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Business Law
Mary Marble took out a homeowner's insurance policy on her residence. One of the policy provisions listed the insured's duties with respect to a loss. This provision required the policyholder to give
Robert purchased and placed in service $100,000 of 7-year class assets on August 10 of the current year. He also purchased and placed in service $500,000 of 5-year class assets on November 15 of the
Discuss the general cost recovery method for farming assets?
Jim owns a very large ranch. A large part of his business is the production and raising of breeding cattle. Jim understands that he is entitled to use MACRS cost recovery on breeding cattle. Identify
Discuss the cost recovery periods and methods to be used on leasehold improvement property owned by the lessee?
Explain how the § 179 limited expensing deduction affects the computation of MACRS cost recovery?
Discuss the treatment of a § 179 expensing carry forward?
Discuss the implications of an automobile that is used in a trade or business and has a gross vehicle weight (GVW) exceeding 6,000 pounds?
Discuss how the limits on cost recovery apply to listed property?
Discuss the tax consequences if the business use percentage of listed property falls to 50% or lower after the year the property is placed in service?
Harold and Bart own 75% of the stock of Orange Motors. The other 25% of the stock is owned by Jeb. Orange Motors entered into an agreement with Harold and Bart to acquire all of their Orange stock.
Discuss the amortization of startup expenditures?
In May 2014, 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
Discuss how the cost of mineral rights enters into the calculation of cost depletion?
José purchased a house for $300,000 in 2011. He used the house as his personal residence. In March 2014, when the fair market value of the house was $400,000, he converted the house to rental
Orange Corporation acquired new office furniture on August 15, 2014, for $210,000. Orange elects immediate expensing under § 179. Orange does not claim any available additional first-year
Weston acquires a new office machine (7-year class asset) on November 2, 2013, for $75,000. This is the only asset Weston acquired during the year. He does not elect immediate expensing under § 179.
Juan acquires a new 5-year class asset on March 14, 2014, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under § 179. He does not claim any
On August 2, 2014, Wendy purchased a new office building for $3.8 million. On October 1, 2014, she began to rent out office space in the building. On July 15, 2018, Wendy sold the office building. a.
On April 3, 2014, Terry purchased and placed in service a building. The building cost $2 million. An appraisal determined that 25% of the total cost was attributed to the value of the land. The
At the beginning of the current year, Henry purchased a ski resort for $10 million. Henry does not own the land on which the resort is located. The Federal government owns the land, and Henry has the
On March 15, 2014, 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, 2014, 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, 2014. The corporation incurs startup expenditures of $64,000. If Oleander elects § 195 treatment, determine the total amount
Martha was considering starting a new business. During her preliminary investigations related to the new venture, she incurred the following expenditures. Salaries
Chris purchased an oil interest for $2 million. Recoverable barrels were estimated to be 500,000. During the year, 120,000 barrels were sold for $3.84 million, other business expenses (including cost
John Smith, age 31, is single and has no dependents. At the beginning of 2014, John started his own excavation business and named it Earth Movers. John lives at 1045 Center Street, Lindon, UT, and
Discuss the computation of cost recovery in the year an asset is placed in service when the mid-quarter convention is being used?
Discuss the computation of cost recovery in the year of sale of an asset when the mid-quarter convention is being used?
Your client, Dave's Sport Shop, sells sports equipment and clothing in three retail outlets in New York City. Earlier this year, the CFO decided that keeping track of inventory using a combination of
In 2010, Jed James began planting a vineyard. The costs of the land preparation, labor, rootstock, and planting were capitalized. The land preparation costs do not include any non-depreciable land
Changes to depreciation systems often are discussed by policymakers and observers of the tax system. Outline the terms and policy objectives of one of the changes currently proposed by the Treasury,
Sophia and Jacob are married and file a joint return. The return for 2013 included a Form 2106 for each of them. The return for 2014, however, included a Form 2106 and a Schedule C. In terms of
Explain the difference between travel expenses and transportation expenses?
Lance, who practices law in New York City, leaves his office on Tuesday at 4:00 A.M., flies to Los Angeles, makes a court appearance at 1:00 P.M., and flies back to New York that same day. a. Was
The lodging expense of an employee who is not away from home overnight can never be deductible. Do you agree with this statement? Explain.
Dr. Werner is a full-time professor of accounting at Pelican University. During the year, he teaches continuing education programs for CPA groups in several cities. He also serves as an expert
Bill and Jean Wilder attend a three-day seminar in Chicago on current developments in taxation. Bill is a partner in a law firm in Memphis specializing in tax practice, while his wife, Jean, is a
Rick is scheduled to go to London on business and would like to do some sightseeing while there. A colleague advises him that to maximize his deductible expenses, he should plan the business and
To qualify for the moving expense deduction, a taxpayer must satisfy a time test. a. What is the time test? b. When might the taxpayer be excused from satisfying the time test? c. What reporting
Emma, who lives and works in Wisconsin, is planning to retire and move to Costa Rica. She has heard that when you retire and move to a foreign country, all moving xpenses are deductible. Does Emma
Jamie has an undergraduate degree in finance and is employed full-time by a bank. She is taking courses at a local university leading to an MBA degree. a. Is the cost of this education deductible to
In connection with § 222 (deduction for qualified tuition and related expenses), comment on the relevance of the following: a. The standard deduction is claimed. b. Enrollment at a college does not
Yolanda is employed but is not reimbursed by her employer for her job-related expenses. If Yolanda always claims the standard deduction, she can never deduct any of these expenses. Do you agree with
In each of the following situations, indicate whether there is a cutback adjustment. a. Each year, the employer awards its top salesperson an all-expense-paid trip to Jamaica. b. The employer has a
At the last minute, a law firm purchases 10 tickets to the Super Bowl to entertain certain key clients. Comment on some possible tax ramifications of this situation?
In connection with the office in the home deduction, comment on the following: a. The exclusive use requirement. b. The distinction between direct and indirect expenses. c. The effect of the
Review the advantages and disadvantages of the new simplified method for determining the office in the home deduction?
Trent, a resident of Florida, attends Rice University. After graduation, he moves to Dallas, where he begins a job search. Shortly thereafter, he accepts a position with a local TV station as a
Regarding the tax implications of various retirement plans, comment on the following: a. The difference between Keogh (H.R. 10) and traditional deductible IRA plans. b. The difference between
Joey, who is single, is not covered by another qualified plan and earns $116,000 at his job in 2014. How much can he contribute to a traditional IRA or to a Roth IRA in 2014?
What tax return reporting procedures must be followed by an employee under the following circumstances? a. Expenses and reimbursements are equal under an accountable plan. b. Reimbursements at the
Comment on the deductibility of each of the following items: a. Club dues for the Coronado Club. Taxpayer, a lawyer, uses the luncheon club exclusively for business. b. Cost of dry cleaning uniforms
During the year, Olivia holds two jobs. After an eight-hour day at the first job, she works three hours at the second job. On Fridays of each week, she returns home for dinner before going to the
Jackson uses his automobile 90% for business and during 2014 drove a total of 14,000 miles. Information regarding his car expenses is listed below. Business parking
On July 1, 2010, 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 2010, 19,000 miles in 2011, 20,000 miles in 2012, and
Kim works for a clothing manufacturer as a dress designer. She travels to New York City to attend five days of fashion shows and then spends three days sightseeing. Her expenses are as
Monica travels from her office in Boston to Lisbon, Portugal, on business. Her absence of 13 days was spent as follows: Thursday ........................... Depart for and arrive at Lisbon Friday
Caden, a financial planner, decides to quit his job with an investment bank in Charleston, South Carolina, and establish a private practice in Santa Fe, New Mexico. In connection with the move, he
Bernard operates a hair styling salon as a sole proprietor. Because his shop has several extra workstations that are not being used, he is considering renting these to other stylists, but he wants to
After being downsized by his former employer, in November 2013, Wayne moves from Minnesota to Alabama to accept a new job. When filing his Federal income tax return for 2013, Wayne deducts the
Eric is a licensed commercial pilot who works for Snipe Charter Jet Service. Typically, Eric, who lives near the airport, flies a charter out of Tupelo (MS), to either Las Vegas or Reno, spends
Stork Associates paid $60,000 for a 20-seat skybox at Veterans Stadium for eight professional football games. Regular seats to these games range from $80 to $250 each. At one game, an employee of
During the current year, Paul, the vice president of a bank, made gifts in the following amounts: To Sarah (Paul's personal assistant) at Christmas .................... $36 To Darryl (a key
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
Christine is a full-time teacher of the fourth grade at Vireo Academy. During the current year, she spends $1,400 for classroom supplies. On the submission of adequate substantiation, Vireo
Amber's employer, Lavender, Inc., has a § 401(k) plan that permits salary deferral elections by its employees. Amber's salary is $99,000, and her marginal tax rate is 33%.a. What is the maximum
In mid-2014, Madison goes to work for Knot Corporation. In January 2015, she receives a Form 1099 from Knot reflecting her classification as an independent contractor. Madison disagrees with this
Answer the following independent questions with respect to traditional IRA contributions for 2014: a. Juan, age 41, earns a salary of $28,000 and is not an active participant in any other qualified
Jimmy establishes a Roth IRA at age 47 and contributes a total of $89,600 over 18 years. The account is now worth $112,000. How much of these funds may Jimmy withdraw tax-free?
Audry, age 38 and single, earns a salary of $59,000. She has interest income of $1,600 and has a $2,000 long-term capital loss from the sale of a stock investment. Audry incurs the following
Ava recently graduated from college and is interviewing for a position in marketing. Gull Corporation has offered her a job as a sales representative that will require extensive travel and
B. J. and Carolyn Grace are full-time employees. B. J. is an elementary school teacher, and Carolyn is a registered nurse at a hospital. During the year, they incur the following employment-related
In terms of characteristics, how are statutory employees similar to common law employees? To independent contractors?
Complete the following table by classifying each of the independent expenditures (assume that no reimbursement takes place).
Addison Parker, single and age 32, lives at 3218 Columbia Drive, Spokane, WA 99210. She is employed as regional sales manager by VITA Corporation, a manufacturer and distributor of vitamins and food
The IRS presumes that two types of workers should be classified as independent contractors. Who are these workers, and why is the automatic classification justified?
In 2012, 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
Your client, a large construction firm organized as a C corporation, allows certain employees (including the president of the corporation) to use its company owned airplane for non-business flights.
What are the guidelines regarding the deductibility of luxury water travel (e.g., cruise ship) for business purposes? Refer to Chapter 1 of IRS Publication 463.
Dan, a self-employed individual taxpayer, prepared his own income tax return for the past year and has asked you to check it for accuracy. Your review indicates that Dan failed to claim certain
A local ophthalmologist's advertising campaign included a certificate for free LASIK eye surgery for the lucky winner of a drawing. Ahmad held the winning ticket, which was drawn in December 2013.
In 2014, a state issued checks to homeowners as a rebate of property taxes. Funds for the rebate were available because of unexpectedly high state tax revenues due to a new law that legalized
Diane owns a principal residence in Georgia, a townhouse in San Francisco, and a yacht in Cape Cod. All of the properties have mortgages on which Diane pays interest. What are the limitations on
Mason Gregg's car was destroyed by a flood. Unfortunately, his insurance had lapsed two days before he incurred the loss. Mason uses his car for both business and personal use. Mason, who is
Commercial Bank has initiated an advertising campaign that encourages customers to take out home equity loans to pay for purchases of automobiles. Are there any tax advantages related to this type of
Thomas purchased a personal residence from Rachel. To sell the residence, Rachel agreed to pay $5,500 in points related to Thomas's mortgage. Discuss the deductibility of the points.
Ellen borrowed $50,000 from her parents for a down payment on the purchase of a new home. She paid interest of $3,200 in 2012, $0 in 2013, and $9,000 in 2014. The IRS disallowed the deduction. What
The city of Lawrence was hit by a tornado in April 2014, leaving many families in need of food, clothing, shelter, and other necessities. Betty contributed $500 to a family whose home was completely
Mike purchased four $100 tickets to a fund-raising dinner and dance sponsored by the public library, a qualified charitable organization. In its advertising for the event, the library indicated that
Nancy, who is a professor at State University, does some of her writing and class preparation at home at night. Her department provides faculty members with a $1,500 allowance for a desktop computer
Barbara incurred the following expenses during the year: $840 dues at a health club she joined at the suggestion of her physician to improve her general physical condition, $240 for multiple vitamins
Susan traveled to rural Tennessee during the year to do volunteer work for one week for Habitat for Humanity. She normally receives $2,000 salary per week at her job and is planning to deduct the
William, a high school teacher, earns about $50,000 each year. In December 2014, he won $1 million in the state lottery. William plans to donate $100,000 to his church. He has asked you, his tax
Nate, whose combined Federal and state income tax rates total 40% in 2014, expects to retire in 2015 and have a combined tax rate of 30%. He plans to donate $100,000 to his church. Because he will
Megan decided to have a garage sale to get rid of a number of items she no longer needed, including books, old computer equipment, clothing, bicycles, and furniture. She scheduled the sale for Friday
For calendar year 2014, 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 a policy covering 2014.
During 2014, Susan, age 49, incurred and paid the following expenses for Beth (her daughter), Ed (her father), and herself: Surgery for Beth
In May, Rebecca's daughter, Susan, sustained a serious injury that made it impossible for her to continue living alone. Susan, who is a novelist, moved back into Rebecca's home after the accident.
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