CPA TCP flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

QBI deduction threshold 2024

For 2024 the Section 199A threshold is $191,950 single and $383,900 MFJ. Above it, specified service trade or business owners lose the deduction; others face W-2 wage and UBIA limits.

Kiddie tax threshold

A child's unearned income above $2,600 in 2024 is taxed at the parents' marginal rate. The first $1,300 is offset by the standard deduction; the next $1,300 is taxed at the child's rate.

Additional Medicare tax

A 0.9% tax applies to wages and self-employment income above $200,000 single, $250,000 MFJ, or $125,000 MFS. Employers must begin withholding once wages exceed $200,000 regardless of filing status.

Net investment income tax

A 3.8% surtax on net investment income applies when MAGI exceeds $200,000 single, $250,000 MFJ, or $125,000 MFS. It applies to the lesser of NII or the excess MAGI.

Estimated tax safe harbor

To avoid underpayment penalties, pay at least 90% of current-year tax or 100% of prior-year tax. The prior-year safe harbor rises to 110% when prior-year AGI exceeds $150,000.

AMT exemption phaseout

The 2024 AMT exemption is $85,700 single and $133,300 MFJ. It phases out at 25% of AMTI above $609,350 single or $1,218,700 MFJ, and the AMT rate is 26% then 28%.

Educator expense deduction

Eligible K-12 educators may deduct up to $300 of unreimbursed classroom expenses in 2024, or $600 for married couples filing jointly when both spouses are eligible educators.

Capital gain rate brackets

Long-term capital gains are taxed at 0%, 15%, or 20% depending on taxable income. For 2024, the 15% bracket begins above $47,025 single and $94,050 MFJ.

S corporation eligibility limits

An S corporation may have no more than 100 shareholders, only eligible individuals, estates, and certain trusts, one class of stock, and must be a domestic corporation.

Built-in gains tax

A C corporation converting to S status pays 21% on net recognized built-in gain during the five-year recognition period, limited to the net unrealized gain existing at conversion.

Dividends-received deduction tiers

The corporate DRD is 65% for less than 20% ownership, 75% for 20% to less than 80%, and 100% for 80% or more. A 50% tier applies when the corporation is not fully taxed.

Section 179 limits 2024

For 2024 the Section 179 expensing limit is $1,160,000, phased out dollar-for-dollar when qualifying property placed in service exceeds $2,890,000. It cannot create a loss.

Bonus depreciation phase-down

Bonus depreciation is 60% for property placed in service in 2024, 40% in 2025, 20% in 2026, and zero thereafter. It applies to new and used qualifying property.

Partnership basis ordering rules

Partnership losses are allowed only to the extent of basis, which is increased by contributions and income and decreased by distributions and losses. Excess losses carry forward to later years.

S corporation reasonable compensation

Shareholder-employees of an S corporation must receive reasonable wages before distributions. Wages are subject to payroll tax; distributions reduce stock basis and then become capital gain.

Entity return due dates

Partnerships and S corporations file by March 15, extendable to September 15. C corporations file by April 15, extendable to October 15. Calendar-year entities follow these dates.

S election deadline

Form 2553 must be filed by March 15 for a calendar-year corporation to be treated as an S corporation for that year, or within two months and 15 days of the tax year start.

Section 121 exclusion

A taxpayer may exclude up to $250,000 ($500,000 MFJ) of gain on a principal residence used and owned for two of the last five years. Partial exclusion applies for unforeseen circumstances.

Like-kind exchange deadlines

Under Section 1031, replacement property must be identified within 45 days and acquired within 180 days of the relinquished property sale. Only real property qualifies after the 2017 Tax Cuts and Jobs Act.

Unrecaptured Section 1250 gain

Depreciation taken on real property is recaptured at a maximum 25% rate on sale, with remaining gain taxed at long-term capital gain rates. Section 1245 recapture is taxed as ordinary income.

Inherited property basis

Under Section 1014, the basis of property acquired from a decedent is its fair market value at date of death, eliminating pre-death appreciation. Community property receives a full step-up.

Installment sale gross profit ratio

Gain recognized each year equals payments received times the gross profit ratio, which is gross profit divided by total contract price. Interest on deferred tax applies to large sales.

Involuntary conversion reinvestment

Gain on property destroyed or condemned is deferred if proceeds are reinvested in similar property within two years, or three years for presidentially declared disasters. Basis is reduced by deferred gain.

Qualified Opportunity Zone deferral

Gain invested in a qualified opportunity fund is deferred until 2026 or earlier disposition. A 10-year holding period eliminates tax on appreciation in the fund investment.

Charitable contribution AGI limits

Cash gifts to public charities are deductible up to 60% of AGI. Appreciated long-term capital gain property is limited to 30% of AGI, with a five-year carryforward for excess amounts.

Nonqualified use rule

Periods of nonqualified use after 2008 reduce the Section 121 exclusion proportionally. Rental or business use before 2009 or after moving out does not count against the exclusion.

Annual gift tax exclusion

For 2024 the annual exclusion is $18,000 per donee. Gifts above that amount use the lifetime exemption of $13,610,000 and must be reported on Form 709.

Estate tax portability

A surviving spouse may use the deceased spouse's unused exclusion (DSUE) if a timely Form 706 is filed. The 2024 estate and gift exemption is $13,610,000 per person.

Generation-skipping transfer tax

The GST tax is imposed at a 40% rate on transfers to grandchildren or other skip persons, matching the estate tax rate. The GST exemption equals the estate tax exemption.

Zeroed-out GRAT

A grantor retained annuity trust structured so the remainder value is near zero minimizes gift tax. Appreciation above the Section 7520 rate passes to beneficiaries free of gift tax.

FBAR filing threshold

A FinCEN Form 114 is required when aggregate foreign financial accounts exceed $10,000 at any time during the year. It is due April 15 with an automatic October extension.

Section 409A deferred compensation

Section 409A governs timing of elections and distributions of nonqualified deferred compensation. Violations cause immediate income inclusion plus a 20% penalty and interest.