Complex Investments
Where can you find CBCO guidance for the hedge funds?
ITAX manual has a cheat sheet to help with reclasses.
What order do loss carryovers get used?
FIFO
What is the CBCO standard for suppressing Form 1116?
If the foreign tax credit is less than $600 MFJ ($300 for single), suppress 1116 unless foreign tax credit carryovers exist.
True or False: If an IC indicates that we should maximize depreciation, we should always take 179 before bonus.
False. Careful consideration should be given to what should be taken. If the taxpayer has income, taking 179 would be better as it is a 100% deduction and doesn’t require a MN addback. Bonus on the other hand is 80% in 2023 and is an addback to MN.
BONUS QUESTION: What is the 2024 bonus depreciation percentage under current law?
How do you determine filing requirements in a state?
Check the state's instructions or website. Then discuss with AA/IC if we will be filing.
Where are former 2% deductions reported on partnership K-1s?
Box 13AE - new for 2023, they have their own box.
BONUS QUESTION: What are the two most common examples of 2% deductions? (Need both for 200 point bonus)
When is a §1231 gain/loss included in QBI?
Gain/loss is treated as ordinary.
REMINDER: There is a flow chart in the manual for §1231 treatment.
Name the states that have no individual income taxes. Name at least 4 for full credit.
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
What type of property should be reported on the return, if the business sold...
1. A piece of equipment at a gain
2. A building at a gain
1. §1245 Property
2. §1250 Property
REMINDER: See the Sale of Property flowchart in the BTAX Manual when you have asset sales!
For an investment partnership that elects MN PTE, is the federal deduction treated as nonpassive, passive or nondeductible?
Nonpassive and is a deduction from NII. There should be a footnote on the K-1 so the individual knows its nonpassive.
REMINDER: If you see this footnote, only the PTE included in ordinary income is automatically nonpassive. Other ordinary or rental income/loss is still subject to the normal material participation rules.
How do you handle market discount on a 1099-B?
Pick up as income on Sch B and increase stock basis on Sch D
How do you know if Axcess is tracking the QBI loss carryforwards into 2024 correctly?
Total loss carryovers on the QBL worksheet equals the total Schedule E loss carryovers found on basis worksheet or 8582.
What is the 2023 maximum HSA contributions for the following scenarios? 100 points/scenario
MFJ - Both < 55 years old (family plan)
MFJ - Both > 55 yrs old (T=single plan, S=no plan)
Single - Under 55 years old
1. $7,750
2. $4,850
3. $3,850
What is the dollar amount for IRS’s de minimis safe harbor for immediately deducting small-dollar expenditures?
$5,000 if the taxpayer as an applicable financial statement; $2,500 if no AFS
How is state-source income determined for a part-year resident return?
100% of income for period of residency + apportioned/allocated income for period when nonresident.
What is a wash sale?
Losses are disallowed when the taxpayer repurchases a stock that was sold at a loss within 30 days. The disallowed loss increases the basis for the stock that was purchased.
Name the types of SSTBs (100 points per correct answer, max 4).
Health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset is the reputation or skill of one or more of its employees.
What gains are excluded from NII?
§1231 and ordinary gains from a nonpassive business K-1, capital gain on sale of nonpassive business
What is the difference between recourse debt and nonrecourse debt?
Recourse debt is debt the borrower is personally liable for. The lender can come after the individual for repayment or the debt is from the partner to the business.
Nonrecourse debt is that no one is personally liable. The lender cannot pursue anything other than the collateral on the loan.
How is MN PTE income calculated on a partnership return for part-year MN residents?
Part-year residents are treated as full year residents with 100% of their share of income being included in the MN PTE calculation.
What is CBCO's de minimis threshold for a hedge fund K-1 that breaks out the income/loss between passive and nonpassive income?
$500 - If either the passive portion or nonpassive portion is less than $500, do not split out. Just enter all as passive or all as nonpassive, whichever is greater.
What is the primary CBCO policy for grouping underlying QBI activities?
Need all three of the following to be true:
1. Activities are not broken out separate on Schedule E.
2. Total QBI income/loss factors on the K‐1 is between a $10,000 loss and $10,000 of income.
3. Each underlying activity’s QBI is between a $10,000 loss and $10,000 of income.
REMINDER: There is a cheat sheet in the manual that shows us this!
What is the first test to determine if a taxpayer is passive or nonpassive in a business?
Participate in the business for at least 500 hours.
List the increases and decreases to stock basis. (must name 3 increases & 3 decreases to get full points)
Increases: contributions, ordinary income, separately state income items, tax exempt income, excess depletion
Decreases: distributions, ordinary losses, separately stated loss items, nondeductible expenses, depletion
What is PL 86-272?
Federal law that prevents states from collecting income tax when the only activity in the state is solicitation of sales.