TCP formula sheet & cheat sheet

Key rule: NIIT and additional Medicare tax never apply to the same dollar. One hits investment income, the other hits earned income (wages and SE income). MFS threshold for NIIT is 125,000.

Wash-sale trap: a loss is denied if you buy substantially identical securities within 30 days before or after the sale; the disallowed loss adds to the new lot basis. AMT is owed only when tentative minimum tax exceeds regular tax.

Present-interest trap: only present-interest gifts qualify for the annual exclusion. A Crummey withdrawal power (often 30 days) converts a trust gift into a present interest. You cannot claim both education credits for the same student in the same year.

Penalty exceptions (before 59 1/2): death, disability, certain medical expenses, first-time homebuyer up to 10,000 (IRA only), qualified higher education (IRA), and substantially equal periodic payments. A Roth IRA has no lifetime RMDs for the original owner. An exception waives the penalty, not the income tax.

Portability vs. bypass trust: ported DSUE is fixed and does not capture future growth; a bypass (credit-shelter) trust shelters the first spouse’s exemption AND its future appreciation. Lifetime taxable gifts reduce the exemption available at death under the unified system.

DRD trap: the taxable-income limitation is waived when the full DRD creates or increases an NOL. So take the full DRD (dividends × %) only if it drives taxable income below zero; otherwise take the lesser of the full DRD or the taxable-income limit.

Ordering traps: reduce basis for distributions BEFORE losses. Debt basis comes only from DIRECT shareholder loans, never from a guarantee of corporate bank debt. AAA and the dividend layer matter only when the S corporation has accumulated C-corp E&P.

Section 751 hot assets: on a sale of a partnership interest, the share of unrealized receivables and substantially appreciated inventory is ORDINARY income; the rest of the gain is capital. A liability shift is a deemed contribution (basis up) or distribution (basis down).

Traps: compute each factor as in-state over everywhere, not in-state over in-state. Public Law 86-272 protects only solicitation of orders for tangible goods shipped from outside the state. Passive income (dividends, interest, most rents, royalties) is generally excluded from UBIT. The throwback rule sends an untaxable destination sale back into the origin state’s sales factor.

QSBS is C corp only: the Section 1202 gain exclusion is available only for original-issue qualified small business stock of a C corporation held by non-corporate shareholders. Recognized 351 gain is never more than the boot received.

Traps: the dividend layer always comes first, do not reduce basis before E&P is exhausted. A redemption needs BOTH disproportionate prongs to get sale treatment. Section 318 attribution applies to every redemption test. Retiring-partner payments split into Section 736(b) (property, generally capital) and Section 736(a) (receivables/services, ordinary).

Under the threshold the business may use the cash method even with inventory and is exempt from UNICAP (Section 263A), the Section 163(j) interest limit, and mandatory percentage-of-completion. The installment method does not defer depreciation recapture, which is recognized in the year of sale.

Traps: only Section 179 is income-limited, bonus depreciation can create a loss. A net 1231 loss is ordinary while a net 1231 gain is long-term capital. In a like-kind exchange, recognized gain never exceeds the boot received. Section 197 intangibles (including acquired goodwill) amortize straight-line over 15 years regardless of actual life.