Test Bank for McGraw Hill's Taxation of Individuals and Business Entities 2025

Test Bank for McGraw Hill's Taxation of Individuals and Business Entities 2025 .§1231 assets - ANSWER-depreciable or real property used in a taxpayer's trade or business owned for more than one year. .§1231 look-back rule - ANSWER-a tax rule requiring taxpayers to treat current year net §1231 gains as ordinary income when the taxpayer has deducted a §1231 loss as an ordinary loss in the five years preceding the current tax year. .§1245 property - ANSWER-tangible personal property and intangible property subject to cost recovery deductions. .§1250 property - ANSWER-real property subject to cost recovery deductions. .§162(m) limitation - ANSWER-the $1 million deduction limit on nonperformance-based salary paid to certain key executives. .§179 expense - ANSWER-an incentive for small businesses that allows them to immediately expense a certain amount of tangible personal property placed in service during the year. .§197 intangibles - ANSWER-intangible assets that are purchased that must be amortized over 180 months regardless of their actual useful lives. .§291 depreciation recapture - ANSWER-the portion of a corporate taxpayer's gain on real property that is converted from §1231 gain to ordinary income. .§338 election - ANSWER-an election by a corporate buyer of 80-percent-or-more of a corporation's stock to treat the acquisition as an asset acquisition and not a stock acquisition. .§338(h)(10) election - ANSWER-a joint election by the corporate buyer and corporate seller of the stock of a subsidiary of the seller to treat the acquisition as a sale of the subsidiary's assets by the seller to the buyer. .§481 adjustment - ANSWER-a change to taxable income associated with a change in accounting methods. .§704(b) capital accounts - ANSWER-partners' capital accounts maintained using the accounting rules prescribed in the Section 704(b) regulations. Under these rules, capital accounts reflect the fair market value of property contributed to and distributed property from partnerships. .12-month rule - ANSWER-regulation that allows prepaid business expenses to be currently deducted when the contract does not extend beyond 12 months and the contract period does not extend beyond the end of the tax year following the year of the payment. .30-day letter - ANSWER-the IRS letter received after an audit that instructs the taxpayer that he or she has 30 days to either (1) request a conference with an appeals officer or (2) agree to the proposed adjustment. .83(b) election - ANSWER-a special tax election that employees who receive restricted stock or other property with ownership restrictions can make to accelerate income recognition from the normal date when restrictions lapse to the date when the restricted stock or other property is granted. The election also accelerates the employer's compensation deduction related to the restricted stock or other property. .90-day letter - ANSWER-the IRS letter received after an audit and receipt of the 30-day letter that explains that the taxpayer has 90 days to either (1) pay the proposed deficiency or (2) file a petition in the U.S. Tax Court to hear the case. The 90-day letter is also known as the statutory notice of deficiency. .Abandoned spouse - ANSWER-a married taxpayer who lives apart from his or her spouse for the last six months of the year (excluding temporary absences), who files a tax return separate from his or her spouse, and who maintains a household for a qualifying child. .Accelerated death benefits - ANSWER-early receipt of life insurance proceeds that are not taxable under certain circumstances, such as the taxpayer is medically certified with an illness that is expected to cause death within 24 months. .Accountable plan - ANSWER-an employer's reimbursement plan under which employees must submit documentation supporting expenses to receive reimbursement and reimbursements are limited to legitimate business expenses. .Accounting method - ANSWER-the procedure for determining the taxable year in which a business recognizes a particular item of income or deduction, thereby dictating the timing of when a taxpayer reports income and deductions. .Accounting period - ANSWER-a fixed period in which a business reports income and deductions. .Accrual method - ANSWER-a method of accounting that generally recognizes income in the period earned and recognizes deductions in the period that liabilities are incurred. .Accrued market discount - ANSWER-a ratable amount of the market discount at the time of purchase (based on the number of days the bond is held over the number of days until maturity when the bond is purchased) that is treated as interest income when a bond with market discount is sold before it matures. .Accumulated adjustments account (AAA) - ANSWER-an account that reflects the cumulative income or loss for the time the corporation has been an S corporation. .Accumulated earnings and profits - ANSWER-undistributed earnings and profits from years prior to the current year. .Accumulated earnings tax - ANSWER-a tax assessed on C corporations that retain earnings without a business reason to do so. .Acquiescence - ANSWER-issued after the IRS loses a trial-level or circuit court case when the IRS has decided to follow the court's adverse ruling in the future. It does not mean that the IRS agrees with the court's ruling. Instead, it simply means that the IRS will no longer litigate this issue. .Acquisition indebtedness - ANSWER-debt secured by a qualified residence that is incurred in acquiring, constructing, or substantially improving the residence. .Action on decision - ANSWER-an IRS pronouncement that explains the background reasoning behind an IRS acquiescence or nonacquiescence. .Active participant in a rental activity - ANSWER-an individual who owns at least 10 percent of a rental property and participates in the process of making management decisions, such as approving new tenants, deciding on rental terms, and approving repairs and capital expenditures.