AFTR Business Tax Basics Flashcards

When a business sells depreciable property used in a trade or business at a gain, the gain is reported on:

Answer: Form 4797, Sales of Business Property

Gains and losses from the sale of business property, including recaptured depreciation, are reported on Form 4797, which then flows to Form 1040.

A net operating loss (NOL) generated in tax years after 2017 can generally be carried:

Answer: Forward indefinitely, limited to 80% of taxable income

Under the TCJA, NOLs arising after 2017 can no longer be carried back (with limited exceptions) but may be carried forward indefinitely, limited to 80% of taxable income in the carryforward year.

The standard mileage rate method for vehicle deductions can generally NOT be used when:

Answer: The taxpayer used MACRS depreciation on the vehicle in a prior year

Taxpayers who previously claimed MACRS depreciation (or Section 179) on a vehicle generally cannot switch to the standard mileage rate method for that vehicle.

Employers who pay wages must deposit employment taxes by using:

Answer: EFTPS (Electronic Federal Tax Payment System)

Employers must deposit federal employment taxes (income tax withheld, Social Security, and Medicare) through EFTPS; deposits by check directly to the IRS are no longer permitted.

A corporation that accumulates earnings beyond the reasonable needs of the business may be subject to:

Answer: The Accumulated Earnings Tax (AET) of 20%

The Accumulated Earnings Tax (AET) of 20% is imposed on C corporations that accumulate earnings in excess of $250,000 ($150,000 for personal service corporations) without reasonable business justification.

Which depreciation method is required for real property placed in service under MACRS?

Answer: Straight-line over 27.5 years (residential) or 39 years (nonresidential)

Under MACRS, residential rental property is depreciated straight-line over 27.5 years, and nonresidential real property is depreciated straight-line over 39 years.