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Business Law
Both a value added tax (VAT) and a national sales tax have been criticized as being regressive in their effect. a. Explain. b. How could this shortcoming be remedied in the case of a national sales
Serena operates a lawn maintenance service in Southern California. As most of her employees are itinerant, they are paid on a day-to-day basis. Because of cash-flow problems, Serena requires her
Assess the probability of an audit in each of the following independent situations: a. As a result of a jury trial, Linda was awarded $3.5 million because of job discrimination. The award included $3
With regard to the IRS audit process, comment on the following: a. The audit is resolved by mail. b. The audit is conducted at the office of the IRS. c. A "no change" RAR results. d. A special agent
Aldo has just been audited by the IRS. He does not agree with the agent's findings but believes that he has only two choices: pay the proposed deficiency or resort to the courts. Do you agree with
What purpose is served by a statute of limitations? How is it relevant in the case of tax controversies?
World War II converted the Federal income tax into a mass tax? Explain.
Regarding the statute of limitations on additional assessments of tax by the IRS, determine the applicable period in each of the following situations. Assume a calendar year individual with no fraud
Brianna, a calendar year taxpayer, files her income tax return for 2013 on February 3, 2014. Although she makes repeated inquiries, she does not receive her refund from the IRS until May 28, 2014. Is
On a Federal income tax return filed five years ago, Andy inadvertently omitted a large amount of gross income. a. Andy seeks your advice as to whether the IRS is barred from assessing additional
Isabella files her income tax return 35 days after the due date of the return without obtaining an extension from the IRS. Along with the return, she remits a check for $40,000, which is the balance
For tax year 2011, the IRS assesses a deficiency against David for $500,000. Disregarding the interest component, what is David's penalty if the deficiency is attributable to: a. Negligence? b. Fraud?
In March 2014, Jim asks you to prepare his Federal income tax returns for tax years 2011, 2012, and 2013. In discussing this matter with him, you discover that he also has not filed for tax year
In terms of tax policy, what do the following mean? a. Revenue neutrality. b. Pay-as-you-go, or "paygo." c. Sunset provision. d. Indexation?
How does the pay-as-you-go procedure apply to wage earners? To persons who have income from sources other than wages?
A mother sells a valuable collection of antiques to her daughter for $1,000. What judicial concept might the IRS invoke to question this transaction?
Edward leases real estate to Janet for a period of 20 years. Janet makes capital improvements to the property. When the lease expires, Edward reclaims the property, including the improvements made by
Using Adam Smith's canon on economy, evaluate the Federal income tax?
The Adams Independent School District wants to sell a parcel of unimproved land that it does not need. Its three best offers are as follows: from the state's Department of Public Safety (DPS), $2.3
Interpret each of the following citations: a. Temp.Reg. § 1.956-2T. b. Rev.Rul. 2012-15, 2012-23 I.R.B. 975. c. Ltr.Rul. 200204051?
Sally Andrews calls you on the phone. She says that she has found a 2007 letter ruling that agrees with a position she wants to take on her tax return. She asks you about the precedential value of a
Dwain receives a 90-day letter after his discussion with an appeals officer. He is not satisfied with the $101,000 settlement offer. Identify the relevant tax research issues facing Dwain?
What is the primary purpose of effective tax planning? Explain.
Describe simulation questions on the CPA exam?
Rank the items below from most reliable to least reliable: a. Letter Ruling. b. Legislative Regulation. c. Code Section. d. Revenue Ruling. e. Proposed Regulation. f. Interpretive Regulation. g.
Using the legend provided, classify each of the following citations as to publisher: Legend RIA = Research Institute of America CCH = Commerce Clearing House W = West U.S. = U.S. Government O =
Using the legend provided, classify each of the following statements: Legend A = Tax avoidance E = Tax evasion N = Neither a. Sue writes a $707 check for a charitable contribution on December 28,
Interpret this Regulation citation: Reg. § 1.163-10(a)(2)?
Determine the missing data in these court decisions and rulings. a. Higgens v. Comm., 312 U.S._ _ _ __ (1941). b. Talen v. U.S., 355 F.Supp.2d 22 (D.Ct. D.C., _ _ _ __ _). c. Rev.Rul. 2008-18,
When Oprah gave away Pontiac G6 sedans to her TV audience, was the value of the cars taxable? On Labor Day weekend in 2006, World Furniture Mall in Plano, Illinois, gave away $275,000 of furniture
You are interviewing a client before preparing his tax return. He indicates that he did not list as income $96,000 received as a recovery for false imprisonment. What should you do with respect to
(1) Go to www.taxalmanac.org and use the website to find § 61(a).What is defined in this Code Section? Is the definition broad or narrow?(2) Go to www.legalbitstream.com and find the case in which
Go to the U.S. Tax Court website (www.ustaxcourt.gov). a. What different types of cases can be found on the site? b. What is a Summary Opinion? Find one. c. What is a Memorandum Opinion? Find one. d.
Patsy maintains a household that includes her eldest son (age 30) and one of Patsy's cousins (age 28). She can claim the cousin as a dependent but not her son? Explain.
Isabella, Emma, and Jacob share equally in the support of their parents. Jacob tells his sisters that they should split the dependency exemptions among themselves? Explain what Jacob means.
Mario, who is single, is a U.S. citizen and resident. He provides almost all of the support of his parents and two aunts, who are citizens and residents of Guatemala. Mario's parents and aunts are
Comment on the availability of head-of-household filing status in each of the following independent situations. a. Al lives alone but maintains the household of his parents. In July, the parents use
Several years ago, after a particularly fierce argument, Fran's husband moved out and has not been heard from or seen since. Because Fran cannot locate her husband, she uses a "married, filing
In connection with the application of the kiddie tax, comment on the following. a. The child generates only earned income. b. The child reports a modest amount of unearned income. c. The child is age
During the year, Hernando recorded the following transactions. How should Hernando treat these transactions for income tax purposes? • Gain on the sale of stock held as an investment for 10
Randy, Sarah, and Tori inherited equal shares in their grandmother's art collection. This year, they sold the collection to an art dealer. When they filed their tax returns, Randy's tax rate on the
Marcie is divorced, and her married son, Jamie (age 25), and his wife, Audrey (age 18), live with her. During the year, Jamie earned $4,800 from a part-time job and filed a joint return with Audrey
Compute 2014 taxable income in each of the following independent situations.a. Drew and Meg, ages 40 and 41 respectively, are married and file a joint return. In addition to four dependent children,
Determine the number of personal and dependency exemptions in each of the following independent situations. a. Reginald, a U.S. citizen and resident, contributes 100% of the support of his parents,
Determine how many personal and dependency exemptions are available in each of the following independent situations. Specify whether any such exemptions would come under the qualifying child or the
Jenny, age 14, lives in a household with her father, uncle, and grandmother. The household is maintained by the uncle. The parties, all of whom file their own Federal income tax returns, have AGI as
In each of the following independent situations, determine Winston's filing status. Winston is not married. a. Winston lives alone, but he maintains a household in which his parents live. The mother
Christopher died in 2012 and is survived by his wife, Chloe, and their 18-yearold son, Dylan. Chloe is the executor of Christopher's estate and maintains the household in which she and Dylan live.
Nadia died in 2013 and is survived by her husband, Jerold (age 44); her married son, Travis (age 22); and her daughter-in-law, Macy (age 18). Jerold is the executor of his wife's estate. He maintains
Using the Tax Rate Schedules, compute the 2014 tax liability for Charlotte. Charlotte (age 40) is a surviving spouse and provides all of the support of her four minor children, who live with her.
Use the Tax Rate Schedules to compute Morgan's 2014 Federal income tax liability. Morgan (age 45) is single and provides more than 50% of the support of Rosalyn (a family friend, age 36), Flo (a
During the year, Inez recorded the following transactions involving capital assets.Gain on the sale of unimproved land (held as an investment for 3 years) ............ $ 3,000Loss on the sale of a
During the year, Chester incurred the following transactions involving capital assets.Gain on the sale of an arrowhead collection (acquired as an investment at different times but all pieces have
Each year, Tom and Cindy Bates report itemized deductions of $10,000, including a $4,000 pledge payment to their church. Upon the advice of a friend, they do the following: in early January 2014,
In connection with the standard deduction, comment on the following. a. Percentage of taxpayers who chose the standard deduction rather than itemize. b. Status of a taxpayer who dies before
Tom and Sandy were divorced on July 7, 2011. Under the divorce decree, Sandy received full custody of their three children, and Tom was awarded the dependency exemptions for them. After the trial was
Kathy and Brett Ouray married in 1996. They began to experience marital difficulties in 2010 and, in the current year, although they are not legally separated, consider themselves completely
When taxpayers pay Federal income taxes by means of a credit or debit card, they are charged "convenience fees" by the issuer of the card. How are these fees determined?Are these fees themselves
Locate IRS Form 2120 at www.irs.gov, which is used to register a multiple support declaration for a dependency exemption.a. Who must sign the form?b. Who must file the form?c. Can the form be used
According to the Supreme Court, would it be good tax policy to use income as computed by financial accounting principles as the correct measure of income for Federal income tax purposes? Explain.
A Series EE U.S. government savings bond accrues 3.5% interest each year. The bond matures in three years, at which time the principal and interest will be paid. The bank will pay the taxpayer at a
The taxpayer performs services with payment due from the customer within 30 days. All customers pay within the time limit. What would be the benefit to the taxpayer using the cash method of
Wade paid $7,000 for an automobile that needed substantial repairs. He worked nights and weekends to restore the car and spent $2,400 on parts for it. He knows that he can sell the car for $13,000,
Anita, a cash basis taxpayer, sued her former employer for wage discrimination. Her attorney agreed to pursue the case on a contingent fee basis-the attorney would receive one-third of any settlement
Rex became a partner with a 30% interest in the partnership profits when he invested $200,000. In 2014, the partnership generated $400,000 of taxable income, and Rex withdrew $100,000. In 2015, the
Mark and Del were residents of Texas. In 2014, Del left Mark, and he has been unable to find her even though he hired a private investigator to do so. Mark and Del are still married at year-end. Both
The divorce agreement requires Alice to pay her former spouse $50,000 a year for the next ten years. Will the payments qualify as alimony? Why or why not?
Evaluate the following statement: "In dividing up assets when a couple divorces, the basis of the assets is not relevant because the property division is nontaxable"?
Compare and contrast the economist's concept used to recognize income with the concept employed in measuring taxable income?
Brenda loaned her son Bart $250,000 to purchase a new home. Brenda did not charge interest on the loan. Brenda was required to recognize imputed interest income, and Bart had imputed home mortgage
In the current year, the Rose Corporation made a $400,000 interest-free loan to John Rose, the corporation's controlling shareholder. Mr. Rose is also the corporation's chief executive officer and
Connor purchased an annuity that was to pay him a fixed amount each month for the remainder of his life. He began receiving payments in 1998, when he was 65 years old. In 2014, Connor was killed in
An employer provides all of his employees with life insurance protection equal to twice the employee's annual salary. Melba, age 42, has an annual salary of $70,000. Is Melba required to recognize
For a person who receives Social Security benefits, what effect, if any, can an increase in other income have on that person's taxable income?
Andy recently completed medical school and is beginning his medical practice. Most of his patients are covered by health insurance with a co-pay requirement (e.g., the patient pays $10, and the
Harper is considering three alternative investments of $10,000. Assume that the taxpayer is in the 28% marginal tax bracket for ordinary income and 15% for qualifying capital gains in all tax years.
Allen visits Reno, Nevada, once a year to gamble. This year his gambling loss was $25,000. He commented to you, "At least I didn't have to pay for my airfare and hotel room. The casino paid that
Determine the effects of the following on a cash basis taxpayer's gross income for 2014 and 2015. a. On the morning of December 31, 2014, the taxpayer received a $1,500 check from a customer. The
Marlene, a cash basis taxpayer, invests in Series EE U.S. government savings bonds and bank certificates of deposit (CDs). Determine the tax consequences of the following on her 2014 gross income: a.
Freda is a cash basis taxpayer. In 2014, she negotiated her salary for 2015. Her employer offered to pay her $21,000 per month in 2015 for a total of $252,000. Freda countered that she would accept
Ben lost his job when his employer moved its plant. During the year, he collected unemployment benefits for three months, a total of $1,800. While he was waiting to hear from prospective employers,
Rusty has been experiencing serious financial problems. His annual salary was $100,000, but a creditor garnished his salary for $20,000; so the employer paid the creditor (rather than Rusty) the
Troy, a cash basis taxpayer, is employed by Eagle Corporation, also a cash basis taxpayer. Troy is a full-time employee of the corporation and receives a salary of $60,000 per year. He also receives
Faye, Gary, and Heidi each have a one-third interest in the capital and profits of the FGH Partnership. Each partner had a capital account of $50,000 at the beginning of the tax year. The partnership
In 2014, Alva received dividends on her stocks as follows: Amur Corporation (a French corporation whose stock is traded on an established U.S. securities market)
Liz and Doug were divorced on December 31 of the current year after 10 years of marriage. Their current year's income received before the divorce was as follows: Doug's salary
Nell and Kirby are in the process of negotiating their divorce agreement. What should be the tax consequences to Nell and Kirby if the following, considered individually, became part of the
Pam retires after 28 years of service with her employer. She is 66 years old and has contributed $42,000 to her employer's qualified pension fund. She elects to receive her retirement benefits as an
The LMN Partnership has a group term life insurance plan. Each partner has $150,000 of protection, and each employee has protection equal to twice his or her annual salary. Employee Alice (age 32)
Herbert was employed for the first six months of 2014 and earned $90,000 in salary. During the next six months, he collected $8,800 of unemployment compensation, borrowed $12,000 (using his personal
Melissa, who is 70 years old, is unmarried and has no dependents. Her annual income consists of a taxable pension of $17,000, $14,000 in Social Security benefits, and $3,000 of dividend income. She
Donna does not think she has an income tax problem but would like to discuss her situation with you just to make sure there is no unexpected tax liability. Base your suggestions on the following
Cecil C. Seymour is a 64-year-old widower. He had income for 2014 as follows:Pension from former employer ..................................................... $39,850Interest income from Alto
What is the purpose of the constructive receipt doctrine?
Sandra, a cash basis taxpayer, purchased a certificate of deposit for $970 on July 1, 2014, that matures on June 30, 2015, with the maturity value being $1,000. Also on July 1, 2014, she purchased a
Your client was the beneficiary of an annuity contract purchased by her stepmother. When the stepmother died, the insurance company paid the client $400,000 and sent her a Form 1099 indicating that
Your client is a new retailer who often issues store gift (debit) cards to customers in lieu of a cash refund. You recall that the IRS issued a Revenue Procedure that provided that the prepaid income
Lottery winnings are taxable for Federal income tax purposes. What many lottery hopefuls forget to factor into their tax considerations are that lottery winnings are also taxable in many states.
Go to the web page of a consulting firm that offers counseling services to individuals as they negotiate the terms of a divorce. What specific tax-related services do these firms offer? Suggest a new
Billy fell off a bar stool and hurt his back. As a result, he was unable to work for three months. He sued the bar owner and collected $100,000 for the physical injury and $50,000 for the loss of
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