harder option to pass SUPPORT test (must supply more than one half of support to person OR multiple support) UNDER gross income limitation (taxable income is less than 4,200 (2019), usually 4k-5k, GR: exemption amount) PRECLUDES dependent filing a joint return (unless no tax liability on the couple's joint return) ONLY citizens of the united states or residents of the united states, mexico, or canada RELATIVE (or) TAXPAYER lives with the individual (if non-relative) for the whole year ...wont help for HOH but for tax credits

No RIBS No BIBS

RIBS: Railroads, insurance companies, banks, small buss. investment companies/savings institutions may not file for Chapter 7 bankruptcy BIBS: Brokers, insurance companies, banks, small business investment companies/savings institutions may not file for Chapter 13 bankruptcy (railroads dropped)

DII

Real and personal property the debtor receives within 180 days after filing petition is in debtor's estate (used to pay off creditors) DII: Also includes property received from divorce, inheritance or insurance within 180 days (Please don't die within 180 days! - inheritance)

AMT Formula

Regular Taxable Income +/- Adjustments +Preferences =Alternative Min. Taxable Income <AMT Exemption> (phased out if above threshold) =Alternative Min. Tax Base x AMT Rate (26% up to $194,800, 28% for rest) =Tentative AMT tax <Tax credits> =Tentative min. tax <Regular Income Tax> =AMT Use the greater of the regular tax and tentative min. tax

Casualty/Theft deductible loss formula

Smaller loss (Lost cost/adjusted basis OR Decreased FMV <Insurance recovery> = Taxpayers loss <$100> (IRS deduction) =Eligible Loss <10% AGI> =Deductible Loss (usually smallest loss is correct, deductible if nationally declared disaster)

MY LEGS

Statute of frauds: 6 contracts that require writing MARRIAGE can't be performed within 1 YEAR involving LAND or LEASES more than 1 year EXECUTORS (to pay estate debt out of personal funds) sale of GOODS for $500 or more (services can be oral regardless of price if within 1 year) SURETY (pay the debt of another person)