Tax Exam I Chapter 3

Front 1

Limitations on Accruals

Back 1

May only expense Accruals that will be expensed within 2.5 months of tax year close.

Front 2

Charitable Contributions treatment factors?

Back 2

Timing of deduction, amount of permitted deduction for property donations, maximum amount.

Front 3

Charitable Contributions Timing

Back 3

Must pay accrued donations by March 15th if year end (2.5 months after year end is rule)

Front 4

Charitable Contributions of Property

Back 4

Contribution deductions = FMV unless appreciated property the special rules apply

Front 5

Special Rules for donation of appreciated property

Back 5

Deduction = FMV - Gain would have realized had it been sold. So its cost!
Exception to this rule

Front 6

Exception to Special Rule for donation of ordinary income appreciated property.

Back 6

You may deduct basis + 1/2 gain would have been realized but limited to 2*Basis if:
Property to be used in donees function of helping needy infants, not exchange was present, and a letter is given stating this from the donee.

Front 7

Exception to Special Rule for donation of Capital Gain income appreciated property.

Back 7

Donation = FMV unless donation is unrelated to activities performed by donee, is a patent, or to certain non-operating foundations; then it is back to basis.

Front 8

Substantial Requirements for Charitable Deductions.

Back 8

Exceeds 500 then must include a description of property, Exceeds 5000 then must obtain appraisal, exceeds 500,000 then appraisal needed. Unless is cash, inventory, and other thins

Front 9

Maximum Deduction allowed

Back 9

10% Adjusted taxable income

Front 10

Adjusted Taxable Income calculation does not include?

Back 10

5 Things:
Charitable deduction
NOL carry back
Capital Loss Carry back
Dividends deduction
U.S. production deduction

Front 11

What happens to the extra charitable donations not allowed in current year?

Back 11

Carry over to next 5 years.

Front 12

Page to find Charitable breakdown

Back 12

pg 3-13

Front 13

Main points of Charitable donations

Back 13

Limited to 10% of AGI
Unused portion carries forward 5 years.

Front 14

Production Deduction allowed?

Back 14

Lesser of 9% x lessor of(qualified activities income or taxable income before production deduction)

Front 15

Production Deduction Limit?

Back 15

May not exceed 50% of wages allocated to production activities

Front 16

Dividends Received and NI

Back 16

Include dividends with NI

Front 17

Deduction for Dividends?

Back 17

Less than 20% = 70% deduction
19.9% < X <80% = 80% deduction

Front 18

Have interests in both a 20% level and 80% level?

Back 18

Must take the 80% deduction first and calculate again for the 70% deduction.

Front 19

Special exception to the Dividends deduction?

Back 19

If Full dividends applied creates a NOL for year, then may take the full amount.

Front 20

Own more than 80 of another corp and receive dividends?

Back 20

Write off full amount of dividend.

Front 21

May not claim dividends deduction if holding period....

Back 21

is less than 45 days.

Front 22

Sequence of Deductions?

Back 22

1. All other deductions not listed here
2. Charitable
3. Dividends
4. NOL
5. Production

Front 23

Temporary Differences v/s Permanent Differences on page?

Back 23

3-40

Front 24

Temporary Difference: Prepaid

Back 24

Tax now book later

Front 25

Temporary Difference: Depreciation

Back 25

Tax on MACRS book on own system. Difference is Temp dif

Front 26

Temporary Difference: Capital Gains and Losses

Back 26

Expensed in Current year for book but carried for Tax

Front 27

Temporary Difference: Charity

Back 27

Expense all this year for book but limited and carry over for tax

Front 28

Temporary Difference: Accruals

Back 28

Accruals not allowed for tax but all taken for book. Tax only allows expensed

Front 29

NOL rules

Back 29

Carry back 3 forward 20

Front 30

I see dividend and think?

Back 30

Comes from E&P?
Property or Cash?
Current year gain or loss?
My % owned of giver
Holding period for stock

Front 31

Charitable calculations

Back 31

Short term cap gain = basis
Long term cap gain = FMV
Ordinary inc prop = basis

Front 32

3 Steps to Charity Deduction

Back 32

1. Classify the property
2. Calc the total donations
3. Apply restrictions