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south western federal taxation

Questions and Answers of South Western Federal Taxation

Jacob, age 42, and Jane Brewster, age 37, are married and file a joint return in 2017. The Brewsters have two dependent children, Ellen and Sean, 10-year-old twins. Jacob is a factory supervisor; he
Robert A. Kliesh, age 41, is single and has no dependents. Robert’s Social Securitynumber is 111-11-1112. His address is 201 Front Street, Missoula, MT 59812. He does not contribute to the
Brown Corporation (a calendar year taxpayer) provides you with the following information.Taxable income
Bonnie, who is single, reports a zero taxable income for 2017. Bonnie itemizes deductions and takes the personal exemption. She incurs positive timing adjustments of $200,000 and AMT exclusion items
Lynn, age 45, is single and has no dependents. Her income and expenses for 2017 are reported as follows.Income—Salary
Farr is single, has no dependents and does not itemize her deductions.She reports the following items on her 2017 tax return.Bargain element from the exercise of an ISO (no restrictions apply to the
Pat, who is age 66 and single with no dependents, received a salary of $90,000 in 2017. She earned interest income of $1,000, dividend income of $5,000, gambling winnings of $4,000, and interest
Chuck is single, has no dependents, and does not itemize deductions. In 2017, he claims a personal exemption of $4,050 and reports taxable income of $120,000. His tax preferences total $51,000. What
Chance and Lindsay, both 37, are married and file a joint return in 2017. Their AGI is $580,000. They report $39,000 of itemized deductions, consisting of the following amounts.Home mortgage interest
Gabriel, age 40, and Emma, age 33, are married with two dependents. They had AGI of $110,000 in 2017 that included net investment income of $3,000 and gambling winnings of $2,500.They incurred the
Sammy and Monica, both age 67, incur and pay medical expenses in excess of insurance reimbursements during the year as follows.For Sammy ...........................................
Christopher regularly invests in internet company stocks, hoping to become wealthy by making an early investment in the next high-tech phenomenon. In 2011, Christopher purchased 3,000 shares of
In 2017, Liza exercised an incentive stock option that had been granted to her in 2014 by her employer, White Corporation. Liza acquired 100 shares of White stock for the option price of $190 per
Burt, the CFO of Amber, Inc., was granted incentive stock options in 2012. Burt exercised the stock options in February 2016 when the exercise price was $75,000 and the fair market value of the stock
In 2017, Geoff incurred $900,000 of mine and exploration expenditures. He elects to deduct the expenditures as quickly as the tax law allows for regular income tax purposes.a. How will Geoff’s
In March 2017, Helen Carlon acquired used equipment for her business at a cost of $300,000. The equipment is five-year property for depreciation purposes.a. If Helen depreciates the equipment using
Lonzo owns two apartment buildings. He acquired Forsythia Acres on February 21, 1998, for $300,000 ($90,000 allocated to the land) and Square One on November 12, 2017, for $800,000 ($100,000
Archie runs a small mineral exploration business (as a sole proprietorship). In 2015, he purchased land (for $68,000) where he suspected a magnesium deposit was located. He incurred $18,000 of
Angela, who is single, incurs circulation expenditures of $153,000 during 2017. She is deciding whether to deduct the entire $153,000 or to capitalize it and elect to deduct it over a three-year
Arthur Wesson, an unmarried individual who is age 68, reports taxable income of $160,000 in 2017. He records positive AMT adjustments of $40,000 and preferences of $35,000. Arthur itemizes his
Use the following data to calculate Chiara’s AMT base in 2017.Taxable income .......................................... $148,000Positive AMT adjustments .........................
Elijah is single. He holds a $12,000 AMT credit from 2016. In 2017, his regular tax liability is $28,000 and his tentative minimum tax is $24,000. Does Elijah owe AMT in 2017? How much (if any) of
Yanni, who is single, provides you with the following information for 2017.Salary ........................................................... $80,000State income taxes
Ramon had AGI of $180,000 in 2017. He is considering making a charitable contribution this year to the American Heart Association, a qualified charitable organization. Determine the current allowable
Download IRS Form 8919 (Uncollected Social Security and Medicare Tax on Wages) from the IRS website. According to the instructions, who should file this form?
For calendar year 2017, Stuart and Pamela Gibson file a joint return reflecting AGI of $350,000. Their itemized deductions.Casualty loss after $100 floor (not covered by insurance) ..................
Marcia, a shareholder in a corporation with stores in five states, donated stock with a basis of $10,000 to a qualified charitable organization in 2016. Although the stock of the corporation was not
Kellye, a teacher, volunteers for eight hours per week at a school for high-risk children, a qualified charitable organization. Kellye’s normal rate for teaching is $30 per hour. Kellye’s
Zunilda is 77-year-old individual with an AGI of $25,000 in 2016. She began living in a nursing home in 2016 upon the recommendation of her primary care physician in order to receive medical care for
Dorothy acquired a 100% interest in two passive activities: Activity A in January 2012 and Activity B in 2013. Through 2015, Activity A was profitable, but it produced losses of $200,000 in 2016 and
A number of years ago, Lee acquired a 20% interest in the BlueSky Partnership for $60,000. The partnership was profitable through 2016, and Lee’s amount at risk in the partnership interest was
How might a taxpayer who cannot avoid engaging in activities that generate AMT adjustments minimize or eliminate such adjustments?
Tad, who owns and operates a business, acquired machinery and placed it in service in June 2008. The machinery is 10-year property. Does Tad need to make an AMT adjustment in 2008 or 2017 for the
Celine is going to be subject to the AMT in 2017. She owns an investment building and is considering disposing of it and investing in other realty. Based on an appraisal of the building’s value,
Paola exercised an incentive stock option on March 1, 2017. She acquired 2,000 shares of stock at an exercise price of $3 per share when the fair market value of the stock was $15 per share. However,
Matt, who is single, always has elected to itemize deductions rather than take the standard deduction. In prior years, his itemized deductions always exceeded the standard deduction by a substantial
During the year, Rachel earned $18,000 of interest income on private activity bonds that she had purchased in 2008. She also incurred interest expense of $7,000 in connection with amounts borrowed to
Compute the 2017 AMT exemption for the following taxpayers.a. Bristol, who is single, reports AMTI of $149,500.b. Marley and Naila are married and file a joint tax return. Their AMTI is $498,000.
In March 2017, Serengeti exercised an ISO that had been granted by his employer, Thunder Corporation, in December 2014. Serengeti acquired 5,000 shares of Thunder stock for the exercise price of $65
Kiki, who incurred intangible drilling costs (IDC) of $94,000 during the year, deducted that amount for regular tax purposes. Her net oil and gas income for the year was $110,000. Currently, Kiki has
Linda, who files as a single taxpayer, had AGI of $280,000 for 2017. She incurred the following expenses and losses during the year:Medical expenses (before the 10%-of-AGI limitation)
Evan is single and has AGI of $277,300 in 2017. His potential itemized deductions before any limitations for the year total $52,300 and consist of the following:Medical expenses (before the
Bart and Elizabeth Forrest are married and have no dependents. They have asked you to advise them whether they should file jointly or separately in 2017. They present you with the following
On December 27, 2017, Roberta purchased four tickets to a charity ball sponsored by the city of San Diego for the benefit of underprivileged children. Each ticket cost $200 and had a fair market
Ramon had AGI of $180,000 in 2017. He is considering making a charitable contribution this year to the American Heart Association, a qualified charitable organization. Determine the current allowable
Liz had AGI of $130,000 in 2017. She donated Bluebird Corporation stock with a basis of $10,000 to a qualified charitable organization on July 5, 2017.a. What is the amount of Liz’s deduction
Malcolm owns 60% and Buddy owns 40% of Magpie Corporation. On July 1, 2017, each lends the corporation $30,000 at an annual interest rate of 5%. Malcolm and Buddy are not related. Both shareholders
During 2017, Susan incurred and paid the following expenses for Beth (her daughter), Ed (her father), and herself:Surgery for Beth .............................................................
For calendar year 2017, Jean was a self-employed consultant with no employees. She had $80,000 of net profit from consulting and paid $7,000 in medical insurance premiums on her policy covering 2017.
Derek, a cash basis, unmarried taxpayer, had $610 of state income tax withheld during 2017. Also in 2017, Derek paid $50 that was due when he filed his 2016 state income tax return and made estimated
Pierre, a cash basis, unmarried taxpayer, had $1,400 of state income tax withheld during 2017. Also in 2017, Pierre paid $455 that was due when he filed his 2016 state income tax return and made
William, a high school teacher, earns about $50,000 each year. In December 2017, he won $1 million in the state lottery. William plans to donate $100,000 to his church. He has asked you, his tax
Jayden, a calendar year taxpayer, paid $16,000 in medical expenses and sustained a $20,000 casualty loss in 2017. He expects $12,000 of the medical expenses and $14,000 of the casualty loss to be
Cheryl incurred $8,700 of medical expenses in November 2017. On December 5, the clinic where she was treated mailed her the insurance claim form it had prepared for her with a suggestion that she
In 2017, Archer, a single individual, moved from Minneapolis to Phoenix to start a new job with InnoTech, which began February 1, 2017. Archer worked for Inno-Tech until November 15, 2017, when
Pinnacle Productions, Inc., holds a luxury skybox season ticket at a local sporting arena. Pinnacle uses the skybox to entertain clients while holding business meetings. The cost of Pinnacle’s
Melanie is employed full-time as an accountant for a national hardware chain. She recently started a private consulting practice, which provides tax advice and financial planning to the general
Elijah is employed as a full-time high school teacher. The school district where he works recently instituted a policy requiring all of its teachers to start working on a master’s degree. Pursuant
After being downsized by his former employer in November 2016, Wayne moves from Minnesota to Alabama to accept a new job. When filing his Federal income tax return for 2016, Wayne deducts the $14,000
On July 1, 2013, Rex purchases a new automobile for $40,000. He uses the car 80% for business and drives the car as follows: 8,000 miles in 2013, 19,000 miles in 2014, 20,000 miles in 2015, and
Jackson uses his automobile 90% for business and during 2017 drove a total of 14,000 business miles. Information regarding his car expenses is listed below.Business parking
Ella is the regional sales manager for a clothing store. She starts her work day by driving from home to the regional office, works there for several hours, and then visits the three stores in her
William is employed by an accounting firm and uses his automobile in connection with his work. During the month of October 2017, he works at the office for 3 days and participates in the audit of a
Lara uses the standard mileage method for determining auto expenses. During 2017, she used her car as follows: 9,000 miles for business, 2,000 miles for personal use, 2,500 miles for a move to a new
In 2015, Emma purchased an automobile, which she uses for both business and personal purposes. Although Emma does not keep records as to operating expenses (e.g., gas, oil, and repairs), she can
Weston acquires a new office machine (7-year class asset) on November 2, 2016, for $75,000. This is the only asset Weston acquired during the year. He does not elect immediate expensing under § 179.
Sophia and Jacob are married and file a joint return. Their 2016 tax return included a Form 2106 for each of them. Their 2017 tax return, however, included a Form 2106 and a Schedule C. In terms of
In 2017, Dolly purchased and placed into service qualifying depreciable property at a total cost of $2,280,000. Dolly has elected to take the § 179 deduction. What is Dolly’s § 179 deduction for
On April 3, 2017, Terry purchased and placed in service a building that cost $2 million. An appraisal determined that 25% of the total cost was attributed to the value of the land. The bottom floor
On August 2, 2017, Wendy purchased a new office building for $3.8 million. On October 1, 2017, she began to rent out office space in the building. On July 15, 2021, Wendy sold the office building.a.
Lori, who is single, purchased 5-year class property for $200,000 and 7-year class property for $410,000 on May 20, 2017. Lori expects the taxable income derived from her business (without regard to
Jabari Johnson is considering acquiring an automobile at the beginning of 2017 that he will use 100% of the time as a taxi. The purchase price of the automobile is $35,000. Johnson has heard of cost
On March 15, 2017, Helen purchased and placed in service a new Escalade. The purchase price was $62,000, and the vehicle had a rating of 6,500 GVW. The vehicle was used 100% for business. Calculate
Sally purchased a new computer (5-year property) on June 1, 2017, for $4,000. Sally could use the computer 100% of the time in her business, or she could allow her family to use the computer as well.
Dennis Harding is considering acquiring a new automobile that he will use 100% for business. The purchase price of the automobile would be $48,500. If Dennis leased the car for five years, the lease
Oleander Corporation, a calendar year entity, begins business on March 1, 2017. The corporation incurs startup expenditures of $64,000. If Oleander elects § 195 treatment, determine the total amount
Quanti Co., a calendar year taxpayer, purchased small tools for $5,000 on December 21, 2017, representing the company’s only purchase of tangible personal property that took place during 2017. On
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2016, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her
John Smith, age 31, is single and has no dependents. At the beginning of 2017, John started his own excavation business and named it Earth Movers. John lives at 1045 Center Street, Lindon, UT, and
Your client, Dave’s Sport Shop, sells sports equipment and clothing in three retail outlets in New York City. During 2017, the CFO decided that keeping track of inventory using a combination of
Orange Corporation acquired new office furniture on August 15, 2017, for $130,000. Orange does not elect immediate expensing under § 179. Orange claims any available additional first-year
Jose' purchased a house for $300,000 in 2014. He used the house as his personal residence. In March 2017, when the fair market value of the house was $400,000, he converted the house to rental
On March 25, 2017, Parscale Company purchases the rights to a mineral interest for $8 million. At that time, the remaining recoverable units in the mineral interest are estimated to be 500,000 tons.
On September 30, 2017, Priscilla purchased a business. Of the purchase price, $60,000 is allocated to a patent and $375,000 is allocated to goodwill. Calculate Priscilla’s 2017 § 197 amortization
McKenzie purchased qualifying equipment for his business that cost $212,000 in 2017. The taxable income of the business for the year is $5,600 before consideration of any § 179 deduction. Calculate
Diana acquires, for $65,000, and places in service a 5-year class asset on December 19, 2017. It is the only asset that Diana acquires during 2017. Diana does not elect immediate expensing under §
Andre acquired a computer on March 3, 2017, for $2,800. He elects the straight-line method for cost recovery. Andre does not elect immediate expensing under § 179. He does not claim any available
Euclid acquires a 7-year class asset on May 9, 2017, for $80,000. Euclid does not elect immediate expensing under § 179. She does not claim any available additional first-year depreciation.
In May 2017, George began searching for a trade or business to acquire. In anticipation of finding a suitable aquisition, George hired an investment banker to evaluate three potential businesses. He
Explain how the § 179 immediate expensing deduction affects the computation of MACRS cost recovery.
Discuss whether land improvements used in a trade or business are eligible for cost recovery.
Identify the correct statement below regarding the domestic production activities deduction (DPAD).a. Qualified production activities income (QPAI) is calculated by applying a percentage to net
Glenn and Mary’s house was damaged by a hurricane in 2017. The fair value of their home before the hurricane was $150,000. After the hurricane, the fair value of their home was $125,000. They
Esther owns a large home on the East Coast. Her home is surrounded by large, mature oak trees that significantly increase the value of her home. In August 2016, a hurricane damaged many of the trees
During 2017, John was the chief executive officer and a shareholder of Maze, Inc. He owned 60% of the outstanding stock of Maze. In 2014, John and Maze, as co-borrowers, obtained a $100,000 loan from
Mason Phillips, age 45, and his wife, Ruth, live at 230 Wood Lane, Salt Lake City, UT 84101. Mason’s Social Security number is 111-11-1111. Ruth’s Social Security number is 123-45-6789. Mason and
Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic
Jed, age 55, is married with no children. During 2017, Jed had the following income and expense items:a. Three years ago, Jed loaned a friend $10,000 to help him purchase a new car. In June of the
Assume that in addition to the information in Problems 54 and 55, Nell had the following items in 2017:Personal casualty loss on an asset held for five years ..................
Nell, single and age 38, had the following income and expense items in 2017:Nonbusiness bad debt ....................................................$ 6,000Business bad debt

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