Tax and Regulation

CPA Exam REG

How long is the extension on a tax return?

6 months

what entails a multiple support agreement?

two or more people providing more then 10 percent but under 50% of someone’s support, so they can claim them as a dependent

Qualifying child ages

19 if not in school 24 if they are a full time student

Is alimony, child support, or property settlements taxable?

only alimony

When is alimony taxable?

If the alimony is from a divorce prior to dec 31 2018 then it is taxable

How are principal and earnings treated for non-deductible traditional IRA distributions?

Nontaxable principle and taxable earnings

How are principal and earnings treated for deductible traditional IRA distributions?

taxable principle and earnings

How are principal and earnings treated for Qualified Roth IRA Distribution?

Nontaxable Principle and earnings

How are principal and earnings treated for a Nonqualified Roth IRA Distribution?

Nontaxable Principal and taxable earnings

Is student loan interest an above-the-line or below-the-line deduction to arrive at AGI?

Student loan interest is an above-the-line deduction to arrive at AGI if the loan was used to pay qualified education expenses such as college tuition and fees.

When are individuals not subject to AGI phase-out limitations in relation to IRAs?

If a taxpayer (and spouse, if any) is not a participant in another plan, there is no AGI phase-out for the deduction for contributions to traditional IRAs.

What is the max of the educator expense deduction and is it above or below the line?

above the line and $300 max

What is the max of the student loan interest deduction and is it above or below the line?

above the line and $2500 max

What qualifies someone to receive an extra standard deviation?

being over 65 and being blind

How do you calculate casualty loss?

smaller of damage or decrease in FMV

(insurance recovery)

Total ___________________

($100 floor)

(10% of AGI)

Total Deductible Loss ________

What is the charitable deduction AGI threshold for an individual?

60% of AGI

If an individual donates stock to a qualifying charitable organization when is the FMV used and when is the Original cost used in calculations?

FMV is used when it is long term stock (held for more then 1 year) and if it is short term stock then you use the lower of the cost and the FMV

How much is the capital loss deduction for individuals?

$3000

How much of an individual's self-employment tax can they deduct?

50%

How do you calculate self-employment tax?

self employment income x 92.35% = self employment subject to tax

self employment subject to tax x 15.3% = self employment tax liability

self employment tax liability x .5 = deductible park of self-employment tax

Can the foreign tax credit be carried back or carried forward?

yes it can be carried back one year and carried forward 10 years

What is the maximum American opportunity credit

2500

What is the max life time learning credit

$2000

What are the refundable tax credits?

Federal Income Tax Withheld

American Opportunity Credit

Child tax credit

Earned Income Credit

Excess Social Security tax paid

What are the nondeductible losses?

Wash sale loss

Related party losses

And

Personal losses

Under MACRS, what personal property is under the 5-year class?

automobiles, light trucks, computers, and copiers

Under MACRS, what personal property is under the 7-year class?

furniture, fixtures, machinery, and equipment

What is the maximum deduction an individual can take through the section 179 expense deduction?

$1,250,000 and reduced dollar for dollars by any amount of property exceeding $3,130,000

What are the bonus depreciation rates?

2018 - 2022: 100%

2023: 80%

2024: 60%

2025: 40%

2026: 20%

If stock was sold by an individual after owning it for one year and it did not result in a gain or loss, what would be its holding period?

N/A (not long term and not short term)

Under MACRS, how many years is qualified improvements to the interior of a nonresidential office building depreciated for?

15 years

is an estimated liability for contingency (ex, warranty) a temporary or permanent difference between book and tax?

temporary

How do you calculate the foreign tax credit?

Worldwide Taxable Income x US Tax Rate = A

Foreign Income/ Worldwide Taxable Income = B

A x B

What percentage of future taxable income can a NOL carry forward offset?

pre 2021: 100%

Post 2021: 80%

What is the limitation for the DRD?

taxable income x 50%

What characteristics exclude a person from being a tax return preparer?

merely furnishes typing, reproducing, or other mechanical assistance, prepares a return or claim for refund for their employer, or prepares as a fiduciary (trustee, executor, etc.) a return or claim for refund for any other person

For a taxpayer who chooses to litigate a tax position, which court should the taxpayer choose to start in if he does not want to pay the disputed tax in advance?

US Tax Court

If someone fails to file and fails to pay which penalties will they have to pay?

If both the failure-to-file penalty and the failure-to-pay penalty apply, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty.

If a party loses a litigation in this type of court they may appeal to the US Court of Appeals.

US Tax Court and US District Court

Which of these courts hear only federal tax cases: U.S. Tax Court Small Cases Division, Regular U.S. Tax Court, U.S. District Court, and US Court of Federal Claims

U.S. Tax Court Small Cases Division, Regular U.S. Tax Court

What is governed by common law

real estate, insurance, services, employment

what are the three requirements of a legally enforceable contract?

offer and acceptance, exchange of consideration (something of legal value), and a lack of defense

Are advertisements offers in themselves?

they are not offers and are only considered to be invitations

What must be included for a contract to be created under common law?

identity of the offeree, price, time, quantity, and nature of the work

what kind of contract under common law is not terminated by the death of a party?

option contract

What are the characteristics of fraud relating to a contract?

Misrepresentation of material face by the defrauding party

Actual reliance

Intent to induce reliance

Damages

Scientier (intent to deceive)

What is the statute of frauds?

six contracts that require written contracts

Marriage

Year (cannot be performed within a year)

Land

Executors

Goods (sale of goods for more then $500)

Surety (pay anothers debt)

what four duties does an agent own to a principle?

Loyalty

Obedience

Reasonable Care

Account

What automatically terminates actual authority

Bankruptcy of principal

Incapacity of the principal

Death of either principal or agent

License (failure to have the necessary one)

Illegality

Destruction of subject matter

If someone asks someone to sign an autograph and secretly is getting them to sign a contract, what is the best defense to make the contract void?

Fraud in execution

What must occur in order for a merchant’s form offer to be irrevocable?

The offer must be contained in a signed writing that gives assurance that the offer will be held open

How long must an individual wait to file for bankruptcy after being discharged in the past?

8 years

If company A and company B merged would company A’s stock turn into company B’s stock?

A merger does not require that the stockholders of the merged corporation receive the stock of the surviving corporation.

What are the refundable credits?

Federal Income Tax Withheld

American Opportunity Act

Child tac credit

Earned income credit

excess Social Security tax