SE Income
What kind of gain on fixed assets is included in box 1 on the K-1 but excluded from SE income?
Ordinary
What type of debt increases tax basis but not at-risk basis?
Nonrecourse liabilities
A company sells a piece of machinery used in its business for more than its depreciated value but less than its original cost.
What is the character of the gain related to depreciation?
§1245 - the gain up to the amount of depreciation taken is recaptured as ordinary income under §1245
Give an example of a state tax paid by an S corporation that is typically included in the state tax addback calculation for federal tax purposes?
TN excise tax, etc. - Judge AKS to determine if correct
What depreciation method allows a taxpayer to recover the cost of property over a specified life using equal annual deductions, rather than accelerated or immediate expensing methods?
When a K-1 only shows guaranteed payments as subject to self-employment tax and other income is excluded, the recapture of this deduction may still be included in SE income. What is this deduction called?
§179
What type of debt increases both tax basis and at-risk basis?
Qualified nonrecourse liabilities and recourse liabilities
A sole proprietor sells office supplies inventory at a loss.
What is the character of the loss?
Ordinary - Inventory is ordinary income property, so losses are ordinary
Give an example of a state tax paid by an S corporation that is typically treated as a distribution for tax purposes.
Nonresident withholding, Composite, Owners’ personal tax payments, etc.
When calculating QBI, what order do loss carryovers get used?
FIFO
What type of insurance deduction is often listed on a K-1 but is excluded from self-employment income for tax purposes?
SE health
A partner guarantees a partnership’s bank loan. What type of debt is this?
Recourse
A business disposes of a building used in operations after holding it for 5 years, resulting in a net gain.
What is the character of the gain?
§1231 - Real property used in a trade or business and held for more than one year falls under §1231, which can result in capital gain treatment if there's a net gain.
Give an example of a state tax paid by an S corporation that is typically treated as an expense but not a state tax addback.
Minimum fees, net worth taxes, payroll taxes, etc.
Put these loss limitations in the order they are applied on an individual’s return: PAL, EBL, Basis, 179, At-risk Basis
179, basis, at-risk basis, PAL, EBL
What type of payments are made to a limited partner for the use of capital and are specifically excluded from self-employment income?
Guaranteed payments for capital for limited partner
What type of debt gives an S corp shareholder debt basis?
Shareholder Loans
An individual sells stock held for investment for a profit after holding it for 14 months.
What is the character of the gain?
Capital - Stock held for more than one year is a long-term capital gain.
What state requires an addback for all state tax payments regardless of type (i.e. income and non-income-based taxes deducted on federal are added back)?
Wisconsin
What is the Federal law that prevents states from collecting income tax when the only activity in the state is solicitation of sales?
PL 86-272
What type of payments are made to a limited partner for services performed and are included in self-employment income?
Guaranteed payments for services for limited partner
An S corp shareholder deducts losses against open account debt. The debt is repaid before basis is restored. What is the shareholder’s tax treatment of the repayment?
Ordinary gain
A taxpayer sells a personal-use vehicle at a loss.
What is the character of the loss?
Nondeductible Personal Loss - Losses on personal-use property are not deductible.
Which state has a tax that is sometimes included in the state tax addback and sometimes excluded, depending on the rules of the state performing the addback calculation?
Texas franchise
A trader enters into offsetting positions in securities and closes one leg at a loss.
What character might apply to the loss?
Straddle - losses may be deferred under straddle rules until the offsetting position is closed