CFP Exam- Taxes and Retirement

what tax form is used for entity reporting in partnership

1065

how much is self employment tax?

15.3%, represents owner and employee share of FICA taxes

what is the pass thru deduction amount?

20% of taxpayers qualified biz income from noncorporate entity

what is age range to qualify for EIC

25 to 60

what are 2 types of corporations

C S

what schedule is income from sole prop reported?

C, as self-employed income

A ____________________is generally used as an estate planning technique to move wealth from one generation to another.

FLP (family limited partnership)

Each year, the partner's ___________ is increased by any income received or decreased by any losses or distributions taken from the partnership.

adjusted basis

what is a general partnership

all general partners

what is a flow through entity

all income/expenses reported directly to owner's personal tax return

how are FLPs taxed

as flow thru entities

how are assets passed to younger relatives in an FLP

assets and property is owned by partnership and is slowly gifted to them

how is a C corporation taxed?

at entity and personal level (double taxed)

with net profit received as sole proprietor, are u subject to income/self employment/both taxes?

both

what kind of corporations enjoy limited liability of owners

both C and S

what is the only type of biz entity that is double taxed

c corporation

how are partnership distributions taxed once adj basis dips below zero?

cap gain

Often, valuation (premiums/discounts) are generated on the transfer of the limited interest.

discounts

for pass thru deduction, qualified income (includes/excludes) capital gains/losses, dividends, payments to employees, payments to partners, and nonbusiness interest income

excludes

how are s corporations taxed?

flow through

is health insurance from self-employment for agi or from agi?

for

is student loan interest for or from agi deduction

for

why are FLPs established

for senior family member to control assets as general partner and to gift away portions of it to qualify for valuation discounts and annual gift exclusion TO REDUCE OVERALL ESTATE

what tax forms are needed for partnership

form 1065-entity schedule k-1 personal

what tax forms are needed for a c corporation

form 1120-entity form w-2 and 1099 DIV-personal

what tax forms are needed for s corporation

form 1120s-entity form w2 and schedule k1-personal

2 types of partners in partnership

general limited

In a ________ partnership, all partners are involved in the day-to-day operations of the business.

general (limited partners not involved in day to day)

how are the owners' incomes taxed in a partnership?

general=self-employed limited=ordinary income

general vs limited partner

general=unlimited liability exposure, personal assets not protected limited=liability limited to amount partner invested in partnership, no obligation to contribute additional capital

what is the basis for a partner in a partnership

income based off expertise or labor contributed to entity

When a partner contributes cash or property to the partnership, there (is/isnt) taxable event

isnt, considered the basis

what is a partnership agreement

it is used in partnership to set rules and conditions for how biz is conducted and who does what to avoid confusion

what tax form does FLP partners receive, regardless of type of member

k1

In a __________ partnership, limited partners are not allowed to participate in the day-to-day operations of the business.

limited

what does llp stand for

limited liability partnership

what kind of partnership requires formal partnership agreement and why

limited partnership, to protect limitations of limited partners

how is a corporations owners liabilities limited

limited to the basis they put in

what happens if a imited partner participates in day to day operations of biz

lose status as limited partner, becoming general partner and losing limited liability status

what is a limited partnership

mix of general and limited partners

An LLP provides (more/less) liability protection for each partner than a partnership.

more

are distributions to shareholders deductible for C corportions

no

are medical expense reimbursements taxable income?

no

are there any formation reqs for sole proprietorship

no

are workers comp benefits considered taxable income?

no

can a property settlement be treated as alimony

no

can anyone else besides owner make biz decisions in sole prop?

no

can more than 1 person own sole proprietorship

no

can u claim eic if you are a qualified child of another person

no

can u get EIC (earned income credit) if filing separate?

no

do members of a partnership have to be individuals?

no

in a flow thru entity, does the corp itself pay taxes

no

is a sole proprietorship a separate legal entity

no

is child support income considered gross income

no

Mabel is single and age 67. Prior to her retirement this year, she received a $3,000 bonus and $1,500 in wages. After her retirement, she received $9,000 in Social Security benefits. does she have to file? if so, how much?

no, but can if she withheld taxes (income below std deduction and ss benefits dont count as income)

are distributions from a partnership considered taxable?

no, but it lowers basis

are meals and facilities provided by employer for employee benefit a taxable fringe benefit?

no, tax free

are roth contributions for agi deductable

no, traditional are

does a sole proprietorship need separate tax id number

no, unless it involves payroll expenses

how are c corporations double taxed

once at the corporation level and once at the shareholder level

A limited partner's share of any partnership income is generally considered _______________income

ordinary

In a _______(entity), each person makes a contribution of capital, expertise, or labor and receives a share of both profits and losses of the business

partnership

what biz entity is a relationship between two (or more) taxpayers who come together to carry on a trade or business.

partnership

Limited liability partnerships are similar in structure and organizational requirements to ___________

partnerships

3 types of entities that qualify for pass thru deduction

partnerships sole props s corporations

Typically, LLPs are __________________ businesses

professional service (like cpa or law firm)

what protections do LLPs offer partners

protection against negligent acts of other partners protects personal assets from creditors

what tax form is used in partnership when partners report gains and losses

schedule k1

A general partner's share of any partnership income is generally considered _______________income

self employment, pay self emp taxes in addition to income ones

what type of businesses are eligable for pass thru deduction

service related

how is corporation formed

shareholders provide money or property in exchange for stock

In an FLP, a senior family member generally owns a (small/large) general partnership interest and a (small/large) limited partnership interest

small large

what type of biz entity is the riskiest

sole prop

what is simplest biz entity

sole proprietorship

alimony payments must be for the benefit of spouse (t/f)

t

a pass-thru deduction is taken from (agi/taxable income)

taxable income

how are owners' incomes taxed

w-2 income (salary) and dividend income (distributions)

how is owners income taxed in an s corporation

w-2 income (salary) and ordinary income (flow thru)

how are partnerships formed

when income from biz is earned

when is a sole prop considered to be formed

when self-employment income is earned

Do payments made to a third party on behalf of the former spouse qualify as alimony?

yes

are gifts/awards provided by employer considered taxable income?

yes

are partnerships flow thru

yes

are profits or losses passed through to the partners in partnership

yes

can a gift of partnership interest in an FLP be counted towards annual gift exclusion?

yes

can partnership have more than 2 partners

yes

can partnerships be formed with a handshake

yes

can partnerships operate on fiscal/tax years that are different from the calendar year

yes

does pass thru deduction have phase outs

yes

in an llp, is the partner's interest in the LLP's assets at risk due to other partners actions?

yes

in sole prop, can biz assets be used to satisfy personal liabilities

yes

is a corporation separate from its owners

yes

is a sole proprietorship a flow thru entity

yes

is rental income considered part of gross income

yes

is the entity of a c corporation taxable

yes

does a partnership have to file separate tax return for entity? is any tax paid at partnership level?

yes no

are parterships required to have general partner(s)

yes, at least 1

does a partnership have to conform its tax year to the same tax year as that of its partners

yes, but can obtain permission to use diffrenent year

are moving expenses reimbursed by employer a taxable fringe benefit?

yes, only if possible for employee to deduct it themselves

are punitive damages from a lawsuit taxable income?

yes, unless reimbursement for property damage or personal injury