Questions and Answers of Taxation

Mr. Tolen made the following interest payments. Determine the extent to which he can deduct each payment on his Form 1040. a. $4,600 on credit card debt. b. $14,100 on a $210,000 mortgage secured by
Buddy Bushey is a student at a local community college. This year, he received a $20,000 living allowance from his parents and an $11,500 academic scholarship from a civic club. This scholarship paid
Mr. and Mrs. Kilo purchased their first home in 2003 for $240,000. They sold this home in 2007 for $210,000. They purchased their second home in 2008 for $435,000 and sold it this year for
On January 12, 2015, Mr. and Mrs. Nixon moved out of their old residence (where they had lived for 22 years) and into a new residence purchased nine days earlier on January 3.They finally sold their
Mrs. Small had the following items of financial support this year: Social Security benefits ...................................... $13,670 Pension from her former employer ..........................
Mr. and Mrs. FP bought $500 worth of Girl Scout cookies from their godchild. Because they don't eat sweets, they gave away every box to various friends and family members.Identify the tax issue or
For the past 10 years, Mr. Y lived on his sailboat for eight months of the year and spent the other four months in his daughter's home. This year, he realized a $35,200 gain on sale of the boat and
On a recent scuba dive, Mr. UW located a shipwreck and recovered a Spanish sword inlaid with precious stones. The sword's appraised value is $11,500. Mr. UW mounted the sword over his
The pilots of Skyway Airlines have been on strike for four months. Ms. BG received a $2,700 benefit from her union, the Airline Pilots Association International. The union funded the benefits for
Zachary and Stella Hernandez divorced this year. The divorce agreement reads, "Zachary Hernandez shall pay Stella Hernandez $1,750 every month. This payment is in complete satisfaction of Mr.
Eighteen months ago, Barry Shelton won a $2 million Maryland state lottery jackpot and chose to receive it as $120,000 annual annuity for the rest of his life. This year his brothers persuaded him to
Mr. and Mrs. JM, ages 68 and 66, always claim the standard deduction on their joint return. They own a local restaurant, the Shoreline Grill, as a sole proprietorship. They are both graduates of
Which has the greater chance of audit: a Form 1040 with $200,000 AGI, all of which is salary income, or a Form 1040 with $200,000 AGI, all of which is net profit from a sole proprietorship?
Percy Wilson is a calendar year taxpayer. What is the un-extended filing date of Percy Wilson's 2017 federal income tax return if: a. Percy Wilson Inc. is a corporation? b. Mr. Percy Wilson is an
LZ Corporation uses a fiscal year ending September 30. The controller filed LZ's Form 1120 for the year ending September 30, 2018, on October 23, 2018. a. What is the last day on which the IRS may
Mrs. Fugate, who is divorced, failed to include $28,000 alimony on her 2016 Form 1040. The only gross income she reported was her $78,000 salary. She filed her return on January 19, 2017. a. What is
Egolf Corporation failed to include $300,000 of taxable interest income on its 2017 calendar year Form 1120. The gross income reported on the return was $4.7 million, and the return was filed on
A revenue agent determined that Ms. Owen understated her tax by $48,100 and concluded that $9,200 was caused by her inadequate record keeping while the remainder was caused by her misapplication of a
The revenue agent who audited Mr. and Mrs. Arnold's Form 1040 concluded that the couple failed to report $16,900 of taxable income for the year. As a result, the IRS assessed a $4,225 deficiency of
During the audit of Mr. and Mrs. Jessel's 2014 and 2015 tax returns, the revenue agent learned that they kept two sets of books for their sole proprietorship. A comparison of the two revealed that
Mr. and Mrs. Lear filed their 2015 Form 1040 on April 1, 2016. In November 2017, they received a notice of deficiency in which the IRS assessed $19,044 of additional 2015 income tax. Compute the
Mr. Leon filed his 2015 Form 1040 by the April 15, 2016, filing date. In 2018, the IRS issued a notice of deficiency to Mr. Leon, in which it assessed $7,700 of additional 2015 income tax. Compute
Mr. and Mrs. Boyd Knevel use a fiscal year ending July 31 as the taxable year for filing their joint Form 1040. a. What is the last date on which the Knevels can apply for an automatic extension of
Zucker Inc. uses a fiscal year as the taxable year for filing its Form 1120.a. If Zucker's fiscal year ends on March 31, what is the filing date and the extended filing date for Zucker's Form 1120
Mr. and Mrs. Pratt failed to apply for an extension of time to file their 2016 Form 1040 and didn't mail the return to the IRS until May 29, 2017. Assuming the Pratts had no excuse for filing a
Mr. and Mrs. Wickham did not apply for an extension of time to file their 2016 Form 1040. Because they were vacationing outside the United States, they neglected to file their Form 1040 until July
Mr. Hall prepared and signed last year's tax return on April 3. However, he forgot to mail the return until the morning of April 20. He enclosed his check for the $3,612 balance of tax due with the
Mr. Davis filed a delinquent tax return on July 27. The return reflected $3,700 total tax, $4,000 withholding, and a $300 refund due. Compute his late-filing penalty?
On April 13, Mr. LP applied for an automatic extension of time to file his Form 1040. He estimated that the balance of tax due was $3,800, which he paid with the extension request. He filed his
Mr. T has not paid income tax or filed a tax return for the last eight years. He believes that the IRS can no longer assess back taxes for the first five of those years.Identify the tax issue or
KP, a calendar year corporation, filed its 2013 return on March 8, 2014. On February 19, 2017, it filed an amended 2013 return reflecting $2.61 million less taxable income than the original return
Mr. B, a self-employed consultant, charged a client a $15,000 fee plus $3,900 reimbursable business expenses. The client paid the $18,900 bill and sent a Form 1099 reporting $18,900 income. When Mr.

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