Questions and Answers of Taxation

Q:

What is a tax? How does a tax differ from a fine?

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Differentiate the tax treatment of an individual's capital losses from the tax treatment of corporate capital losses.

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What are the basic tax rates for an individual and a corporation?

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What are two fiduciary entities and how are they created? Define grantor, trustee, and beneficiary for a trust.

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Which version of the tax code is applicable today?

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If a taxpayer has $140,000 of employee salary, how much will be withheld for the Social Security and Medicare taxes in 2016?

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Determine Amy's taxable income for 2016 if she has $40,000 of salary income, is single, and has $10,350 in total allowable deductions.

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Marlee is a single parent with $25,450 in total allowable deductions and qualifies as head of household for 2016. Determine her taxable income if she

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Determine George and Mary's taxable income and tax liability for 2016 if George has $65,000 and Mary has $45,000 of salary income, they have $36,200

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Refer to the information in problem 34. Determine Warner Corporation's income tax liability. Data from problem 34 The Warner Corporation has gross

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Define tax expenditure?

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Explain the integration of the gift and estate taxes.

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Sally and Jim are married and have taxable income in 2016 of $160,000. If they could file their income tax as single individuals, each of them would

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Conrad and Anita (a college student with no income) plan to marry on December 21, 2016. Filing jointly, they expect to have $180,000 of taxable

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Carrie and Stephen have gross salary and wages of $76,000 in 2016 and file a joint return. They have $27,150 of total allowable deductions and a $240

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An estate has $20,000 of taxable income in 2016. What amount of tax will the estate pay if it fails to distribute the income to the beneficiaries?

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Lilikoi Corporation began business in 2014. Lilikoi earned taxable income of $40,000 in 2014 and $120,000 in 2015. For 2016, Lilikoi Corporation has

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June and John decide to form a business. They each plan to contribute $20,000 in exchange for a 50 percent interest in the business. They will then

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John and Martha are planning to be married. Both are professionals each with taxable incomes of $89,700 annually. They are deciding on a wedding

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Jeremy is setting up a service business. He can either operate the business as a sole proprietorship or he can incorporate as a regular C

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Carol has recently incorporated her sole proprietorship and is considering making an S election. The corporation has $200,000 of gross revenue and

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What is the maximum income tax rate that applies to the employee salary, the employment tax rate(s) on the salary, and the capital gain rate(s) on

Q:

Differentiate a consumption based tax from an income tax and illustrate with an example.

Q:

How does a franchise tax differ from an income tax?

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Go to www.taxfoundation.org (the Web site for the Tax Foundation). a. What is Tax Freedom Day? b. When were Tax Freedom Days in 2014 and 2015?

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What employment taxes are imposed on an employee and an employer?

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Over what ranges of taxable income in 2016 will the total income tax liability two persons with equal incomes who file as single individuals equal

Q:

Differentiate a progressive tax system from a proportional and a regressive system and give examples of each.

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What basic tax rates apply to the ordinary income, dividend income, and interest income of an individual? What are they for a corporation?

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What tax rates apply to an individual's capital gains and to which tax brackets do each of this rates apply?

Q:

Briefly explain Adam Smith's four canons of taxation.

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What Constitutional Amendment allowed implementation of an income tax? In what year was it ratified?

Q:

Explain the business purpose doctrine.

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In the citation Reg. §1.247-3, what do the 1 and the 247 indicate?

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What does it mean when a Tax Court decision says that the decision has been entered under Rule 155?

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What are the four sections of a memo to the file? Explain what each section should include.

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Kevin deliberately omitted $40,000 of gross income from his restaurant on his 2016 tax return. The return indicated gross income of $200,000 when

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Alison accidentally omitted $40,000 of gross income from the restaurant she owned on her 2015 tax return. The return showed gross income of $150,000

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Thomas received $30,000 in a legal settlement in 2016. The tax treatment of the item is not certain. Thomas's research results were ambiguous and he

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Cynthia and Howard, married taxpayers filing a joint return, have $100,000 in taxable income in 2016. They have 4 children (ages 4 through 12) who

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What are the three courts in which a taxpayer initiates tax litigation to settle a dispute with the IRS? To which courts can adverse decisions from

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Go to www.aicpa.org (the AICPA's Web site) and search for Statements on Standards for Tax Services. Read the history section of the most recent

Q:

Jim was reviewing several of a client's prior tax returns in preparation for completing the current year's return. Jim discovered a serious error on

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Your client, Ms. I.M. Gorgeous, is an aspiring actress. She has managed to earn a living doing television commercials but was unable to get the

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Last year your client, Barney Bumluck, worked part-time for Timely Tax Return Preparation Service. Barney was promised an hourly wage plus a

Q:

Your clients, Sonny and his wife Honey, believe in worshiping Ta-Ra, the Sun God. To practice their religious beliefs, they take a weeklong trip to

Q:

Fred Fisher is a licensed scuba diver who lives in Key Largo. He is employed full-time as an engineer. Five years ago he had been employed as a

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Locate and read Greg McIntosh, TC Memo 2001-144, 81 TCM 1772, RIA TC Memo ¶2001-144 (6/19/2001). Answer the following questions. a. What

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Locate and read the following two cases: J.B.S. Enterprises, Inc., T.C. Memo 1991-254,61 TCM. 2829, 1991 PH T.C. Memo ¶91,254 Summit Publishing

Q:

Explain the realization principle.

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Explain how the community property laws can affect the allocation of income between spouses.

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At the beginning of the current year, Martha, a cash-basis taxpayer, purchased a $10,000 three-year bond from Lauderhill Corporation at its issue

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Provide three reasons why generally accepted accounting principles are not allowed for tax purposes.

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At the end of October, year 1, Dunbar Corporation hired Specialty Training, an accrual-basis, calendar-year taxpayer, to provide a six-week training

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Mac's 24-year-old daughter, Alana, is a full-time student. In 2016, Mac gives Alana 600 shares of Highgrowth stock. Mac purchased the stock 10 months

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What are two major categories of differences between financial accounting income and taxable income?

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What types of investments are favored by tax law and why?

Q:

Krystyna, a single individual, invested $20,000 in corporate bonds with a stated interest rate of 5 percent and another $20,000 in tax-exempt

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Justin's 24-year-old son, Carlos, is a full-time student. In April 2016, Justin gave Carlos 450 shares of Striker Oil stock. Justin purchased the

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Some politicians have proposed changing the way Social Security benefits are taxed. One proposal would increase the amount of Social Security

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U.S. citizens residing in certain countries are exempt from U.S. tax on their social security benefits. Go to the IRS Web site (www.irs.gov) and

Q:

Gamma Corporation, a calendar-year accrual-basis taxpayer, operates department stores. Alpha Corporation and Beta Corporation are wholly-owned

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Thomas ran for Congress, raising $2 million for his campaign. Six months after losing the election, auditors discovered that Thomas kept $160,000 of

Q:

Samantha has been unemployed for some time and is very short of money. She learned that the local blood bank has a severe shortage of her type of

Q:

Alice and Manny agree to divorce. Alice proposes that Manny purchase and assign to her a life insurance policy on his life as part of the divorce

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A minister receives an annual salary of $16,000 in addition to the use of a church parsonage with an annual rental value of $6,000. The minister

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John is a single individual who works for Auto Rental Cars in Japan during the entire calendar year. His salary is $140,000. How much of this salary

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Nick, age 53, is single and has AGI of $63,000. He contributes $5,000 to his IRA in 2016. a. How much can Nick deduct if he is not covered by an

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Jennifer, age 35, is single and is an active participant in her employer's qualified retirement plan. Compute the maximum Roth IRA contribution that

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Carrie owns a business that she operates as a sole proprietorship. The business had a net profit of $25,000 in 2016. This is Carrie's only earned

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George has $83,000 in salary from his full-time position and $43,000 in net income in 2016 from his sole proprietorship. What is his self-employment

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Luis operates a bakery as a sole proprietorship which generated $280,000 in net income. He has four bakers whom he employs on a full-time basis and

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Global Corporation is looking for a new CEO. The board of directors selected Miguel as the top candidate. During negotiations, Miguel indicated he

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Evan is setting up a new business. He can operate the business as a sole proprietorship or he can incorporate as a regular C corporation or as an S

Q:

Go to www.legalbitstream.com. Locate and read Revenue Ruling 2003-102. What type of medicines and drugs can be reimbursed through a flexible spending

Q:

Martin Martindale, the 40-year-old founder and President of Martindale Corporation (an accrual-basis calendar-year C corporation), owns 60 percent of

Q:

McGuire Corporation is planning to acquire a corporate jet to increase the efficiency and security of its executives who will use the jet for both

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Robert, age 35, has accumulated $36,000 in his traditional IRA. He recently married and would like to withdraw $25,000 from his IRA for a down

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Jennifer, age 40, has accumulated $40,000 in her traditional IRA. She would like to withdraw $22,000 from her IRA to pay for her daughter's college

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Elena is single but her mother, Maria, lives with her. Maria's sole income is $7,000 in Social Security (which she saves for unexpected medical

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Mark and Patricia report adjusted gross income of $380,500 and itemized deductions of $64,000 for the interest on home acquisition mortgage

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Cindy files as head of household and has three dependent children ages 12, 14, and 16. Her AGI is $80,000. How much can Cindy claim for the child tax

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Greg and Barbara, a married couple with an AGI of $80,000, have three children who are full-time college students. They pay $6,000 for tuition

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Doris is a single individual with modified AGI of $56,000. During the year, she paid $11,000 tuition for a master's in taxation program. How much can

Q:

Roland worked for Sorbonne Company for the first four months of 2016and earned $40,000 from which his employer withheld $3,060 for payroll taxes. In

Q:

Linda received $90,000 in salary income for 2016. She has no dependents. Determine her income tax liability under each of the following independent

Q:

Andrew, a single individual, has $220,000 in salary and $60,000 in self-employment income in 2016. How much must he pay for his additional Medicare

Q:

Lenora and Sam are married and file a joint tax return. Lenora has $180,000 in salary and Sam has $190,000 in self-employment income in 2016. How

Q:

During 2016, Raymond, a single individual, earned a salary of $196,000. He also had the following items of investment income: $40,000 net short-term

Q:

Michelle, a single individual, reports 2016adjusted gross income of $280,000 and has the following itemized deductions before applicable

Q:

Which of the following individuals must file a tax return in 2016? a. Carolyn is single and age 66. She receives $2,000 of interest income, $3,000 of

Q:

Kelly Martin is divorced; her dependent child, Barbara, lives with her and is her dependent. Kelly has the following items of income and

Q:

Differentiate between an abandoned spouse and a surviving spouse.

Q:

Jennifer and Jason Greco are married and file a joint tax return. Their two dependent children (Jim, age 14 and Jessica, age 16); both live at home.

Q:

Lauren is single, age 60, and has an annual salary of $68,000. She paid off her mortgage in December 2015 but expects that her annual real estate

Q:

Manuel plans to make a significant contribution to his favorite charity with one of the following assets. Which asset would you recommend Manuel

Q:

When would a taxpayer claim the standard deduction rather than itemizing deductions?

Q:

Don has a very painful terminal disease and has learned that marijuana may mitigate his pain. Don lives in a state in which it is legal to use the

Q:

Charlene provides 100 percent of the support for her elderly handicapped mother, Amanda. Amanda insists on living alone in her own apartment even

Q:

Howard is a single parent with an 11-year-old dependent son. The son currently attends sixth grade at public school. Howard accepts a temporary

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