REG

90-day letter:

Notice of deficiency (when taxpayer is audited); received when appeals conference is not requested after 30 day letter or taxpayer & IRS do not agree at appeals conference -90 days to pay deficiency OR file petition w/ US tax court (if want to sue in US District Court or US Court of Federal Claims: must pay first, then sue)

743(b) Adjustment:

adjustment for transfer of partnership interest is the difference between the value of outside basis to transferee (purchase price) and his share of partnership's inside basis -adjustment (positive or negative) is prorated over partnership assets Goal: make transferee have an inside basis = outside basis Adjustment has NO EFFECT on partnership's income or loss

Basis for inherited property:

basis = Donors basis + gift tax paid attributable to appreciation gift tax paid attributable to appreciation = when FMV > NBV, [(FMV - NBV)/FMV] * gift tax paid

Respondeat Superior:

doctrine under which a corp. is made liable for torts of employees within scope of employment (if outside scope of employment: principal not liable)

Foreign income Exclusion: (individual)

exclude up to $102,100 of foreign-inc. IF: -resident of foreign country for entire year -present in foreign country for 330 days out of year

Nonresident Alien Witholding:

flat 30% of the foreign person's US source income is withheld

Stare Decisis:

judges required to respect precedents established by prior decisions on same set of facts

Foreign subsidiary:

separate legal entity incorporated under laws of foreign country that taxes profit Taxed by US when brought to US in form of dividend (Schedule F) -- Exception: passive income taxed by US immediately

S Corp Flow-Through and Separately Stated Items:

Flow-Through: 1. Ordinary income (not subject to FICA) -Includes: sales, COGS, business related int. exp., officer compensation, MACRS depreciation (not Sec. 179), Sec. 1245 gains (since treated as ordinary income) Separately Stated: 1. Rental income/loss 2. Portfolio income 3. Tax exempt int. 4. Invest. int. exp. 5. Percentage depletion 6. Section 1231 G/L 7. Foreign income tax 8. Charitable contributions 9. Exp. deduction for recovery property 10. Unrecaptured section 1250 income 11. G/L from sale of collectibles 12. Section 179 expense

General business credit

For investment credit, work opp., low-inc. housing, employer-provided child care, alt. motor vehicle, qualified child care expd., etc. Credit = NI tax (reg. tax + AMT - nonrefundable credit) less greater of: (1)25% of reg. tax liability over $25k OR (2) tentative min. tax

Surety's rights against (1)principal, (2) creditor, (3) cosurety:

PRINCIPAL: 1. exoneration - suit to compel payment before surety pays creditor 2. subrogation - enforcement of creditor's rights against principal after payment CREDITOR: -generally no rights COSURETIES: 1. jointly and severally liable (any 1 or more may be liable for entire obligation) 2. surety may compel cosureties by a suit in equity or exoneration to pay their pro-rata share of debt before surety pays 3. Surety may seek contribution from cosureties after he/she pays for their share 4. If cosurety's obligation is discharged in bankruptcy, nothing can be collected from him/her 5. If default and settlement amounts are not the same, use the settlement amount

Stock Redemption Treatment:

Proportional: taxable dividend/ordinary income to SHs (not sale or exchange treatment) Disproportional: taxable capital G/L to SH (sale/exchange treatment) -Ownership must be <50% after redemption and <80% before

AMT Formula:

Reg. taxable income + preferences +/- adjustments =AMTI <exemption> =AMT base *AMT Rate =Tentative AMT tax <AMT foreign tax credit> =Tentative Minimum Tax <regular inc. tax> =AMT

Standard Deduction:

S/MFS $6,350 HH $9,350 MFJ $12,700 Additional deduction: 1 qualified: 65 OR blind = $1,550 S, $1,250 MFJ; 65 AND blind = double 2 qualified (MFJ): each 65 OR blind: $2,500; double if both 65 AND blind Dependent of another: Greater of: $1,050 or $350 + Earned Income (up to $6,350) Can still claim additional std. deduction if 65/blind

Corp. AMT Preferences: (PPP)

Same as for individual (private act. bonds, percentage depletion, pre 1987 ACRS depreciation)

Worthless Section 1244 stock:

Treat as ordinary loss & deduct up to $50k S, $100k MFJ -Must be original owner -First $1m of corp's stock

Foreign Branch:

Unincorporated foreign entity and extension of domestic corp; not a legal entity; earnings taxed by foreign host country and US when earned

When is a contract VOID? Voidable?

VOID: (AIM PE) 1. Adjudicated (declared) mentally incompetent 2. Illegality (void if illegality is based on protecting public; voidable if there to raise revenue) 3. Mutual mistake (as to quality and existence, not value) 4. Physical duress 5. fraud in the Execution (party deceived into signing) Voidable: 1. fraud in the inducement (terms materially misrepresented) 2. innocent misrepresentation (no scienter) 3. economic or social harm duress 4. undue influence (not arms length) 5. unilateral mistake (both parties knew/should have known) 6. minority (was a minor when contract made; may ratify when 18) 7. intoxication (voidable if other party knew of impairment and promisor doesn't know nature and significance and prevented from performing)

Big diff. between ISO and SPP:

Voting power limit: 5% SPP, 10% ISO Grant & Exercise req.: exercise within 27 months of grant(SPP), must be granted and exercised within 10 years of plan(ISO) Stock limit: $25k/year (SPP), $100k/ year (ISO) Employee Taxation: based on option price v. FMV on grant date (SPP), capital G/L when sold (ISO)

When is a stock option considered non-qualified?

When it doesn't meet one of the ISO or ESPP rules! MOST COMMON: 1. > 10% voting power 2. Stock holding req. < 2 years after grant and < 1 year after exercise 3. Stock limit > $100k/year

When is a 743(b) adjustment REQUIRED by the IRS?

When there is a substantial built-in loss at the time of purchase ---- ONLY APPLIES TO PARTNERSHIPS -----

Qualified Widower v. HH residence rule:

Widower: live w/ for WHOLE year HH: live w/ (or provide housing) for HALF year

Amortization:

-Intangibles: SL over 15 years (180 mo.) -Org. and Start Up: $5k each, and then rest over 180 mo. -Research exp.: over 60 mo. -Pollution control facilities: over 60 mo. -Reforestation costs: over 84 mo. -Geological and geophysical costs: over 24 mo.

Rental Income treatment:

1. Rented < 15 days: exclude from income, don't deduct expenses 2. Rented 15+ days and used personally for greater of: (1) 15+ days or (2) 10% of rental days: -include income -allocate and deduct expenses for rental use -can deduct exp. UP TO income recognized -no loss 3. Rented 15+ days and used personally < 15 days: -recognize income -allocate and deduct expenses for rental use -can recognize loss up to $25k IF ACTIVE PARTICIPANT (Mom & Pop rule)

Requisites for creation of Agency Relationship: (4)

1. principal appoints agent to ach on their behalf 2. principal must have contractual capacity & consent (agent does not) 3. Written agreement not required (unless extends for > 1 year or agent buys/sells real property) 4. Consideration is NOT required

4 elements req. to prove malpractice against CPA/tax preparer:

1. tax preparer owed duty 2. breach of duty 3. injuries 4. cause between injury and duty of tax prepare

American Opp. Credit

100% of first $2k 25% of next $2k of exp. Up to $1k (40% of max $2.5k) is refundable Phase-out: -AGI $80k - 90k S; 160k - 180k MFJ

AMT Tax Rate:

26% on $0-$187.8k of taxable excess 28% on excess greater than $187.8k

Unrelated Business Inc. of Charity:

Deduction: $1000 Excludes: -royalties, dividends, int., annuities -rents from real and personal property -G/L on property not held primarily for sale to customers -income from research of college or hospital -income of labor unions used to establish retirement home, hospital, or similar facilities -activities limited to exempt organizations by state law (e.g., bingo) -value of securities loaned to broker and income received by lender of securities to broker -income from exchange or rental of membership lists to tax-exempt charitable orgs

Itemized Deduction Phaseout:

AGI > $313,800 MFJ; $287,650 HH; $261,500 S; $156,900 MFS

AMT Preferences (PPP):

ALWAYS ADD BACK 1. Private activity bond interest income 2. Percentage depletion deduction (excess over adj. basis) 3. Pre-1987 accelerated depreciation (excess over SL for prop. placed in svc. before 1987)

Acceptances are effective when _______, whereas revocations/rejections/counteroffers are effective when _________.

Acceptance: when dispatched/mailed (unless otherwise stated) revocations/rejections/counteroffers: when received

What elements does a common law contract require to be stated? What about a UCC contract?

Common Law: 1. identity of offeree and subject matter 2. price 3. time 4. quantity 5. nature of work UCC contract: 1. quantity

Fringe benefit treatment for S Corp:

Deductible for non-SH employees owning < 2% of S corp. Not deductible for SHs owning 2% or more (included in SH income)

Corporate AMT:

Minimum tax rate of 20% Regular taxable income +/- adjustments + preferences = Unadj. AMTI +/- adjusted current earnings - AMT NOL deduction = AMTI - AMT exemption =AMT base * 20% = Gross AMT -AMT foreign tax credit =Tentative minimum tax -Regular tax liability =AMT AMT exemption = $40k - (25% * AMTI in excess of $150k)

What method is required for LT contracts?

% of completion EXCEPTION: may use completed contract method if (1) small contractor (projects < 2 years long, w/ avg. annual gross receipts < $10M for past 3 years) (2) home construction contractor (80% of costs are from construction of residential units, NOT hotels)

Non-Qualified Stock Options: 1. Ordinary Income 2. Basis 3. Holding period 4. Future sale treatment 5. Lapsed option treatment

** deductible to co. when ord. inc. recognized by taxpayer 1. *w/ RAV:* Ordinary Income= when granted Basis = option price + amount prv. taxed Holding period = begins on exercise date Future sale = capital G/L Lapsed options = capital loss based on value prv. taxed 2. *w/out RAV:* Ordinary Income= when exercised Basis = option price + ord. inc. recognized Holding period = begins on exercise date Future sale = capital G/L Lapsed options = not taxable event (not taxed until exercised)

Power to Terminate Agency Relationship:

*Both parties have the power, but not the right Exception: agency coupled with an interest -principal has no power or right to terminate -only agent can terminate -agency power is given as security -cannot be ended by death, incapacity, or bankruptcy of principal

Tax Credits:

*REFUNDABLE* 1. Child tax credit ($1k for kid under 17) 2. Earned Income credit 3. Excess withholding 4. Excess SS paid 5. American Opp. Credit (40% refundable) *NOT REFUNDABLE* 1. Child & dependent care credit 2. Elderly and permanently disable credit 3. Lifetime learning credit 4. Retirement savings contribution credit 5. Foreign tax credit 6. General business credit 7. Adoption credit ($13,570/kid)

Individual AMT Adjustments (PANIC TIME):

+/- Passive activity losses +/- Accelerated depreciation +/- NOL of individual +/- Installment income of dealer +/- Contracts (% of completion v. completed contract) + Tax deductions (disallowed) + Interest deductions on home equity loans + misc. deductions + exemptions (personal) and standard deduction

Corp. AMT Adjustments: (A LIE)

- Adjustments for G/L due to diff. in depreciation - LT contracts (% of completion method for AMT) - Installment sales-dealer (installment not allowed for AMT) - Excess depreciation for (1) prop. between 1986-1999 and for (2) property after 1999

Section 179 Expense:

-Expense machinery and equip. instead of capitalizing/depreciating -Must be used in business and purchased from UNRELATED party Limitation on immediate expensing: $500k -reduced $ for $ by amount of property placed into service during year > $2,030,000 -Deduction not permitted if net loss exists or if it would create one SUV: can only expense $25k

ACE: (MOLDD)

-Intended to reflect economic income Step 1: determine adj. current earnings + muni bond int. + org. exp. amort. + life ins. proceeds on key person +/- diff. btw. AMT and ACE depr. (ifAMT depr. > ACE depr., then add) + DRD if amount taken is 70% Step 2: calculate actual ACE adjustment -ACE adj. = 75% of diff. btw. ACE and AMTI before adj. and alt. minimum NOL deduction (if AMTI > ACE, then ACE is a negative adj.) -Adj. can be negative, but cannot be greater than cumulative net positive ACE adjustments (prior positive adj. less prior negative) (i.e., neg. adj. is limited to net prior positive adj.)

PHC:

-More than 50% owned by 5 or fewer individuals -60% of adjusted ordinary income consists of: (NIRD) 1. Net rent (if < 50% of ordinary gross income) 2. Interest that is taxable 3. Royalties 4. Dividends from unrelated domestic corp Additional 20% tax on NI not distributed PHCs are NOT subject to accumulated earnings tax -- penalty on income not distributed, not earnings

Accumulated Adjustments Account (AAA):

-Prior S Corp income which can now be withdrawn tax free Increased by: income & gains, excluding tax-exempt inc. and life ins. proceeds Decreased by: distributions, exp., losses, charity, non-deductible exp. (excludes: nondeductible items that don't affect capital account, corp. beneficiary life insurance premiums)

Accord & Satisfaction:

-Same parties, new agreement Accord: agreement to substitute one contract for another Satisfaction: execution of accord

Novation:

-new party and old party is released -simple release = release w/out replacement

Loss treatment for losses limited from and definitions of: 1. Tax Basis 2. At-Risk 3. Passive Loss

1. *Tax Basis*: property & cash contributed - distributions -Carry forward indefinitely -Unused losses are LOST when sold 2. *At-Risk*: tax basis + recourse loans -Carry forward indefinitely until taxpayer generates more at-risk basis -Unused losses are OFFSET against gain when sold 3. *Passive Loss*: if participates less than 500 hours/year -Carry forward indefinitely -Unused losses are DEDUCTED in FULL when sold

What organizations do not have to file a Form 990:

1. Certain orgs w/ < $5k in gross receipts 2. (religious/related to religious)Orgs that have < $50k in gross receipts file an electronic postcard (CHRIST): -Churches -High school (religious) -Religious orders -Internal support auxiliaries -Societies (missionary related) -Tax exempt (organized by congress)

Not allowed for calculating corp. NOL: (5)

1. Charitable contrib. deduction 2. DRD if it results in NOL for the year 3. Domestic production activities deduction 4. NOL carryfoward/back from another year 5. Capital loss carry back (only carry forward allowed)

Required level of proof for IRS in a (1) civil case and (2) criminal case:

1. Civil: beyond a reasonable doubt -burden of proof is on IRS 2. Criminal: by a preponderance of evidence

Depletion:

1. Cost Depletion (GAAP - not for Tax) unit depletion rate = remaining basis of property/remaining # of recoverable units 2. % Depletion (not GAAP - for Tax) depletion = certain % * gross income from property during year deduction is limited to 50% of taxable income excluding depletion (100% allowed for oil and gas) May be taken after costs have been completely recovered, but excess is an AMT preference

When is actual and apparent authority terminated by law? (5)

1. Death of principal or agent 2. incapacity of principal 3. bankrupt principal 4. failure to acquire necessary license 5. destruction of subject matter 6. subsequent illegality

Liability in Agency Relationship when: 1. Disclosed principal 2. Partially disclosed principal (known existence, not identity) 3. Undisclosed principal

1. Disclosed principal: principal is liable, not agent 2. Partially disclosed: principal and agent (but not both) liable 3. undisclosed: principal and agent (but not both) liable

For AGI deductions: (12)

1. Educator exp.: $250 ($500 if MFJ and both teachers) 2. IRA Deduction 3. Student loan interest: $2,500/year Phase-out: AGI $65k S, $135k MFJ Can't claim if dependent 4. HSA: $3,400 (S), $6,750 (families) 5. Moving expenses: includes travel & lodging during moving, moving personal effects, cost of insuring goods while transporting 6. 1/2 SE tax 7. SE Health Insurance premiums 8. SE Retirement Plan contribution (not deducted on Schedule C) (i.e., Keogh): deductible lesser of $54k or 20% * net SE earnings max contribution = lesser of $54k or 100% net Keogh earnings Note: Net earnings = bus. inc. - bus. exp. - 1/2 SE tax 9. Penalty on early withdrawal of savings 10. Alimony paid 11. Attorney fees paid in discrimination (age, sex, race) and whistle-blower cases 12. Domestic production activities deduction: 9% deduction for lesser of QPAI or TI (before QPAI deduction) for architecture, engineering, construction, film production, or sale/rental/lease of equip. in US

5 Methods of Forming Contracts:

1. Express contract: formed by oral/written language 2. Implied-in-fact contract: formed by conduct 3. Implied-in-law contract/quasi contract: not a contract; remedy that allows plaintiff to recover benefit unjustly conferred upon defendant; remedy to prevent unjust enrichment 4. Unilateral contract: 1 promise; contract formed when performed is complete 5. Bilateral contract: 2 promises; contract formed when promises are exchanges

What CREDITS can reduce AMT liability? (FACCE)

1. Foreign 2. Adoption 3. Child 4. Contribution to IRA 5. Earned income

Misc. Itemized Deductions (NOT subject to 2% AGI floor):

1. Gambling losses (up to winnings) 2. Federal estate tax paid on income in respect of descendent

Qualified Stock Options: (2)

1. ISO 2. Stock Purchase Plan

Capital Loss deduction for individual and corp:

1. Individual: -$3000 S, MFJ, HH -$1500 if MFS -suspended losses = retain original character 2. Corp: -NOT DEDUCTIBLE (can only offset cap. gains) -Suspended losses = ST

Keogh Plan deductibility for SE individual and company:

1. Individual: deductible up to lesser of (1) $54k or (2) 20% * net self employment earnings 2. Company: not deductible

3 Taxes on S Corps (when C Corp in PY):

1. LIFO Recapture Tax: -must include excess of FIFO inventory over LIFO -1 of 4 installments due with final C Corp return, remaining 3 on S Corp return 2. Built-in Gains Tax: -Taxed at highest C Corp rate for FMV>NBV at S Corp date when asset is sold w/in 7 years of becoming S Corp 3. Tax on Passive Investment Income: -taxed as if the S Corp had accumulated C Corp E&P from PY and passive income > 25% of gross receipts -Tax = 35% * lesser of (1) NI or (2) excess passive invest. income

Duty of Agent to Principal (LORA):

1. Loyalty 2. Obedience 3. Reasonable Care 4. Account

Statute of Frauds: (MY LEGS)

1. Marriage consideration 2. Year (cannot be performed w/in 1 year) 3. Land interests and leases over a year 4. Executor contracts (reps who pay estate debts out of personal funds) 5. Goods in excess of $500 (NOT services) 6. Surety contracts (pay the debt of another -- must be signed by surety) NOTE: only defendant must have signed to be enforceable -writing must be evidence of material terms

ESPP employee taxation:

1. Option price < FMV on grant date: ord. inc. = lesser of (1) FMV when sold - exercise price or (2) exercise price - FMV on grant date

6 things that may trigger Nexus:

1. Owning or leasing tangible personal or real property 2. Sending employees into state for training or work 3. Soliciting sales in a state 4. Providing installation, maintenance, etc. to customers within a state 5. Accepting or rejecting sales orders within the state, or accepting returns (unless order is fulfilled by shipment/delivery point outside the state) 6. Collection of delinquent accounts within the state

4 Types of Business Entities and their Forms:

1. Partnership, Form 1065 (K-1) 2. S Corp, Form 1120S (K-1) 3. Sole Proprietorship, Form 1040 (Schedule C) 4. C Corp (separate tax paying entity), Form 1120

3 Transfer Pricing Options:

1. Section 482 Study: if based on allowable pricing methods, then taxpayer won't have to pay penalty if they did their due diligence. If not based on allowable pricing methods, penalty may be avoided if increase in federal income tax is attributable to any transaction solely between foreign corps, unless it affects US income tax 2. Competent authority: advanced ruling where IRS approves the transfer price prior to transaction performance -- avoids double tax 3. Advance Pricing Agreement (APA) Program: binding agreement with IRS where IRS agrees not to seek transfer pricing adjustment for a covered transaction if TP files its return consistent with agreed transfer pricing method

Penalty for Fraud for (1) the taxpayer and (2) tax preparer:

1. Taxpayer: 75% of understatement & criminal charges 2. Tax Preparer: Greater of $5000 or 50% of income received & possible criminal charges

2 Possible Transfer Pricing Issues:

1. US based taxpayer transfers, sells, purchases, or leases tangible or intangible property to/from an affiliate that either isn't subject to US income tax or doesn't file a consolidated return w/ US taxpayer 2. US based taxpayer enters into loan agreement, service contract, or shares costs with affiliate that either is not subject to US income tax or doesn't file a consolidated income tax return with US taxpayer

Misc. Itemized Deductions (2% AGI floor):

1. Unreimbursed employee exp 2. Education exp (if maintaining/improving skills or to meet express req. of employer) 3. uniforms 4. business gifts ($25/gift) 5. employment agency fees (not deductible if for new job/new profession) 6. Expenses of investors (safe deposit box, invest. advice, etc.) 7. Subscriptions to professional journals 8. Tax preparation fee 9. Debit card convenience fees incurred to pay inc. tax 10. Appraisal fee for charitable contribution, IRA custodial fees, and check writing fees for personal account 11. Hobby expenses (up to income earned)

When are scholarships/grants taxable?

1. When grants to participate in university research 2. tuition reduction when it is the TA/RA's only compensation 3. When used to pay for anything other than tuition, fees and books 4. If given to a NON-degree seeking student

3 Elements of enforceable contract:

1. agreement w/ offer and acceptance 2. exchange of consideration (legal value) 3. lack of defenses * does not need to be in writing

Duty of Principal to Agent:

1. compensation (implied) 2. reimbursement/indemnification (implied) 3. remedies for damages

9 defenses of a surety:

1. defrauded principal 2. duress upon principal 3. illegality of principal's obligation 4. discharge of principal's obligation 5. surety's incapacity or bankruptcy 6. lack of consideration (therefore no contract; gratuitous surety would still be bound if promises before consideration) 7. variations of surety's risk or extension of time -gratuitous surety: discharged if ANY variation -compensated surety: discharged for material variation/increase in risk of loss Note: delay in collection discharges nobody 8. loss of security (surety is discharged by value of security/collateral released) 9. release of cosurety (remaining surety is discharged to extent surety could have recovered from released surety)

4 constructive dividends:

1. excessive salaries paid to SH employees 2. excessive rents and royalties 3. Loans to SH where there is no intent to repay 4. Sale of assets below FMV

When is an employer liable for independent contractors?

1. if employer authorized the tort, or 2. work involved ultra-hazardous activity

Controlled Foreign Corps (CFC):

50% or more of stock is owned by US shareholders any day of the year Taxed by foreign country and US when earned US shareholders owning >10% of CFC must immediately recognize subpart F income (foreign tax credit still available)

Highest tax on SS income?

85% (if AGI+tax exempt interest + 50% of SS benefits > $34k for S, $44k for MFJ)

Passive Foreign Investment Company (PFIC):

A US resident who invests in a foreign corp with at least 75% of passive gross income or 50% of average assets that product passive income -if both PFIC and CFC rules apply, taxed as CFC

Section 754 Election:

Available when certain distributions of property from the partnership to a partner occur or when there is a transfer of a partnership interest by sale, exchange, or death Sec. 754 election made by reason of (1) sale or (2) exchange results in a Section 743(b) adjustment

Basis of property dividend when taxpayer assumes debt?

Basis = FMV of property NOT REDUCED BY DEBT ASSUMED Debt assumed decreases the taxable income, but does NOT affect the basis

Basis of wash sale w/ disallowed loss:

Basis = purchase of new security + disallowed loss

Bonus Depreciation:

Can expense additional % of qualified property placed into service during CY Qualified property = new property w/ recovery period of 20 years or less %: 50% in 2015, 2016, and 2017 40% in 2018 30% in 2019 $8k additional first year depreciation for vehicles that use bonus depreciation Claimed after Sec. 179 expense but before regular depreciation

When does the burden of proof shift to the IRS?

During CRIMINAL cases, income, gift, estate or generation-skipping tax cases

2 taxes that Estates are subject to and 1 that Trusts are subject to:

ESTATE: 1. Income tax (annually) 2. Estate tax: one-time only transfer tax based on value of dependent's estate TRUST: 1. Income tax (annually)

Who pays generation skipping transfer tax?

Either Transferor or Transferee

FICA & Medicare tax rate:

FICA: 15.3% (up to $127.2k of income) Medicare: 2.9% (all income)

Foreign tax credit calculation

Lesser of (1) foreign tax paid or (2) foreign tax credit limit Foreign Tax Credit Limit = [taxable foreign inc./(total taxable inc+exemptions)] * US Tax

Itemized Deductions Effected by Phaseout:

Limited: 1. Taxes paid 2. Interest paid 3. Charitable donations 4. Job expenses and misc. itemized 5. Other misc. itemized Not limited: (*GIMC*) 1. Gambling losses 2. Investment interest exp. 3. Medical and dental exp. 4. Casualty and theft losses

Child & dependent care credit

MAX: $3k for 1 dependent, $6k for 2+ 20-35% of eligible expd. based on: 20% if AGI > $43k 35% if AGI < $15k (HIGHER deduction if you have LOWER AGI) Dependent must be under 13 or disabled (& meet support test) Credit is limited to: lesser of: (1) earned inc. of spouse w/ lesser amount, (2) actual expd., or (3) max amount

Are real estate taxes for special assessments deductible?

NO!!!

Gain on Small Business Stock Treatment:

NON-CORP SHAREHOLDER: If held for 5+ years, exclude 100% of gain Max exclusion limited to 100% of greater of: (1) 10 times taxpayer's basis in the stock, or (2) $10m ($5m if MFS)

How to calculate self-employment tax:

Net business income * 92.35% = taxable base * 15.3 (income up to $127.2k) and 2.9% = SE tax * 50% = SE tax deduction (for AGI)

Can you carry forward excess student loan interest?

No! Any interest paid > $2,500 is treated as personal consumer interest and therefore is NOT deductible (no carryover)

Employer deductibility for non qualified SO and qualified SO (ISO and SPP):

Non-qualified: deducted when ord. inc. recognized by taxpayer Qualified: NO DEDUCTION

Casualty and Theft Loss calculation:

Smaller loss <insurance recovery> = taxpayer's loss <$100> =eligible loss <10% AGI> =deductible loss Smaller loss = lesser of (1) lost cost/adjusted basis, or (2) decreased FMV (mkt. val. before and after casualty)

Surety v. Guarantor:

Surety: directly liable on his contract Guarantor: liable when debtor does not perform duty to creditor and after creditor has exhausted all legal remedies

Personal Svc. Co.:

Taxed at flat 35% rate