Tax Accountant Examination flashcards

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

Gross income definition

All income from whatever source derived unless specifically excluded by statute under IRC §61; includes wages, interest, dividends, rents, royalties, and business income.

Capital gain holding period

Long-term if held more than one year; taxed at 0%, 15%, or 20% depending on taxable income; short-term taxed at ordinary rates.

Standard deduction 2024

$14,600 single, $29,200 married filing jointly, $21,900 head of household; additional amounts for age 65+ and blindness.

QBI deduction

IRC §199A allows 20% deduction of qualified business income from pass-through entities, limited by W-2 wages or UBIA for specified service businesses above threshold.

Kiddie tax

Unearned income of a child under 19 (or under 24 if full-time student) above $2,600 in 2024 is taxed at the parents' marginal rate.

S corporation eligibility

No more than 100 shareholders, only eligible individuals (with limited trust/estate exceptions), no nonresident aliens, one class of stock.

Partnership outside basis

Partner's basis increased by contributions and distributive share of income, decreased by distributions and losses; losses limited to basis.

Built-in gains tax

C corporation converting to S status pays corporate tax on appreciation existing at conversion if sold within 5 years.

Section 754 election

Permits partnership to step up inside basis of assets on transfer of partnership interest or distribution, avoiding mismatch with outside basis.

Corporate formation §351

No gain or loss if transferors control corporation immediately after exchange (80% vote and value) and receive only stock.

Adjusted basis formula

Original basis plus capital improvements plus assessments minus depreciation allowed or allowable minus casualty losses claimed.

Inherited property basis

Basis equals fair market value at date of death or alternate valuation date if elected; holding period automatically long-term.

Gift basis rule

Carryover donor basis generally; dual basis rule applies for loss property (FMV for loss, donor basis for gain); holding period tacks.

Installment method

Gain recognized as payments received; gross profit ratio equals gross profit divided by contract price; not available for inventory in ordinary course.

MACRS depreciation

Half-year convention, 200% declining balance for 3-, 5-, 7-, 10-year property; 150% for 15- and 20-year; straight-line for realty.

Section 179 expensing

Up to $1,160,000 in 2024 with phase-out above $2,890,000 of qualifying property; limited to taxable income from active trades or businesses.

Circular 230 §10.34

Requires reasonable basis for positions, no frivolous positions, and proper signing and furnishing of returns to taxpayers.

Preparer penalty §6694

$1,000 (or 50% of fees) for understatement due to unreasonable position; $5,000 (or 75% of fees) for willful or reckless conduct.

Accuracy-related penalty §6662

20% of underpayment for negligence, substantial understatement, or valuation misstatement; 40% for gross valuation misstatement.

Golsen rule

Tax Court follows precedent of the Court of Appeals to which the decision would be appealed, even if contrary to prior Tax Court ruling.

Authority hierarchy

IRC highest; Treasury Regulations next; IRS rulings and procedures; IRS publications and instructions are not binding authority.

Section 121 exclusion

Up to $250,000 ($500,000 MFJ) exclusion of gain on sale of principal residence if owned and used 2 of prior 5 years.

Like-kind exchange §1031

Real property held for productive use or investment qualifies; 45-day identification and 180-day closing deadlines; deferral only, boot recognized as gain.

Passive activity loss rules

Losses from passive activities deductible only against passive income; $25,000 rental real estate exception phases out at $100k-$150k MAGI.

Section 83(b) election

Include restricted stock value at grant in income within 30 days; starts holding period and avoids future ordinary income at vesting.

Qualified small business stock

IRC §1202 allows 100% exclusion of gain on stock acquired after Sept 27, 2010, held 5+ years; limited to $50 million gross assets at issuance.

Estimated tax safe harbor

Required if tax liability ≥ $1,000; pay 90% of current year tax or 100% of prior year (110% if prior AGI > $150,000).

Failure to file penalty

5% per month up to 25% of unpaid tax; failure to pay 0.5% per month up to 25%; combined maximum 47.5% when both apply.

Form 1040-X

Amended individual return; generally must be filed within 3 years of original filing or 2 years after tax paid.

FBAR requirement

FinCEN 114 required if aggregate foreign account balances exceed $10,000 at any time during the year; due April 15 with automatic extension.

Form 941 due dates

Quarterly employment tax return due April 30, July 31, October 31, and January 31; e-file mandatory for 10+ returns.

Statute of limitations

Assessment generally 3 years from filing; 6 years if >25% gross income omitted; unlimited if fraudulent or no return filed.