ACC584A Ch.4 Notes

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ACC584A Ch.4 Notes
2010-10-02 02:47:12

Ch. 4 Notes
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  1. What form does a partnership file?
    An informational Form 1065
  2. What form does an S Corp file?
    Form 1120S
  3. What are the community property states?
    Louisiana, Texas, Arizona, New Mexico, Nevada, California, Washington, Idaho, and Wisconsin
  4. What is the holding period for a dividend?
    • The stock on which the dividend is paid must have
    • been held for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date. (the day before the record date of the dividend - when they get the list of eligible shareholders)
  5. What are the qualifications of alimony?
    • (1) The payments must be in cash.
    • (2) The agreement (or court order) must not say the payments are not alimony (a double negative).
    • (3) The spouses must be living apart (i.e., not members of the same household) at the time the payments are made.
    • (4) The payments must cease upon the death of the payee.
  6. What is alimony recapture?
    • Alimony recapture rules are intended to prevent what is in essence a property division from being deducted as alimony.
    • . The effect is reported on the tax returns for the third year of the payments.

    • (1) The payor includes in gross income the amount of the alimony
    • recapture.

    • (2) The recipient deducts the amount of the alimony
    • recapture.

    • (3) Alimony recapture does not apply if the decrease in payments is due to the death of either spouse or the remarriage of the payee. In addition, the recapture rules do not apply to payments where the amount is contingent, the payments are to be made over a
    • period of three years or longer (unless death, remarriage, or other contingency occurs), and the contingencies are beyond the payor’s control.
  7. What are the exceptions to imputed interest?
    • De minimis loans: - < $10,000
    • Gift loans - excluded except if used to purchase income-producing assets
    • Emloyer/ee and Corp/shareholder - excluded except if principal purpose is tax avoidance
    • Loans of <= $100,000: Between individuals are excluded except if principal purpose is tax avoidance
    • , if the borrower’s net investment income does not
    • exceed $1,000, no interest will be imputed on the loan.
  8. When is a Group Term Life Insurance Policy not deductible? What is the deduction otherwise?
    • If the plan discriminates in favor of certain key employees
    • (e.g., officers), the key employees are not eligible for exclusion treatment.

    The deduction is $50,000