CPWA - Tax Planning

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Calculate AGI. Wages/salaries = $425k ordinary dividends = $25k rental real estate = $75k 401(k) contributions = $25k

$500,000

Calculate AGI. (Self Employed) LLC Income = $625k Other income = $25k HSA contributions = $5k Half of SE tax paid = $20k SEP Contribution = $25k SE Health Insurance Deduction = $10k

$590k

Taxable income +/- AMT adjustments + AMT preference items = ________

AMTI

Tommy buys 100 shares of Boola Boola Corp stock for $1,000 on 1/1/17. He sells the shares on 1/2/18 for $750. Within 30 days he buys another 100 shares of Boola Boola Corp for $800. What is his new basis in the shares?

$1,050

Find AMTI: Susan and Mike Jones are married, have 3 young children and file a joint return. Their taxable income under the regular income tax calculation for this year is $2.5M and their regular income tax liability is $660k. They gave $150k to qualified public charities over the year and have an AMT adjustment of $125k from various non-tax related itemized deductions. The Jones' had preference items from incentive stock options of $75k and tax-exempt interest of $15k from qualified private activity bonds. They paid $80k in property taxes. Calculate the Jones' total tax liability. (Remember: only $10k of property taxes is allowed back in) *Income + add backs

$2.725M

Mary has $150k of total income, $8k of investment income (from ordinary dividends and interest income), $10,500 of investment interest expenses from a margin loan, and $13k of other itemized deductions (such as mortgage interest and state taxes). How much can she deduct to reduce her taxable income?

$8,000

Exemption phaseout for AMT begins at $__,079,800 MFJ.

The AMT exemption phaseout begins at $___,079,800 for MFJ

Section 1244 is certain small company stock owners are allowed ordinary income (versus capital gains) treatment for losses up to $50k/individual and $____k/joint

100

The exemption amount for AMT is $_____,100 for MFJ

118

To qualify as Section _______ stock, the stock must be issued when the corporation is a small business corporation. A corporation is not a small business corporation unless the aggregate amount of money and other property received by the corporation for stock, as contributions to capital, and as paid-in surplus does not exceed $____M. If property is received for the stock, it is valued for purposes of the $____M limitation based on its adjusted basis, reduced by any liability to which it is subject.

1244, 1

For AMT Rates: ____% for the first $206,100 ____% on amounts above $206,100

26, 28

AMT Rates are 26% and ____%

___.8% Medicare Tax on Net Investment Income and .___% Additional Medicare Tax on Wage and Self-Employment Income

3, 9

What is the surtax on net investment income? It kicks in once a couple MFJ reaches $250k.

3.8%

Gifting cash to a PRIVATE foundation allows ____% deduction of AGI.

Gifting LTCG property to a public charity allows ____% if FMV, or ____% for basis.

30, 50

Common stock holding period = _____ days in the 121 day period beginning ____ days before the ex-dividend date.

Gifting cash to a public charity allows ____% deduction.

Fill in the blank: Current ordinary income tax rates (and rates for short-term capital gains): 10%, 12%, 22%, 24%, 32%, 35%, 37%. Long-term capital gains and qualified dividend rates: 0%, 15% and 20%. Net capital gains on collectibles and certain small business stock can be taxed at 28%. Alternative minimum tax (AMT) rates are 26% and 28% for individuals. 0._____% Medicare Hospital Insurance Tax. 3.8% Surtax on Net Investment Income.

Fill in the blank: Dividends are generally taxed as ordinary income. Qualified dividends are taxed at capital gains rates. Investments held through IRAs and qualified retirement plans that receive qualified dividends do not benefit from this special rule. Dividend has to be paid by an American company or qualified foreign company. Holding period: in order to qualify for the lower rates, investors are required to hold common stock for more than 60 days in the 121-day period beginning 60 days before the ex-dividend date. Holding period: in order to qualify for the lower rates, investors are required to hold preferred stock for more than ___ days in the 181-day period beginning ____ days before the ex-dividend date.

Preferred stock holding period = ____ days in the 181 day period beginning ____ days before the ex-dividend date.

Business activity is presumed to be an activity for profit if it generates profits in any ______ out of ______ consecutive tax years (two out of seven years if related to horses). A. three, five B. four, seven C. six, seven D. two, five

For purposes of determining "above-the-line" and "below-the-line" deductions, the "line" is _______________. A. adjusted gross income B. taxable income C. gross income D. earned income

Generally speaking, _____________________ is/are responsible for recourse debts while ______________________ is/are responsible for non-recourse debts. A. the entity and individual / only the entity B. only the entity / only the entity C. only the entity / only the individual D. the entity and individual / the entity and the individual

Jack gave his daughter, Ellen, a limited partnership interest in a real estate activity. Suspended losses amounted to $30,000. Jack's adjusted basis at the time of the gift was $40,000 (fair market value was greater than $40,000). What is Ellen's basis in the property? A. $70,000 B. $30,000 C. $40,000 D. $10,000

Section ______, based on certain requirements, may allow a deduction of up to $100,000 (for MFJ taxpayers) annually as an ordinary loss. A. 1244 B. 1202 C. 1035 D. 1031

The Smith's family limited partnership generated $330,000 of income this year. Dr. Stacy and Mr. Bill Smith are the general partners, each owning 1% of the partnership where the children and grandchildren, all limited partners, own the remaining 98% in aggregate. Which of the following is accurate as it relates to the current income and its ultimate distribution? A. Stacy and Bill may determine the amount and allocation of the distribution at their discretion. B. The so-called Kiddie Tax does not apply to distributions made from the FLP to their children or grandchildren under the statutory age in which those distributions are considered unearned income. C. Distributions must be made pro-rata. D. All partners must receive annual distributions at least to the extent of basis on a pro-rata basis before any non-pro-rata distributions may be made.

The healthcare surtax applied to net investment income for those with modified AGI above $250,000 (MFJ) is currently _____. A. 3.8% B. 12.9% C. 0.9% D. 7.6%

Thomas was stuck in the alternative minimum tax (AMT) scheme last year and you both think he'll likely be again this year as well. Each of the following strategies could work to help Thomas minimize or possibly avoid AMT this year except for which below? A. defer retirement plan contributions B. employ tandem exercise of qualified and non-qualified stock options C. time charitable deductions D. reduce exposure to private activity bonds

Which of the following statements about tax rates is correct? A. Rates on gains from collectibles, AMTI and qualified small business stock may be taxed at 28%. B. Capital gains and ordinary income tax rates start at 0% and run up to 55% when including the Medicare hospital insurance tax and surtax on net investment income. C. The top ordinary income tax bracket is 40%. D. The regular capital gains rate runs from 15%-20%.

Which of the following statements are NOT accurate? I. The highest long-term capital gains rate is 35%. II. Ordinary income tax rates for individuals stop at 37% (not including the Medicare tax). III. Tax rates on collectibles go up to 25%. IV. Current AMT rates are 20% and 25%. A. IV, I, and III B. III and IV C. I and II D. II, III, and IV

Which of the following statements are true regarding the calculation of income tax liability? I. The standard deduction or itemized deductions are subtracted from gross income to arrive at adjusted gross income. II. Credits are applied to reduce taxable income. III. The standard deduction or itemized deductions are subtracted from adjusted gross income to arrive at taxable income. IV. The number of exemptions (personal and dependency) may need to be adjusted to arrive at taxable income. A. III and IV only B. I and II only C. I only D. II and III only

Standard deduction or itemized deductions are deducted from _________.

AGI

A taxpayer has the following transactions during the year: a $5,000 short-term capital gain, a $3,000 long-term capital gain and a $1,000 long-term capital loss. She also came into the year with an $11,000 short-term capital loss carryover. Which statement best describes her capital gain/loss position for the year: A. A $3,000 deductible loss for the year and no loss carryover to the next year. B. A $3,000 deductible loss for the year and a $1,000 loss carryover to the next year. C. A $2,000 taxable gain for the year and a $6,000 loss carryover to the next year. D. A $4,000 deductible loss for the year and no loss carryover to the next year.

Any new allocable share of recourse debt is _________ the beginning basis in determining current basis. A. not relevant B. added to C. subtracted from D. not added to or subtracted from

Generally speaking and in most partnerships when income is distributed to a partner, she pays taxes on the income and/or her basis goes _________; and when she contributes property or assets to the partnership, her basis goes _________. A. up / down B. down / up C. down / down D. up / up

Section ______, based on limitations and eligibility rules, may allow non-corporate investors to exclude up to $10 million in realized gains on small qualified business stock if held for more than 5 years. A. 1031 B. 1202 C. 1035 D. 1244

Steve is sole shareholder of a corporation that has $50,000 in current accumulated earnings and profits. His basis in the stock is $5,000. The corporation distributes $70,000, which is not compensation. ________ is treated as dividends and taxed as ordinary income, _________ is treated as a return of capital investment (basis is reduced to zero) and ________ is treated as capital gain. A. $20,000 / $15,000 / $5,000 B. $50,000 / $5,000 / $15,000 C. $70,000 / $0 / $0 D. $5,000 / $20,000 / $70,000

The so-called Medicare surtax on wages, compensation, and self-employment income over $250,000 (MFJ) is currently _____. A. 9.4% B. 0.9% C. 3.8% D. 1.2%

The underpayment penalty for taxes is... A. a flat penalty of 5% on the total amount of income. B. an interest calculation based on the amount underpaid. C. interest and penalties not to exceed 50% of the amount not paid. D. a flat penalty plus interest on the amount underpaid.

Which of the following accurately describes the benefit(s) of deductions above or below the line (in the process of taking deductions before or after Adjusted Gross Income or "AGI")? A. Deductions made above the line can often be used as credits, not just as deductions. B. Deductions above the line are not typically subject to the same restrictive adjustments and limitations compared to deductions taken below the line. C. Deductions below the line reduce AGI and this helps when subsequent deductions and credits are based on AGI (i.e., the lower your AGI the better). D. Deductions below the line are generally more favorable than those above the line as they suffer fewer restrictions and offer more tax reduction dollar for dollar.

Which of the following accurately describes the estimated tax payment rules that individual taxpayers must follow to avoid interest and/or penalties? A. If prior year AGI was $150,000 or less, to avoid underpayment penalties, pay 90% of prior year tax or 110% of current year tax, whichever is less. B. If prior year AGI was over $150,000, to avoid underpayment penalties, pay 110% of prior year tax or 90% of current year tax, whichever is less. C. If prior year AGI was over $150,000, to avoid underpayment penalties, pay 110% of prior year tax or 100% of current year tax, whichever is less. D. If prior year AGI was $150,000 or less, to avoid underpayment penalties, pay 90% of prior year tax or 100% of current year tax, whichever is less.

Which of the following accurately describes the primary difference in tax consequences? A. The estate, gift, and generation-skipping transfer taxes are unified by transaction but are taxed at different rates. B. Tax credits reduce tax liability dollar for dollar while tax deductions reduce taxable income. C. A progressive tax is always advantageous to lower income taxpayers while a flat tax treats all taxpayers the same. D. Taxpayers in different states pay different local, state and federal taxes as the rates for all three levels of taxation are different from state to state.

Which of the following is NOT accurate as it pertains to the self-employment tax? I. Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program is taxed at a varying rate. II. OASDI is taxed at 6.20% for employee and 6.20% for employer = 12.40% for self-employed. III. Medicare's Hospital Insurance (HI) program is taxed at a flat rate. IV. HI is taxed at 1.45% for employee and 1.45% for employer = 2.90% for self-employed on a capped amount of net earnings from self-employed. A. II and III only B. IV and I only C. III and IV only D. I and II only

Which of the following regarding charitable contribution deductions is NOT accurate as it pertains to gifts of property encumbered by debt? A. The amount of debt in connection with the gift property is considered an amount realized by the donor. B. The fair market value of gifts is calculated gross of debt. C. Gifting property subject to debt (e.g., a mortgage) may create UBTI for the charity. D. The transfer of encumbered property to charity is considered a bargain sale.

Your client sold property to a buyer who paid her $400,000 cash and assumed an existing mortgage of $150,000. The property had cost $250,000 and she had made improvements of $50,000. Depreciation of $100,000 has been claimed and selling expenses were $20,000. What is the amount of gain? A. $200,000 B. $330,000 C. $350,000 D. $250,000

A corporation can have its "S" election terminated if it has "excessive" __________ income for three consecutive years. This type of income is considered excessive if it exceeds ____% of the gross receipts of the S-corporation. A. passive / 40% B. active / 30% C. passive / 25% D. active / 55%

A loss of up to _________ (for those married filing jointly) may be taken for qualified Section 1244 stock. Additional losses are treated as ____________. In order to qualify as Section 1244 stock, all money and other property received for stock, contributions to capital, or paid-in-surplus must not have exceeded ________. A. $500,000 / capital losses / $10,000,000 B. $1,000,000 / ordinary losses / $10,000,000 C. $100,000 / capital losses / $1,000,000 D. $50,000 / ordinary losses / $500,000

A trust must pay income taxes on income received by the trust, subject to certain exceptions. The general rule is that ______________________________________________. The trust must also pay income taxes on other items of income received. A. the beneficiaries pay capital gains taxes each year and the trust pays income taxes in each taxable year. B. the trustee chooses whether the trust or certain beneficiaries pay taxes in each taxable year. C. the trust must pay taxes on capital gains except in the final year of the trust when capital gains pass through to and are taxable to the beneficiaries. D. the beneficiaries pay taxes on all income and capital gains in each taxable year.

For purposes of determining gain for gain property acquired by gift, the basis to be used is that of the last preceding owner who did not acquire the property by gift. In the usual situation, the donee's basis for computing gain will be the same as __________________. A. the fair market value at the date of the gift B. determined using the alternative valuation method C. basis of the donor D. the greater of the donor's basis or fair market value at the date of the gift

If an individual taxpayer contributes long-term capital gain property to a qualified private foundation and wants to deduct fair market value of "qualified appreciated" stock, the deduction would be subject to which of the following limits: A. 30 percent of the taxpayer's AGI B. 40 percent of the taxpayer's AGI C. 20 percent of the taxpayer's AGI D. 50 percent of the taxpayer's AGI

Mike donates long-term gain property worth $800,000 to a qualified public charity. Mike's adjusted gross income is $2,000,000. Mike's basis in the property for tax purposes is $700,000. What is the maximum deduction Mike can take this year based on these facts? A. $600,000 B. $1,000,000 C. $700,000 D. $800,000

The basis in a partnership _________ by ordinary business income, capital gains and dividend income; and __________ from ordinary business loss, capital loss and cash distributions. If a partner is allocated income (taxable), but receives no cash distribution of that income, the partner is _____________ in the partnership. A. increases / increases / reducing his basis B. decreases / increases / reducing his basis C. increases / decreases / increasing his basis D. decreases / decreases / increasing his basis

The healthcare surtax applied to net investment income for those with modified AGI above $250,000 (MFJ) is currently _____. A. 0.9% B. 7.6% C. 3.8% D. 12.9%

What are the tax consequences of an Incentive Stock Option (ISO)? A. Capital gains are recognized upon the sale of an ISO equal to the sales price - the value of the stock at the date of grant. B. Disregarding AMT, if certain rules are met, the employee is taxed at more favorable ordinary income tax rates when he/she sells the stock. C. The bargain element (difference between value at exercise and option price) is added back for AMT purposes. D. Depending on circumstances, capital gains are recognized at either the grant date or exercise date.

Which of the following items are generally added back to income when calculating Alternative Minimum Taxable Income ("AMTI")? I. excluded gain on sale of qualified small business stock II. standard deductions III. qualified spread on certain Incentive Stock Options IV. charitable deductions V. losses from qualified small business stock VI. qualified mortgage interest VII. tax-exempt interest on qualified private activity bonds A. I, III, V, and VI only B. I, II, IV, VI and VII only C. I, II, III, V, and VII only D. II, III, IV, and V only

__________ gains are based on the disposition of an asset and may or may not have immediate tax consequences, while __________ gains are treated as taxable events for tax purposes. A. Recognized, realized B. Short-term capital, long-term capital C. Realized, recognized D. Long-term capital, short-term capital

Generally speaking, a partner's basis for his partnership interest equals his capital account, increased or decreased, for any of the following except for___________________. A. contributions and distributions of appreciated and depreciated property B. partnership property revaluations C. liabilities D. partnership annual net income

Income can be categorized into each of these primary groups, with the exception of which below, as they relate to tax treatment? A. passive B. portfolio C. active D. phantom

"Net investment income" includes each of the following except for _____________________. A. net short-term capital gains B. nonqualified dividends C. annuity payments D. tax-free municipal bond interest

A wash sale occurs if the taxpayer sells or disposes of the stock or securities, and within ____ days before or after that date (the ____-day period) the taxpayer acquires, or enters into a contract or option to acquire, substantially identical stock or securities. When a loss is disallowed because of the wash sale rule, the disallowed loss is _________ the cost basis of the new stock or securities. A. 60/60/deducted from B. 60/61/added to C. 30/60/deducted from D. 30/61/added to

Mike sells shares of his S&P 500 index ETF inside of his 401(k) Plan and makes a profit of $100,000. Mike's gains are considered.... A. realized and recognized B. recognized only C. neither realized or recognized D. realized only

Most recently the SECURE Act changed taxation on the so-called "kiddie taxable amount" of unearned income amounts above _______ for those dependents under ___________ and full-time student dependents from 19-23 years old to be taxed at the ___________ (like it was before TCJA). A. $11,000, 19 years old, trust tax rate B. $2,300, 21 years old, trust tax rate C. $11,000, 21 years old, parent's rate D. $2,300, 19 years old, parent's rate

Passive activity income __________ include portfolio income such as interest, dividends, annuities, and royalties. A. could B. may C. does D. does not

Place the following steps in order for calculating AMT. I. Preliminary AMT - Tax Credits = Tentative AMT II. Taxable Income +/− AMT Adjustments + AMT Preference Items = AMTI ("alternative minimum taxable income") III. AMTI − Exemption Amount (subject to phase out) = AMT Base IV. Tentative AMT − Regular Tax = AMT Due V. AMT Base × AMT Rate(s) = Preliminary AMT A. I, II, V, III, IV B. V, II, III, IV, I C. III, II, I, IV, V D. II, III, V, I, IV

The maximum number of shareholders/investors for an S-corporation is _____________. A. unlimited B. 10,000 C. 1,000 D. 100

The so-called Medicare surtax on wages, compensation, and self-employment income over $250,000 (MFJ) is currently _____. (Note: NOT Net investment income) A. 3.8% B. 1.2% C. 9.4% D. 0.9%

Thomas exercised 1,000 incentive stock options (ISOs) of his employer, Drums, Inc. The exercise cost was $8 per option at the same time the stock was trading for $60 per share. Thomas pays the company $8,000 and, in return, receives stock valued at $60,000. For regular tax purposes, Thomas [does / does not] report income for regular tax purposes; for AMT purposes, he has a positive adjustment of $____________________. A. does; $52,000 MINUS his regular tax amount B. does not; $26,000 MINUS his regular tax amount C. does; $26,000 D does not; $52,000

Which IRC section below allows depreciable and real property used in trade or business and held for more than one year to be treated as capital gains for tax purposes and allows for ordinary income treatment of losses? A. Section 1031 B. Section 1244 C. Section 1250 D. Section 1231

Which of the following are NOT accurate when describing Uniform Transfer to Minors Act (UTMA) and Uniform Gift to Minors Act (UGMA) accounts? I. Account is opened in the name of the child and his/her tax ID number is used. II. Income from an UTMA or UGMA is not subject to the "kiddie tax rules." III. Based on amount, the income may be: untaxed, included in child's taxable income, or included in parent's taxable income. IV. Income from an UTMA or UGMA does not impact AMT liability. A. IV and I only B. III and II only C. I and III only D. II and IV only

Which of the following is NOT considered a capital asset? (Think of the difference between personal and business asset) A. a rare edition of a book held by an individual who is not a dealer of rare items B. a personal residence owned by an individual not in the business of buying and selling residential houses C. mutual fund shares held by an individual not in the business of buying and selling mutual funds D. stock in the trade of the taxpayer that would be properly classified as inventory

Which of these are not considered pass-through entities for purposes of taxation? I. S-corporation II. C-corporation III. Limited Liability Company IV. Family Limited Partnership V. Grantor Trust VI. Irrevocable Non-Grantor Trust VII. Section 529 Plan A. I, II, V and VII only B. II, III and VII only C. I, V and VI only D. II, VI and VII only

More ways to reduce or minimize AMT liability: ________ deductions for state income or property taxes ________ or accelerate receipt of income Reduce exposure to private activity bonds to avoid AMT Consider taxable bonds if subject to AMT Time charitable contributions ______ or accelerate receipt of capital gains Consider disqualifying disposition on ISOs. Consider tandem exercise of ISOs and NQSOs.

Defer

If gifting property at a loss, they can deduct the lesser of ______ or basis.

FMV

Which entities are pass through entities? S-Corp, Partnership, and ____ taxed as a partnership

LLC

Does passive income include portfolio income (interest, dividends, annuities) or royalties?

_____________ gains occur when triggering a taxable event. _______________ of gains occur upon transaction.

Recognized, Realization

Shareholders in a ________________ include only debt that they personally loaned.

S Corporation

True of false: Mortgage interest is tax deductible up to a loan limit of $750k.

True

Can an UTMA be included in the grantor's taxable estate (if he dies before the child receives the account)?

Yes

Is a Family Limited Partnership considered a pass-through entity?

Yes

Deductions _______ the line are not subject to as many restrictions or limits as deductions taken below the line. The more deductions you take _______ the line, the lower your AGI. This is beneficial as some deductions below the line and credits are based on or limited by AGI - so the lower the AGI, the better.

above

Interest paid on business loans including rental property and other real estate holding is deducted from gross income personally or through a business entity above the line or below the line? *Remember: interest expense from passive activities is only deductible to the extent of income received from these activities.

above

Interest paid on business loans including rental property and other real estate holdings is deducted from gross income personally or through a business entity "________ the line".

above

Student loans are deducted above the line or below the line?

above

Where are contributions to retirement account deducted? Above or below the line?

above

Charitable deductions are or are not an add back item for AMT?

are not

Four major computational differences between a partner's capital account and tax basis of his partnership interest exist: 1. Generally, the basis of a partner's interest increases by his basis in property he contributes to the partnership and decreases by the partnership's basis in property distributed to him. His capital account increases or decreases by the book value of contributed or distributed property. 2. The _______ of an interest increases or decreases to reflect changes in a partner's share of the partnership liabilities. Partnership liabilities are not included in a partner's capital account. 3. Generally, the basis of a partner's interest is not affected by changes in the value of partnership property. A partner's capital account may be revalued to reflect his share of the value of partnership property upon contribution of property, admission of a new partner or under industry accounting standards. 4. A partner cannot have a negative tax basis in his interest. His capital account may be negative if his share of losses and withdrawals exceed his investment.

basis

The _______ account is an account that contains all the transactions occurring between the partners and the partnership firm, such as the initial contribution of capital in partnership, the interest of capital paid, drawings, the share of profit, and other adjustments. It is required to maintain proper accountability and transparency between the partners and the firm.

capital

The partnership ____________ account is an equity account in the accounting records of a partnership. It contains the initial and subsequent contributions by partners to the partnership, in the form of either cash or the market value of other types of assets. *It shows the equity owned by specific partners.

capital

Qualified dividends are taxed at __________ rate.

capital gains

Section 1231 is depreciable and real property used in trade or business and held for more than one year. It is allowed _______ gains treatment for gains and ______ income treatment for losses.

capital, ordinary

Section 1250 is re-characterization of _________ gains to _________ income to recapture accelerated depreciation on certain real property. Ex: Property basis is $200k and you have depreciation of $40k. Your adjusted basis is $160k. If you sold the property for $250k that gives you a gain of $90k. $40k of that gain is recaptured (and taxed) as ordinary income and the remaining $50k is taxed at LTCG rates.

capital, ordinary

"Boot" includes cash and _______ relief.

debt

Partners in a partnership include all of the partnership ________, whether it is recourse or non recourse.

debt

The __________ tax rate is the tax rate actually paid on total income.

effective

The basis of an interest increases or decreases to reflect changes in a partner's share of the partnership liabilities. Partnership _______________ are not included in a partner's capital account.

liabilities

___________ tax rate is the rate you pay on your next dollar of income.

marginal

Income from an UTMA or UGMA *MAY or MAY NOT* impact AMT liability.

may

A ___________ debt does not allow the lender to pursue anything other than the collateral. For example, if a borrower defaults on a nonrecourse home loan, the bank can only foreclose on the home.

nonrecourse

$3,000 of a capital loss may offset _______ income.

ordinary

Dividends are taxed as ______ income.

ordinary

Net income from passive activities is usually __________ income taxed at rates up to 37% and the 3.8% surtax on net investment income may apply.

ordinary

In most cases, interest expense from _________ activities is only deductible to the extent of income from these activities.

passive

Losses from passive activities are deductible to the extent there is _________ income.

passive

S Corporation shareholders include only debt they _____________ personally loan.

personally

John sells mutual fund shares in his IRA and experiences a $200k gain. He has a _____ gain, but it is not yet ___________ for tax purposes.

realized, recognized

There are two types of debt: recourse and nonrecourse debt. A ________ debt holds the borrower personally liable. ______ debt allows lenders to collect what is owed even after they've taken collateral (ex. home). Lenders have the right to garnish wages in order to collect what is owed.

recourse

Any of these "could" potentially reduce (or maybe even eliminate) AMT: a. defer _______________ plan contributions - would raise taxable income and "could" reduce or even eliminate AMT based on AMT thresholds b. reduce exposure to ___________ activity bonds - can be a good strategy since certain private activity bond income is added back in the AMTI calculation c. employ tandem exercise of qualified and non-qualified stock options - definitely a good strategy to consider when one holds both d. time charitable deductions - "can" possibly help by raising or lowering income as needed to work around thresholds

retirement, private

The basic components of an AMTI calculation are as follows: Start with: Taxable Income Add or Subtract: Adjustments including: - _____________ deduction - dependency exemption - itemized deductions - depreciation mining exploration and development costs - alternative tax NOL (see FILEIND: 30,156) - at-risk and other loss limitations - passive activity and farm shelter losses - long-term contracts - circulation and research and experimental expenses - tax refunds - incentive stock options Add: Tax Preference Items including: - depletion - tax-exempt bond interest from certain private activity bonds - accelerated depreciation of property placed in service before 1987 - excess intangible drilling costs - excluded gain on sale of qualified _________ business stock Results in: Alternative Minimum Taxable Income (AMTI)

standard, small

IRS uses the "______-transaction doctrine" to help identify so called sham loans and transactions that are often found in family transactions. Includes the: - binding commitment test - mutual independence test - tax avoidance test - substance over form doctrine - business purpose doctrine

CPWA - Tax Planning

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