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Accounting 5135 with Gutterman at University of Minnesota - Twin Cities

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By: Jeffrey Hong
Created: 2012-03-31
Size: 45 flashcards
Views: 3

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What is the difference between "for" AGI deductions and "from" AGI deductions?

"for" deductions are guaranteed for taxpayers and are "above the line" deductions. (Employer and Self-Employed-Sch C.) business deductions that reduce AGI

"from" deductions are Itemized Deductions-Sch. A (Employee)

Bad Debt Deduction

Permitted only if income arising from the creation of the account receivable was previously included in income.

Specific charge-off method

May claim a deduction when a specific business debt becomes either partially or wholly worthless or when a specific nonbusiness debt becomes wholly worthless.

Non business bad debt

debt unrelated to the taxpayer's trade or business either when it was created or when it was worthless

Worthless security write down

loss allowed for securities that become completely worthless during the year

Individual loss deductions

losses incurred in a trade or business, losses incurred in a transaction entered into for profit, losses ceased by fire/storm/shipwreck/other casualty/other theft

When are theft losses recognized

deducted in year of discovery, not year of theft (unless discovery and theft in same year)

When not to deduct casualty losses

If a reimbursement claim with a reasonable prospect of full recovery

Personal casualty gain

gain recognized from casualty or theft of personal property

Personal casualty loss

casualty or theft loss of personal property after applicable $100 floor and must be reconciled with personal casualty gains

Net Operating Loss

no tax benefit if code did not provide for carryback or carryforward of such losses to profitable years, which u r able to deduct

Realized gain

difference between amount received from sale or other method of disposition of property-property
s adjusted basis on date of property's disposition. if adjusted basis exceeds amount realized then it is a realized loss

Sale or disposition

very broad and includes virtually any disposition of property

calculate Amount realized

AR = cash received + FMV property received + assumed debt

Fair Market Value

the price the property will change hands between a willing buyer and a willing seller when neither compelled to sell or buy

Adjusted basis

Cost on date of acquisition+capital additions-capital recoveries

Capital recoveries

depreciation and cost recovery allowance, casualties/thefts, certain corporate distributions, amortizable bond premium, easements

What is recognized for tax purposes?

Realized gains are taxable, but realized losses are not deductible

How much is cost basis of property

Generally the property's cost, but sometimes different if it is a bargain purchase

When given as a gift how is cost basis determined

By the date of the gift, the basis of the property to the donor, the amount of the gift tax paid and the fair market value of the property

Disallowed Losses

Temporarily Disallowed: Wash Sales & Section 1031 Exchanges
Permanent Disallowed: Related Party transactions, Gifts Below FMV & Sale of Personal Uses Assets at a Loss

Look on 14-23 to 14-24

in order to have a summary of what to do to adjust the basis of stuff if certain things happen (like bad debts and casualties)

Nontaxable exchange

realized gains or losses are not recognized in that current year, but rather recognized at a later date (postponed)

Nontaxable v. tax-free

Nontaxable is postponement of recognition and tax-free is nonrecognition if permanent

Nontaxable if meets what list

form of transaction is an exchange, both property transferred and property received are held either for productive use in a trade or business or for investment, property is like-kind property

Like-kind property

qualifying business or investment property that can be exchanged on a nontaxable basis, also nature or character of the property and not to its grade or quality (like real estate property exchanged for real estate property)

Delayed swap qualified for like-kind exchange if what tests are satisfied?

identification period and exchange period

Boot

property that is not like-kind property, look on page 15-9 to figure out how example two works

Involuntary conversion

may postpone recognition of grain realized from the conversion if amount reinvested in replacement property equals or exceeds the amount realized, if reinvestment in replacement property is less then realized gain is recognized

Severance awards

amount received not included in the amount realized

Taxpayer use test

property must be used by taxpayer in similar endevors

Functional use test

use of replacement property and involuntarily converted property must be the same

Time limit

two years from event

Direct Conversion

if it is directly converted into replacement property, rather than money, non-recognition is mandatory

Conversion into money

gain recognized only to extent amount realized from the involuntary conversion exceeds cost of qualifying replacement property

Gain on Personal Residence Exclusion

Taxpayers may exclude up to 250K (or 500k joint return) of gain on the sale of a qualifying principal residence. IRC Sec 121(a) Property must have been owned and used by taxpayer for at least 2 of last 5 years.

Exception to two year ownership rule

change in place of employment, heath reasons, and extent provided in Regulations for unforeseen circumstances

Realized gain or loss

The positive or negative difference between the amount realized (amount received from sale-selling costs) on the disposition of property and the adjusted basis of the property

What is tax law for capital gains and losses?

must be separated from other types of gains and losses due to capital gains may be taxed at a lower rate than ordinary gains and net capital loss deductible up to 3,000 per year

Characteristics for classification

tax status of the property (capital, Section 123 or ordinary), manner of the property's disposition (sale/exchange/theft/condemnation), and holding period of the property (short or long)

What is a capital asset

something for personal or investment purposes

What does it say on 16-8

what the special real estate owner tax rules or for treatment of capital gain

Long-term v. short-term

long term is one year or more while short-term is less than a year

How to net short term and long term

short term must be netted against short term and long term must be netted against long term

Collectibles

work of art, rare or antique, any metal or gem, stamps, alcoholic beverage, coins, historical objects

About this deck

By: Jeffrey Hong
Created: 2012-03-31
Size: 45 flashcards
Views: 3

About StudyBlue

“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis