Term
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Definition
- comprised of depreciable personal and real property used in business held over 12 months
- gain = LT capital gain from sales, exchanges, or involuntary conversions
- loss = ordinary loss |
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Term
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Definition
- personal business property (i.e. autos)
- GAIN ONLY = lesser of gain recognized or all A/D is recaptured as ordinary income
- remaining gain is section 1231 gain |
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Term
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Definition
- real properties used in trade/business (i.e. warehouse/building)
- recaptures only portion of depreciation in excess of straight line |
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Term
| Corporate Alternative Minimum Tax - Adjustments |
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Definition
LIE mnemonic
Long-term contracts: difference b/t completed contract and percentage-of-completion
Installment Sales: difference b/t full accrual and installment sales
Excess depreciation |
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Term
| Corporate Alternative Minimum Tax - Preferences |
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Definition
PPP mnemonic (always add backs)
Percentage depletion: excess over adjusted basis
Private Activity Bonds
Pre 1987 ACRS depreciation |
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Term
| Corporate Alternative Minimum Tax - Adjusted Current Earnings (ACE) |
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Definition
MOLDD mnemonic (increase or decrease AMTI)
Municipal bond interest (add)
Organizational expense amortization(add)
Life insurance proceeds on key employees(add)
Difference between AMT and ACE depreciation(add if AMT higher than ACE)
Dividends Received Deduction(add)
After this, subtract unadjusted AMTI and multiply by 75% to get ACE |
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Term
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Definition
Estate (trust) gross income (includes capital gains)
<Estate (trust) Deductions>
Adjusted Total Income
+ Adjusted Tax-Exempt Interest
<Capital Gains> (attributable to corpus)
DNI |
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Term
| Income Distribution Deduction |
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Definition
| - lesser of actual distribution OR DNI |
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Term
| Contracts requiring writing |
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Definition
MYLEGS mnemonic
Marriage is the consideration
Year or more to complete contract
Land
Executors' contracts
Goods of $500 or more
Surety (pay the debt of another) |
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Term
| Warranties - UCC Sale of goods |
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Definition
- express warranties (oral/written): statements of fact, descriptions, or samples or models, must be part of the basis of the bargin
- implied warranty of title: seller has good title and right to transfer the title, can only be disclaimed by specific language (not "as is")
- implied warranty of merchantability: only one that requires merchant seller, promise goods fit for ordinary purpose
- implied warranty of fitness: buyer relies on any seller to select goods suitable for buyer's purpose (specific, instead of general like merchantability) |
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Term
| What is the "Mom and Pop Exception?" |
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Definition
| Taxpayers can deduct up to $25k/year of net passive losses attributable to rental real estate, active participant, carried forward, phase-out: 25k reduced by 50% of excess of taxpayer's AGI over $100k |
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Term
| Alternative Minimum Tax calculation |
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Definition
Regualr Taxable Income
± Adjustments
+ Preferences
Alternative Minimum Taxable Income
(Exemption)
Alternative Minimum Tax Base
x Tax Computation
Tentative AMT Tax
(Tax Credits)
Tentative Minimum Tax
(Regular Income Tax)
Alternative Minimum Tax (in addition to regular tax) |
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Term
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Definition
medical (>10%agi)
taxes
interest
charity (50% total deduction w/ 50%agi cash & 30% property)
casualty (>10%agi + 100$ deduction)
misc. (>2% agi) |
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Term
| Examples of itemized taxes |
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Definition
RIPS
Real estate taxes
Income taxes (state, local, foreign)
Personal property taxes
Sales tax(state & local)
non-deductible = FIB (Federal, Inheritance, Business & rental property taxes)
can deduct state and local sales tax or state and local income tax, not both. |
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Term
| Examples of itemized interest |
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Definition
HIP =
Home mortgage interest
Investment interest
Prepaid interest (allocate to proper period) |
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Term
| Book income vs taxable income: subtractions from book income |
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Definition
| state municipal interest, life insurance proceeds from key officer |
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Term
| Book income vs taxable income: additions to book income |
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Definition
| federal income taxes, bad debt expense, interest expense loans to buy municipal bonds, penalties, lobbying/political expenses, life insurance policies where corp named beneficiary |
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Term
| Constructive Fraud/Regular Fraud: Element to be proven |
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Definition
MAIDS
Misrepresentation of material fact
Scienter
Inducement to rely on misrepresentation
Actual and justifiable reliance on misrepresentation
Damages |
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Term
| Negligence: elements to be proven |
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Definition
Defendant owed duty of care to plaintiff
Defendant breached duty by not acting with due care
Breach caused injury
Damages |
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Term
| Statute of Frauds Contracts > $500 must be in writing by the party being sued except... |
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Definition
Except for
SWAP
Specially manufactured goods
Written confirmation
Admitted contracts in court
Performed contracts |
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Term
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Definition
6 contracts required writing to be enforceable
MYLEGS
Marriage
multi-Year contracts
Land interests
Executor contracts (pay estate debts out of personal funds)
Goods >= $500
Surety contracts (pay debts of another) |
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Term
| Characteristics of negotiability |
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Definition
Be in writing
Be signed by the maker or drawer
Contain an unconditional promise or order to pay
Fixed amount of money
Payable on demand or at a definite time
Payable "to the order" or "to the bearer" (except checks) |
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Term
| Real defenses that can be asserted against HDC's and non-HDC's |
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Definition
FAIDS
Fraud in execution, Forgery
Adjudicated insanity, material Alteration
Infancy, Illegality
Duress, Discharge in bankruptcy
Suretyship defenses, Statute of limitations |
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Term
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Definition
1) Was the holder a holder of a negotiable instrument?
2) Did the holder give value?
3) Did the holder take the instrument in good faith?
4) Did the holder take the instrument w/o notice of any defenses to or claims on ownership? |
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Term
| 3 requirements for security interest to exist |
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Definition
1) Agreement to create a security interest
2) Secured party must give value for the interest
3) Interest obtained on the date title is taken |
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Term
| Personal Tax Credit Examples |
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Definition
child and dependent care credit
elderly an permanently disabled credit
education credits (lifetime learning credit)
retirement savings contribution credit
foreign tax credit
general business credit
adoption credit |
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Term
| Refundable credit examples |
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Definition
child tax credit
earned income credit
withholding taxes (w-2)
excess social security paid
american opportunity credit (40 percent refundable) |
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Term
| Order of payment on prioritization of debts |
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Definition
SAG WEG CTI
Support obligations to spouse and children
Administrative expenses of bankruptcy proceeding
Gap creditors
Wages up to $12,475 each employee(180 days after filing)
Employe benefit plans ($12,475 each employee)
Grain farmers and fishermen's claims ($6,150)
Consumer deposits for good paid not yet delivered ($2,775)
Taxes
Injury claims caused by intoxicated driving |
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Term
| Individual Alternative Minimum Tax Adjustments - Itemized Deductions |
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Definition
TIMME (always add back to regular taxable income)
Taxes reduced by taxable funds
Interest
Medical Expenses must exceed 10% agi
Miscellaneous deductions not allowed
Exemptions cannot be claimed |
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Term
Individual Alternative Minimum Tax Adjustments |
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Definition
PANIC TIMME
Passive activity losses are added back or recalc
Accelerated depreciation adjustment
Net operating loss recalc
Installment method cannot be used by dealer for property sales
Contracts (long-term)
TIMME = itemized deductions (add backs) |
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Term
| Employee Stock Purchase Plan Requirements |
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Definition
-Not more than 5% holder
-Option price is not less than 85% of stock price when granted/exercised
-Stock held at least 2 years from grant date and 1 year from exercise date |
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Term
| Incentive Stock Option Requirements |
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Definition
Same as ESPP except:
-no more than 10% holder (usually key employees)
-option price not less than the FMV of the stock on grant date
-no taxation to the employee and employer cannot deduct |
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Term
Carryback, carry forwards of:
NOL's
Chartiable Contributions
Capital L's
PAL's |
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Definition
NOL's: 2yr back 20 years forward unlimited amount (individuals & corporate)
Charity: five years forward (individual & corporate)
Capital: deduct up to 3k current year, unlimited carry forward (Individuals), no deduction, 3back 5 forward to offset gains (corporate)
PAL's: Carryforward indefinitely to offset more passive income or deduct entirely when property is sold. |
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Term
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Definition
| Taxed when granted if they have a readily ascertainable value or taxed when exercised |
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Term
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Definition
GRACEFUL
G - General business credit
R - Retirement plan contribution credit
A - Adoption credit
C - Child & dependent care credit
E - Elderly or disabled credit
F - Foreign tax credit
U - Long-term Unused minimum tax credit
L - Lifetime Learning Credit |
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Term
| Adjustments to arrive at AGI |
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Definition
SHIT IM ASS DOPE
Student loan interest ($2500)
Health savings account ($3300)
IRA ($5500 each)
Tuition & fees
Interest withdrawal penalty
Moving expenses
Alimony paid
Self employed health insurance
Self employed retirement
Domestic production activities deduction
One half self employment FICA
Paid attorney fees--discrimination/whistle blower
Educator expenses |
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Term
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Definition
WE ACE
Withholding taxes
Earned income credit
American Opportunity Credit
Child tax credit
Excess social security paid |
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Term
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Definition
D'BASIC WORKUPS
D - Dividends
B - Basic Income
A - Alimony Received
S - State Tax Refunds
I - Interest / IRA Income
C - Capital G/L
W - Wages
O - Other Income
R - Rental I/L
K - K-1 I/L
U - Unemployment Compensation
P - Pension & Annuities
S - SS Benefits |
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Term
| Examples of itemized miscellaneous (subject to 2% floor) |
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Definition
BEBE U BEST
Business gifts (limit to $25 each)
Educational expenses (job related)
Business use of home
Employment agency fees
Uniforms
Business expense--unreimbursed (travel, 50% m&e,lodging)
Expenses of investors
Subscriptions to professional journals
Tax preparation fee |
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Term
| Refund for tax return must be filed by greater of: |
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Definition
3 years date tax was due
or 2 years from when it was paid (if taxpayer didn't file a return) |
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Term
| Basis corporation has in an asset is the greater of |
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Definition
| Liabilities assumed or rollover value of asset from investor |
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Term
| Estimated tax payments to avoid penalty throughout the year can be |
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Definition
Lessor of
100% of current year or 100% of prior year (corporations)
100% of current year (Corps over $1mil)
90% of current year or 100% of prior year(individual)
If AGI > $150k MFJ, must use 110%of last year |
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Term
| Real property vs personal property |
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Definition
real property = land and everything attached to the land
personal property = everything else |
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Term
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Definition
the applicable percentage times the dividend received
or
the applicable percentage applied to taxable income without any regard to NOL's, DRD's, Capital G/L, domestic activities production
*Exception taxable income method including dividend received does not apply if taxable income is negative |
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Term
| Depreciation Methods for Machinery and Equipment vs Real Estate |
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Definition
M&E = Half year convention unless 40% purchased in last quarter which well then be mid-quarter convention
Real-Esate = Mid-month convention; Residential (27.5yrs) Non-Residential (39yrs) |
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Term
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Definition
Max Deduction: 25,000
Reduce by:
Purchases: xxx
Max allowed: (250,000)
Excess: (xxx)
Allowable 179 deduction: xxx |
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Term
| Statute of frauds >$500 goods exemptions to written contract |
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Definition
SWAP
Specially completed good
Written confirmation
Admitted in court
Performed (enforce to extent of performance of the party sought to be held liable) |
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Term
| American Opportunity Credit vs Lifetime Learning credit |
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Definition
AOC: 100% on first $2000, 25% on next $2000; must be full time first 4 years of undergrad
Lifetime: 20% of first $10,000 qualified expenses |
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Term
| Computation of basis: contributed property to corporation |
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Definition
Adj. basis in property (including cash contrib)
+FMV services rendered
+Gains recognized by shareholder
-Cash received
-Liabilities assumed by the corporation
-FMV of non-money boot rec'd
= End basis |
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Term
| Partnership Basis Calculation |
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Definition
Calculate gain realized: Adj basis of what is given up - FV of what is being received (liabilities given up, cash rec') = G/L
Calculate gain recognized: Lessor of gain realized or boot rec'd
End basis in new asset: Adj basis old - liabilities given up + liabilities taken on - boot rec'd + lessor of (boot rec'd or gain realized) |
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Term
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Definition
| Deduct (ordinary deduction) up to $50,000 on worthless small business stock |
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Term
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Definition
Personal - 4/15
Partnership - 4/15
LLP, LP, LLC - 4/15
S Corp - Calendar year end, 3/15
Trust - Calendar year end, so 4/15
Estate- Any year end (you file on the 4th month 15th day), if Dec 31st yr end - 4/15
C Corp - Any year end (you file on the 3rd month 15th day), if Dec 31st yr end - 3/15
Tax Exempt - Any year end (you file on the 5th month 15th day), if Dec 31st yr end - 5/15 |
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Term
| Total amount realized by seller in partnership interest |
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Definition
| Cash received + FV of property received + liabilities releived |
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Term
| Ordinary income on sale of partnership recognized to the extent of... |
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Definition
| hot assets (unrealized receivables or appreciated inventory) relieved. The remaining gain is capital gain |
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Term
| Personal Holding Company Characteristics |
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Definition
Corps >50% owned by 5 or fewer individuals
>=60% of adjusted ordinary gross income from
Net rent, interest that is taxable, royalties, dividends from unrelated domestic corps
Bonuses not considered income |
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Term
| What is a personal service corporation |
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Definition
| Corporation whose principal activity is the performance of personal services (health care, law, engineering, or consulting). 35% statutory rate instead of levels. |
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Term
| Corporate dividends taxable to extent of |
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Definition
| current earnings + accumulated earnings + gain recognized on distribution of asset |
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Term
| Corporate property contribution gain calculation |
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Definition
Gain recognized to the lessor of boot received or gain realized*
Gain realized = FMV of things received - adjusted basis |
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Term
| IRC Section 351- Gain realized by contributors of property to corporation if they don't meet these three requirements... |
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Definition
1) 80% shareholder in the company upon contribution
2) No boot received in the transaction
3) No services rendered |
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Term
| Corporation basis in property received |
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Definition
Adjusted basis of shareholder contributing
+ gain recognized by the shareholder
= end basis |
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Term
| Liabilities are not considered boot for determining gain: True or False? |
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Definition
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Term
| Individual basis in corporate stock for property contributed: |
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Definition
| Adj basis in the property + gain recognized (lessor of gain realized or boot) - boot received(liabilities relieved or cash received or other boot) = End basis in stock |
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Term
| Like kind exchanges: boot received equals... |
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Definition
| cash received, FMV of non-like kind property, net relief from liability |
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Term
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Definition
written policy to expense property = $5000 expense per item each year
no written policy = $500 expense per item each year |
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Term
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Definition
| Qualifying small business ( <$10,000,000 in assets) can deduct repair and maintenance expenses up to lessor of $10,000 or .02% * unadj. basis of assets being repaired) |
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Term
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Definition
1) Seller must be a merchant selling goods (not land or services)
2) offer must be in writing and signed by the merchant
3) offer must give assurances it will be kept open for a certain time |
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Term
| Question to ask to detainee if PMSI is present |
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Definition
Did the debtor receive the collateral with the creditors money or creditors credit?
1) Stereo purchased on credit from stereo store (stereo store has pmsi in stereo)
2) Bank loans person money to purchase stereo. (bank has pmsi in stereo) |
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Term
| Creditor priorities in collateral |
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Definition
1) Buyers in the ordinary course of business
2) Properly perfected PMSI
3) Holder of perfected security interest in collateral
4) Unperfected security interest
5) Debtor |
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