Answer the following statements true (T) or false (F)
1. In order to avoid the imputation of interest, the stated interest on a transaction must be at least equal to 100% of the Federal Reserve funds rate.
2. Interest is not imputed on a gift loan between two individuals totaling $15,000 except when the borrowed funds are used to purchase income-producing property.
3. Interest is not imputed on a gift loan between two individuals totaling $100,000 except when the borrowed funds are used to purchase income-producing property.
4. When a new business is formed, it must request approval from the IRS regarding the adoption of its various accounting methods.
5. In general, a change in accounting method must be approved by the IRS.
1. FALSE
The appropriate benchmark is the "applicable federal rate" which is the rate paid by the federal government on borrowed funds.
2. FALSE
Interest is not imputed on a gift loan totaling $10,000 or less unless the proceeds are used to purchased income-producing property.
3. FALSE
The use of the funds does not determine the necessity to impute interest; however, the imputed interest is limited to net investment income.
4. FALSE
A new taxpayer elects an accounting method by applying the selected method when computing income for the initial tax return.
5. TRUE
A change in accounting method generally requires the filing of Form 3115 to seek approval by the IRS.
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Team success is more than just completing a task successfully because:
a. Most tasks are performed better by individuals. b. Success on team tasks is difficult to measure. c. Developing team skills for the future is an important part of teamwork. d. Teams are valuable when events are predictable.
MacKenzie Company sold $800 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 2.0% service charge for sales on its credit cards and credits MacKenzie's account immediately when sales are made. The journal entry to record this sale transaction would be:
A. Debit Accounts Receivable $800 and credit Sales $800. B. Debit Cash $784.00 and credit Sales $784.00. C. Debit Cash of $800 and credit Accounts Receivable $800. D. Debit Cash $784.00; debit Credit Card Expense $16.00 and credit Sales $800. E. Debit Cash of $800 and credit Sales $800.
In conventional arbitration, the arbitrator can look at the final offers of each party to a dispute and create any settlement he or she deems appropriate.
Answer the following statement true (T) or false (F)
On January 1, X9, Gerald received his 50 percent profits and capital interest in High Air, LLC, in exchange for $2,000 in cash and real property with a $3,000 tax basis secured by a $2,000 nonrecourse mortgage. High Air reported a $15,000 loss for its X9 calendar year. How much loss can Gerald deduct, and how much loss must he suspend if he only applies the tax basis loss limitation?
A. $0, $15,000. B. $0, $7,500. C. $0, $4,000. D. $4,000, $0. E. None of the choices are correct.