Tax Planning & Preparation Flashcards
7 cards from real CAT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Tax Planning & Preparation flashcards as text
An S corporation passes its income and losses through to shareholders. How are these items reported by shareholders?
Answer: On Schedule E of their personal Form 1040
S corporation income, deductions, and credits flow through to shareholders and are reported on each shareholder's Schedule E (Supplemental Income and Loss).
Which of the following expenses is deductible as an itemized deduction?
Answer: State and local income taxes (SALT) up to $10,000
State and local taxes (SALT), including income, sales, and property taxes, are deductible as an itemized deduction, capped at $10,000 per return.
What is the tax treatment of employer-provided health insurance premiums for employees?
Answer: Excluded from employee gross income
Employer-paid health insurance premiums are excluded from the employee's gross income and are also deductible by the employer as a business expense.
A taxpayer receives an inheritance from a deceased relative. How is the inherited property generally treated for income tax purposes?
Answer: Not includable in the beneficiary's gross income
Property inherited from a decedent is generally not included in the beneficiary's gross income, and the heir receives a stepped-up basis equal to the fair market value at death.
The net investment income tax (NIIT) of 3.8% applies to individuals whose modified AGI exceeds which threshold (single filers)?
Answer: $200,000
Single taxpayers with MAGI above $200,000 may owe the 3.8% NIIT on the lesser of their net investment income or the amount by which MAGI exceeds the threshold.
A business that operates as a sole proprietorship reports business income and expenses on which schedule?
Answer: Schedule C
Sole proprietors report their business income and deductible expenses on Schedule C (Profit or Loss from Business), attached to Form 1040.
Which of the following best describes the 'at-risk' rules for partnerships?
Answer: A partner can only deduct losses up to the amount they have at risk in the partnership
The at-risk rules limit a taxpayer's deductible losses to the amount they have economically at risk in the activity, preventing deductions exceeding actual economic exposure.