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34 Cards in this Set
- Front
- Back
Types of Partnerships & LLC General Partnership Define |
2 or more partners, no limited partners. Creditors can collect from both personal and business assets, liable for partner malpractice. Used for both operating activities and corporate joint ventures |
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Types of Partnerships & LLC Limited Partnership Define |
at least one GP, and one or more LP, used to raise capital, for liability protection GP are usually corps or LLC’s, only GP are personally liable to creditors, LP loss restricted to capital investment |
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Types of Partnerships & LLC Limited Liability Company Define |
limited liability, benefits for taxation (single level taxation/special allocations), owners considered members, treated as a partnership for tax purposes, service-oriented businesses and professional service-providing companies
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Types of Partnerships & LLC Limited Liability Partnership Define |
similar to a GP, not liable for any partner malpractice |
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Types of Partnerships & LLC Limited Liability Limited Partnership |
all partners accorded limited liability, must file a request to switch from LLP |
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Partnerships & LLC What is included in calculation? |
Original basis + partners distributed share of ordinary income, capital gains and other special income items, tax-exempt income, excess of the deduction for depletion – distributions of property and money, partnerships ordinary loss, special expense items, nondeductible items not chargeable to capital, deduction for oil & gas wells |
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Partnerships & LLC How do the following situations effect the partners basis? Increase/decrease in Partnership liabilities: Increase/decrease in individual liabilities: |
Increase in Partnership liabilities: increase partners basis in the partnership by each partner’s share of increase Decrease in Partnership liabilities: considered to be a distribution of money to each partner’s basis in the partnership by each partner’s share of decrease Increase in individual liabilities: considered to be a contribution of money to the partnership by the partner, partners basis increased Decrease in individual liabilities: considered to be a distribution of money to the partnership by the partner, partners basis decreased |
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Partnerships & LLC Order basis adjusted by item: |
Increased for all income items (excluding tax exempt) Decreased for all distributions Decreased by deductions and losses (including nondeductible items not charged to capital) |
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Partnerships & LLC Sale of partnership basis Usual result? Amount of ordinary gain? |
Usual result = capital gain/loss Amount of ordinary gain: is the “hot asset” |
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Partnerships & LLC Define: hot asset |
gain attributable to unrealized receivables/appreciate inventory/assets (not counted as CG) |
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Partnerships & LLC What happens when there is a pro-rata distribution from partnership? |
No gains/loss can be recognized |
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Partnerships & LLC Single distribution reduces partner’s basis in what order? |
(1) money (2) adjusted basis of all unrealized rec and inv (3) adjusted basis of other property |
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Partner Partnerships & LLC recognizes gain to what extent? |
The extent that money received exceeds the partners partnership basis |
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Partner Partnerships & LLC When does partner recognize loss? |
If (1) the partner receives only cash, unrealized receivables, or inventory. AND (2) The partner’s outside basis in the partnership interest exceeds the partnerships inside basis for the assets distributed. This excess amount is the loss recognized by the distributee partner. |
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Partner Partnerships & LLC When can a partner have a negative basis in the Partnership interest? |
Never, ever |
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S-Corp S-Corp election requirements (6) |
o Is a domestic corporation o Is an eligible corporation o Issues only one class of stock o Is limited to a theoretical maximum of 100 shareholders o Has only individuals, estates, certain trusts, and 501(c)3’s as shareholders o Has no nonresident alien shareholders |
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S-Corp Form for election? |
Form 2553 |
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S-Corps Examples of ineligible corporations? (3) |
Non US corporations, certain banks and insurance companies |
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S-Corps One class of stock requirement: |
A small business corporation may have only one class of stock issued and outstanding. |
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S-Corps Straight debt characteristics (5) |
The debtor is a subject to a written, unconditional promise to pay on demand or on a specific date a sum certain in money The interest rate and payment date are not contingent on corporate profits, management discretion, or similar factors The debt is non-convertible to stock The debt is held by a creditor who is an individual, an estate, or a qualified trust Can be held by creditors actively and regularly engaged in the business of lending money |
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S-Corps Number of shareholders rules: Family members rules: |
Number of shareholders rules: 100 shareholders or less Members of family rule: common ancestors, lineal descendants, spouses of these parties, and family estates count as 1 |
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S-Corps Reason for loss of election (4) |
o Shareholders owning a majority of shares (voting & nonvoting) voluntarily revoke election
o A new shareholder owning more than ½ of the stock affirmatively refuses to consent to the election o The corporation no longer qualifies as a small business corporation o The corporation does not meet the passive investment income limitation (if they have sub corp that contributes over 25% of gross receipts for 3 consecutive years) |
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S-Corps Computation of taxable income: |
Sales
(less) COGS = Gross profit on sales (-/+) Non-separately stated items = Book income from operations (-/+) Separately stated items = Net income per books |
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S-Corps Short year tax election: |
If a shareholders interest is completely terminated during the tax year, all shareholders holding stock during the year and the corp may elect to treat the S taxable year as 2 taxable years. The first year ends on the date of the termination |
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Tax Exempt Entities Requirements for tax exempt entities (4) |
o Must serve some sort of common good o The organization is a not-for-profit entity o Net earnings do not benefit the members of the organization o The organization does not exert political influence |
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Tax Exempt Entities Formula for ceiling for lobbying activities |
Formula for ceiling for lobbying activities: 150% |
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UBIT Definition of trade or business: |
It includes any activity conducted for the production of income through the sale of merchandise or the performance of services |
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UBIT Special rule for corporate sponsorship: (3) |
(1) There is no arrangement or expectation that the trade or business making the payment will receive any substantial benefit other than the use or acknowledgment of its name, logo, or product lines in connection with the activities of the exempt organization. (2) Such use or acknowledgment does not include advertising the payor’s products or services. (3) The payment does not include any payment for which the amount is contingent upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events. |
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UBIT Bingo games: |
Under this provision, a qualified bingo game is not an unrelated trade or business if both of the following requirements are satisfied. (1) The bingo game is legal under both state and local law. (2) Commercial bingo games (conducted for a profit motive) ordinarily are not permitted in the jurisdiction. |
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UBIT General tax model: |
Gross unrelated business income – deductions = net unrelated business income +/- modifications = UBIT |
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Tax Exempt Entities Form Used: (1) Annual reporting requirements: (4) |
501(c)(3), 501(C)(9), and 501(C)(20) are required to file form 990 If annual gross receipts normally don’t exceed $50,000, Form 990-N Form 990-EZ for exempt organizations with receipts less than $200,000 and assets less than $500,000 Private foundations file Form 990-PF Religious and federal agencies have no filing requirement |
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Gift Tax Gift tax requirements (5) |
Donor competent to make the gift Donnee capable of reception/possession Donative intent Actual or constructive delivery Acceptance |
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Gift Tax Amount of annual inclusion: Form: |
Amount of annual inclusion: $14,000 Form: 709 |
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Gift Tax Donnee's basis of gift |
Adjusted basis of donee, unless they pay gift taxes |