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PDtax
PDtax, Master's Degree
Category: Business and Finance Homework
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Experience:  MBA/CPA, Former college instructor and tutor.
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In your "own" words, please describe what a "Suspended Loss"

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Chapter 7
1. In your "own" words, please describe what a "Suspended Loss" is, how it is generated and when it is becomes deductible. (5 pts)
2. Please describe "Active Participation" as it relates to a taxpayer's involvement in an investment in Real Estate. (5 pts).
Chapter 8
3. Macy had a lot of medical expenses this year that were not covered by her insurance (either due to a deductible, co-insurance, or co-pay). Her un-reimbursed qualifying medical expenses total $8,356 and her AGI for 2013 is $45,000. Assuming she will itemize on her 2013 tax return, how much of her medical expenses will she be able to deduct? (5 pts)
4. Heather & Terry have a mortgage on their primary residence of $750,000 and a mortgage on their vacation home of $410,000. In 2013, they incurred $46,400 of mortgage interest expense. How much, if any, of that interest is deductible on Schedule A? (5 pts)
Chapter 14
1. Please describe the concept of "double taxation" and discuss which entity(ies) are subject to this type of taxation. (5 pts)
2. What type of taxpayers is considered "eligible" taxpayers with regard to special ordinary loss treatment of IRC Section 1244 stock? (5 pts.)
3. Please describe how the treatment of capital gains(losses) differ for a C Corporation as compared to an Individual. ( 5 pts.)
4. Please describe the concept of "Depreciation recapture". ( 5 pts.)
Chapter 21
1. Please explain how an S Corporation is created. (5 pts)
2. Please explain how Charitable Contributions made at the S-Corporation level are treated for tax purposes. (5 pts.)
3. How are fringe benefits received by an S Corporation Shareholder treated for tax purposes? (5 pts.)
4. Please explain "pass through" taxation. ( 5 pts.)
Chapters 10-11-12
1. Please explain the distinction between a "realized" gain and a "recognized" gain. (5 pts)
2. Are there any limits to the deductibility of losses on sales and exchanges between related parties? What code section defines this limitation? (5 pts.)
3. What is the basis of property received (i.e. new property) in a like-kind exchange? What is the holding period for the new asset? (5 pts.)
4. David purchased stock in Zoll Corporation in 1985 for $6,000. On April 16, 2013 he gifted the stock to his daughter Susan; at the time of the gift, the Zoll stock was valued at $250,000. Susan sold the stock the next month for $ 252,000. What is Susan's gain or loss and what is the character of the gain or loss? ( 5 pts.)
Chapter 14
1. Please explain how Charitable Contributions come into play in determining "Corporate" taxable income. (5 pts)
2. What happens to a loss on the Corporate Tax Return (Form 1120)? Does it pass through to the shareholders? Is it available for future or past periods? Please explain in detail. (5 pts.)
3. Please describe the purpose of Sch3edules M-1 and M-3. When is a Schedule M-3 required in lieu of a Schedule M-1. (5 pts.)
Chapter 17
4. Please define and differentiate a Spin-off, Split-off, and Split-up. ( 5 pts.)
Submitted: 1 year ago.
Category: Business and Finance Homework
Expert:  Mr. Gregory White replied 1 year ago.
Hello, my name is Greg.

What is your set deadline for the resource?
Customer: replied 1 year ago.

Hi Greg, my deadline is November 18, 2013.

Expert:  PDtax replied 1 year ago.
Welcome to the site. I'm PDtax, and just saw your question. I can help this morning if you still need assistance.
I will be available online until noon or so EST. Let me know.
Expert:  PDtax replied 1 year ago.
I was just asked to assist.
Chapter 7
1. In your "own" words, please describe what a "Suspended Loss" is, how it is generated and when it is becomes deductible. (5 pts)
A suspended loss is a loss, from a passive activity, that is not allowed to be used against other types of income. Such losses are generated from investments in loss generating activity, most often rental real estate. It is suspended until similar income is generated to offset it (passive income) or the activity is sold.
2. Please describe "Active Participation" as it relates to a taxpayer's involvement in an investment in Real Estate. (5 pts).
Active participation (IRC 469 (i)(6)) related only to rental real estate and allows for a limited deduction of passive losses against other types of income. As long as the taxpayer is not a limited partner, is a greater than 10% owner, and makes management decisions, the active participation exception will allow for deduction of up to $25,000 of passive activity losses (PAL) against other income.
Those are the first two. Working on the rest now.
Customer: replied 1 year ago.

Ok. Awaiting all answers! thanks

Expert:  PDtax replied 1 year ago.
Chapter 7
1. In your "own" words, please describe what a "Suspended Loss" is, how it is generated and when it is becomes deductible. (5 pts)
A suspended loss is a loss, from a passive activity, that is not allowed to be used against other types of income. Such losses are generated from investments in loss generating activity, most often rental real estate. It is suspended until similar income is generated to offset it (passive income) or the activity is sold.
2. Please describe "Active Participation" as it relates to a taxpayer's involvement in an investment in Real Estate. (5 pts).
Active participation (IRC 469 (i)(6)) related only to rental real estate and allows for a limited deduction of passive losses against other types of income. As long as the taxpayer is not a limited partner, is a greater than 10% owner, and makes management decisions, the active participation exception will allow for deduction of up to $25,000 of passive activity losses (PAL) against other income.
Chapter 8
3. Macy had a lot of medical expenses this year that were not covered by her insurance (either due to a deductible, co-insurance, or co-pay). Her un-reimbursed qualifying medical expenses total $8,356 and her AGI for 2013 is $45,000. Assuming she will itemize on her 2013 tax return, how much of her medical expenses will she be able to deduct? (5 pts) (8356-(45000*.075)=4981
4. Heather & Terry have a mortgage on their primary residence of $750,000 and a mortgage on their vacation home of $410,000. In 2013, they incurred $46,400 of mortgage interest expense. How much, if any, of that interest is deductible on Schedule A? (5 pts)(###) ###-####1160000*46400=40000.
Chapter 14
1. Please describe the concept of "double taxation" and discuss which entity(ies) are subject to this type of taxation. (5 pts) Double taxation is tax on income of a business entity and second tax on distributions made to owners. The classic example is dividends paid to an owner from a corporation.
2. What type of taxpayers is considered "eligible" taxpayers with regard to special ordinary loss treatment of IRC Section 1244 stock? (5 pts.) Individuals or partnerships who are the original owners of shares in an electing domestic small business corporation. The stock must be issued for property, common or preferred, domestically chartered and otherwise meet the tests to qualify as 1244 stock.
3. Please describe how the treatment of capital gains(losses) differ for a C Corporation as compared to an Individual. ( 5 pts.) Individuals net their capital gains and losses together, and the result is reported on an individual form 1040. Net long term capital gains are taxed at rates currently discounted to ordinary rates. Capital losses can be deducted up to $3,000 per year against ordinary income, with carrybacks and carryforwards available for those losses. C corporations may net capital losses against capital gains only, and pay tax at standard tax rates for capital gains.
4. Please describe the concept of "Depreciation recapture". ( 5 pts.)
Depreciation is the non-cash expensing of a portion of the cost of a fixed asset used in business. When that asset is sold for more than the net value of the asset, depreciation recapture may require that some of the sale proceeds ares taxed at ordinary income rates.
Chapter 21
1. Please explain how an S Corporation is created. (5 pts) A corporation is formed by filing the request with the Secretary of State in the state you wish approval. In coordination with that filing, the owners execute IRS Form 2553, asking IRS to recognize the new corporation as a Subchapter S corporation (states have their own application form too). IRS approval is generally automatic.
2. Please explain how Charitable Contributions made at the S-Corporation level are treated for tax purposes. (5 pts.) Charitable contributions are not deducted at the Subchapter S level, but are instead aggregated and ‘passed through’ to the shareholders for deduction on their personal returns.
3. How are fringe benefits received by an S Corporation Shareholder treated for tax purposes? (5 pts.) For S corp shareholders generally owning more than 2% of the company’s stock, fringe benefits are generally taxable to the shareholder, often as additions to the shareholder W-2 from the corporation as wages.
4. Please explain "pass through" taxation. ( 5 pts.) A pass through entity is not generally taxed on its income itself, but instead ‘passes through’ the income for reporting and taxation by its owners. S corporations and partnerships typically report income in this manner.
Chapters 10-11-12
1. Please explain the distinction between a "realized" gain and a "recognized" gain. (5 pts) A realized gain is a gain generated in a transaction. A recognized gain is that portion of a realized gain that is recognized for tax purposes.
2. Are there any limits to the deductibility of losses on sales and exchanges between related parties? What code section defines this limitation? (5 pts.) IRC Section 267 governs sales or exchanges between related parties, and such losses can not be recognized for tax purposes.
3. What is the basis of property received (i.e. new property) in a like-kind exchange? What is the holding period for the new asset? (5 pts.) The basis for the new property is the basis of the old one, plus any boot received. Holding period for the new property carries over the holding period for the old property as well.
4. David purchased stock in Zoll Corporation in 1985 for $6,000. On April 16, 2013 he gifted the stock to his daughter Susan; at the time of the gift, the Zoll stock was valued at $250,000. Susan sold the stock the next month for $ 252,000. What is Susan's gain or loss and what is the character of the gain or loss? ( 5 pts.) $246,000 long term capital gain.
Chapter 14
1. Please explain how Charitable Contributions come into play in determining "Corporate" taxable income. (5 pts) Charitable contributions can be deducted up to 10% of a corporation’s taxable income before the contribution is considered.
2. What happens to a loss on the Corporate Tax Return (Form 1120)? Does it pass through to the shareholders? Is it available for future or past periods? Please explain in detail. (5 pts.) C corporation losses do not pass through to shareholders. Such losses can be carried back 2 years, and forward 20, until utilized. Unutilized losses expire after 20 years.
3. Please describe the purpose of Schedules M-1 and M-3. When is a Schedule M-3 required in lieu of a Schedule M-1. (5 pts.) M-1 is used to reconcile a corporation’s book to taxable income per Form 1120. M-3 is used to reconcile corporate book to taxable income in instances when the corporation has total assets of $10 million or more.
Chapter 17
4. Please define and differentiate a Spin-off, Split-off, and Split-up. ( 5 pts.)
A spin-off is a pro rata distribution of a controlled corporation’s stock to the shareholders of the controlling corporation. A split-off is a distribution (does not need to be pro-rata) to one or more distributing corporation shareholders in exchange for shares in the distributing corporation. A split-up involves distributing either businesses or shares in a subsidiary corporation to shareholders of the controlling corporation.
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MBA/CPA, Former college instructor and tutor.