Questions and Answers of Concepts In Federal Taxation

Under what conditions are the Exempt Model and Pension Model equivalent? Under what conditions would one model perform better than the other? How does the $$6,500$ limitation on deductible and Roth
Suppose a bond is taxable for both federal and state purposes. Let Rb = the BTROR on the bond, tfed = the federal tax rate, and tst = the state tax rate. Determine the ATROR (i.e., after federal and
Harry wants to contribute either $$6,500$ (BT$$)$ to a traditional deductible IRA or $$6,500$ (AT$$)$ to a Roth IRA. His current tax rate is 30%for ordinary income and 15% for capital gains.
Consider three taxpayers who are in the following tax brackets: Alice 25% Brad 35% Camille 40%
Rita, a calendar year taxpayer, is an employee of the RST Partnership, which has a June 30 year-end. The partnership pays Rita a salary of 2,500 per month for the period January 1 through June 30,
Charles is a 60% partner in CD Partnership, a calendar year partnership. For 2023, Charles received a Schedule K-1 that reported his share of partnership items as follows:In addition, Charles and his
The XYZ Partnership reports the following items during 2022:Calculate ordinary income (or loss) by completing page 1 of Form 1065, and complete Schedule K (Partners’ Shares of Income, Credits,
Eagle Corporation, an S corporation, reports the following items during 2022:Calculate ordinary income (or loss) by completing page 1 of Form 1120-S, and complete Schedule K (Shareholders’ Shares
In January 2022, Joey contributed investment land he had held two years with a FMV of $$6,000$ and an adjusted basis of $$10,000,$ and Rachel contributed $$6,000$ cash to form the Green
Your client, Mr. Stench, is in the garbage business. He purchased an old excavation site because it has a large hole in which he can dump garbage. Mr. Stench paid $$30,000$ for the site and, based
Agnew Corporation has been successful in recent years, with its annual net income growing from about $$50$ million to $$100$ million. The individuals who started Agnew several years ago own all
Blazic Corporation is subject to the book minimum tax. For the current year, its adjusted financial statement income is about 20% larger than its taxable income. Explain why Blazic’s book minimum
For 2023, Alpha Corporation reports $$500,000$ of gross income from business operations and $$625,000$ of allowable business deductions. It also received from a domestic corporation $$150,000$
Yellow Corporation is subject to the book minimum tax. For the current year, its financial statement net income is $$2.5$ billion, and its taxable income is $$2.0$ billion. Net income reflects
Euclid Corporation is subject to the book minimum tax. It has the following adjusted financial statement incomes (before the adjustment for prior financial statement losses):All four of these years
Badger Corporation is subject to the book minimum tax. The following information pertains to Badger for Years 1 and 2:a. What is Badger’s book minimum tax for Year 1?b. What is Badger’s book
Ohio Corporation has a $$40,000$ accumulated E&P balance at the beginning of the current year, and it has a $$73,000$ current E&P deficit for the current year (which is not a leap year). The
Mallard Corporation is a C corporation and is located at 3800 Market Street, Johnsonville, Colorado 81733. It was incorporated on June 27, 1981, its employer identification number is 44-9876543, and
Limestone Corporation is a C corporation that uses the calendar year as its tax year. Its employer identification number is 44-1357913. Limestone is located at 234 Main Street, Anytown, New York
Beth in Case Study Problem I:16-67 also wants to know whether she can make a $$50,000$ capital contribution to the corporation without the corporation’s issuing additional shares.If so, should
In 2020, Peter purchased 150 shares of Able Manufacturing Corporation stock for $$75,000.$ Able is a C corporation that has 40 shareholders. None of the other 39 shareholders own more than 5% of
Erin Brinson founded BCD Corporation in 1993 with a contribution of $$50,000$ cash.The entity has always been a C corporation and Erin has not made any other capital contributions nor has BCD made
Brad and Valerie decided to adopt a child and contacted an adoption agency in August 2022. After extensive interviews and other requirements (such as financial status, etc.), Brad and Valerie were
Reagan and Grady Wade are married with three qualifying children under the age of 17. In 2022, Reagan and Grady had earned income of $$50,000$ and no adjustments. Line 11 of their 1040 reports AGI
Debbie owns a building with a basis of $$300,000$ and a holding period starting on May 10, 2011.Debbie exchanges the building for a building owned by Doug on July 23, 2023. Doug’s building has a
The Nelsons purchased a new residence in 2006 for $$300,000$ from David who owned and used the residence as rental property. When the Nelsons wanted to purchase the property, it was being rented to
The Madison Corporation paid $$3,000$ for several acres of land in 1999 to use in its business. The land is condemned and taken by the state in March 2023. The company receives $$25,000$ from the
On April 27, 2023, an office building owned by the Ava James Corporation, an offshore drilling company that is a calendar-year taxpayer, is destroyed by a hurricane. The basis of the office building
On September 3, 2023, Federal Corporation’s warehouse is totally destroyed by fire. $$800,000$ of insurance proceeds are received, and the realized gain is $$300,000.$ Whenever possible,
Marc, age 45, sells his personal residence on May 15, 2023, for $$180,000.$ He pays $$8,000$ in selling expenses and $$900$ in repair expenses to help sell the residence. He has lived in the
Mr. and Mrs. Rusbarsky purchased a residence on June 12, 2020, for $$200,000.$ On March 12, 2023, they sell the residence for $$300,000,$ and selling expenses amount to $$11,000.$ They purchase
On January 10, 2023, Kirsten married Joe. Joe sold his personal residence on October 25, 2022, and excluded the entire gain of $$175,000.$ Although they had originally planned to live in the house
Mr. and Mrs. Snell own and live in a house, with an adjusted basis of $$300,000,$ that was purchased in 1999. The house is destroyed by a tornado on March 10 of the current year, and the Snells
Mr. and Mrs. Kitchens purchased their first home in Ohio for $$135,000$ on October 1, 2022. Because Mr. Kitchens’ employer transferred him to Utah, they sold the house for $$160,000$ on January
Sherron, who is single, purchased a house to use as rental property on April 1, 2008, for $$300,000.$ He moved into the house on June 1, 2022, and used it as a personal residence until August 1,
Consider the following information for Mr. and Mrs. Di Palma:• On June 10, 2022, they sold their principal residence for $$80,000$ and incur $$6,000$ of selling expenses. The basis of the
Consider the following information for Mr. and Mrs. Gomez:• On May 26, 2022, they sold their principal residence, acquired in 2003, for $$200,000$.They paid $$8,000$ of selling expenses. Their
Paden, who is single and has been employed as an accountant for 27 years with Harper, Inc., lost his job due to company downsizing. His last day of employment is July 31, 2023, and Harper provides a
On October 29, 2022, Miss Joan Seely (SSN 123-45-6789) sells her principal residence for $$150,000$ cash. She purchased the residence on May 12, 2013, for $$85,000.$ She spent $$12,000$ for
At the beginning of 2022, Donna Harp was employed as a cinematographer by Farah Movie, Inc., a motion picture company in Los Angeles, California. In June, she accepted a new job with Ocala Production
Jim Sarowski (SSN 000-00-2222) is 70 years old and single. He received Social Security benefits of $$16,000.$ He works part-time as a greeter at a local discount store and received wages of
On March 10, 2020, Elizabeth, a college professor, purchased a house for $$300,000.$ She did not move into the house until August 8, 2020. On August 1, 2021, she accepted a position as a visiting
For 2023, Tony, who is single and 58 years old, is considering early retirement from his salaried job. He currently has $$90,000$ salary and also earns $$60,000$ profit from a consulting
For 2023, Brian and Jennifer are a married couple who believe they may be subject to the AMT this year. Currently, they calculate their alternative minimum taxable income (AMTI) to be $$900,000$.a.
Sarah, a married taxpayer who files a joint return, is considering a foreign assignment for two years. In 2023, she will earn $$128,000$ in the foreign country.Sarah has no other income. She will
Alice is a single mother, 37 years old, and has two qualifying children, ages 3 and 6. In 2023, she earns $$25,000$ in wages resulting in $$25,000$ of AGI. Is Alice eligible for the earned income
William and Maria Smith are a married couple filing jointly. They have no children and report the following items in 2023:a. What is the Smith’s AMT liability?b. What would be William’s AMT
Jose, an unmarried taxpayer filing single with no dependents, has AGI of $$600,000$ and reports the following items in 2023:What is Jose’s AMT liability for 2023? Taxable income $550,000 Tax
Dylan is a single taxpayer with $$600,000$ of taxable income, which results in a regular tax liability of $$182,332$ in 2023. Dylan is extremely cautious about being subject to AMT and wants to
Allen, an unmarried taxpayer filing single, has no dependents and reports the following items on his 2023 federal income tax return:a. What is the amount of Allen’s AMT adjustments related to
Amelia has wages of $$45,000$ and net income from a small unincorporated business of $$70,000$ for 2023.a. What is the amount of Amelia’s self-employment (SE) tax and deduction for AGI for her
Arnie and Angela are married and file a joint return in 2023. Arnie is a partner in a public accounting firm. His share of the partnership’s income in the current year is $$40,000,$ and he
Anita, a single taxpayer, reports the following items for 2023:a. What is the amount of Anita’s self-employment tax?b. How would your answer to Part a change if Anita’s salary were $$180,000$?
In each of the following independent situations, determine the amount of the child and dependent care tax credit. (Assume that both taxpayers are employed.)a. Brad and Bonnie are married and file a
Lou and Stella North are married, file a joint return, and have two dependent children in college, Phil and Jaci.Phil attends a State University in a neighboring state, and Jaci attends a State
Randall and Dianne Wall live in St. Louis, Missouri. Randall and Dianne are each 30 years old, neither smokes, and they have no children or other dependents.Randall is attending law school full time
Carolyn is unmarried and has one dependent child, age 6, who lived with her for the entire year. In 2023, she has income of $$16,000$ in wages and $$6,000$ of unearned income (none of which was
Jose is unmarried with no qualifying children. He has $$10,000$ of 2023 wages and is otherwise eligible for the earned income credit. Jose has $$200$ of interest income and no for AGI
Latisha is an unmarried taxpayer, filing head of household. She has two dependent children (7-year-old twins) who lived with her all year. Her 2023 earned income was $$18,600,$ her AGI was
Mike Webb, married to Nancy Webb, is employed by a large pharmaceutical company and earns a salary. In addition, Mike is an entrepreneur and has two small businesses on the side, both of which
Doug is a single taxpayer. In 2022, he had wage income of $$115,000$ from his employer. In addition to his wage income, Doug was a consultant in which he made an additional $$75,000$ of net
Barbara was divorced two years ago. However, the final property settlement and determination of alimony payments was not made until February 2023 because of extended litigation.Barbara received a
Lean Corporation was incorporated in 2017 by Bruce Smith, who has served as an officer and member of the Board of Directors. Carl Jones has served as the secretary-treasurer of the company as a
Edith, who has no other sales or exchanges and no non recaptured Sec. 1231 losses, sells three tracts of land that are used in her trade or business. Edith is single, and her taxable income is
At the beginning of 2023, Silver Corporation has a $$95,000$ capital loss carryforward from 2022. During 2023, the corporation sells land, held for four years, and realizes an $$80,000$ gain.
Consider the following summary of Sec. 1231 gains and losses recognized by Janet during the period 2018–2023. Janet had no nonrecaptured Sec. 1231 losses at the beginning of 2018. If Janet has no
Arnie, a college student, purchased a truck in 2021 for $$6,000.$ He used the truck 70% of the time as a distributor for the local newspaper and 30% of the time for personal use. The truck has a
General Corporation owns equipment which cost $$70,000$ and has a $$44,000$ adjusted basis. General exchanges the equipment in June of 2023 for other equipment ($$52,000$ FMV) and marketable
Leroy owned a truck used in his trade or business that cost $$50,000$ and had an adjusted basis of $$34,000$ in 2016 when the truck was exchanged for a new truck that was like-kind property with
The Lapointe Corporation placed in service $$350,000$ of used equipment (seven-year recovery property) on June 3, 2022 and elected to expense $$250,000$ as Sec. 179 depreciation expense but
Mr. Briggs purchased an apartment complex on January 10, 2021, for $$2$ million with 10% of the price allocated to land. He sells the complex on October 22, 2023, for $$2.5$ million. Assume that
In 2017, Jack purchased undeveloped oil and gas property for $$900,000$ and paid $$170,000$ for intangible drilling and development costs. He elected to expense the intangible drilling and
Ed operates a storage business as a sole proprietorship and owns the following assets acquired in 2004:The FMV of the warehouse and the land are $$500,000$ and $$200,000,$ respectively. Ed owns
Betty, whose tax rate is 32%, is in the business of breeding and racing horses. Except for the transactions below, she has no other sales or exchanges and she has no unrecaptured net Sec. 1231
Russ has never recognized any Sec. 1231 gains or losses. In December 2023, Russ is considering the sale of two Sec. 1231 assets. The sale of one asset will result in a $$20,000$ Sec. 1231 gain
Holly has recognized a $$9,000$ STCL. She has no other recognized capital gains and losses in 2023. She is considering the sale of a Sec. 1231 asset held for four years at a $$5,000$ gain in
George Buckner sells an apartment building on October 10 for $$1.75$ million. The building was purchased on January 1, 2002, for $$2$ million.Depreciation of $$420,000$ has been taken. The
Julie Hernandez is single and has no dependents. She operates a dairy farm and her Social Security number is 000-00-1111. She lives at 1325 Vermont Street in Costa, Florida, 44215. Consider the
Assume the same facts as in Case Study Problem I:13-69 except you have the following market values as a result of an appraisal:Tom insists that $$150,000$ of the purchase price should be allocated
Prime Corporation begins operations in late 2023. Prime decides to use the single-pool LIFO method. Year-end inventories under FIFO are as follows:The price index for 2023 is 130%; for 2024, 134%;
On January 30, 2023, Amy sells land to Bob for a stated price of $$200,000.$ The full $$200,000$ is payable on January 30, 2025. No interest is stated. Amy, a cash-method taxpayer, purchased the
Dana manages real estate and is a cash method taxpayer.She changes to the accrual method in 2024. Dana’s business income for 2024 is $$30,000$ computed on the accrual method. Her books show the
BCD Partnership has, for many years, had a March 31 year-end. The partnership’s net income for the fiscal year ended March 31, 2024, is $$400,000.$ Because of its fiscal year, BCD has
Dan turned age 65 and retired this year. He owned and operated a tugboat in the local harbor before his retirement. The boat cost $$100,000$ when he purchased it two years ago. A tugboat is 10-year
Short Tax Form purchases a fourplex on January 8, 2019, for $$175,000.$ She allocates $$25,000$ of the cost to the land, and she deducts MACRS depreciation totaling $$16,364.$ Barbara sells
Rita purchased a house a few years ago for $$250,000$ and has been using it since then as her residence. In the current year, she moves to an apartment in another city to start a new job. The value
In 2023, Andes Corporation purchases $$1.5$ million of machinery (7-year property) and places it into service in its business. What are Andes’depreciation deductions for 2023 and 2024 in each of
Goodrich Corporation uses the calendar year as its tax year. It acquires and places into service two depreciable assets during 2023:• Asset #1: 7-year property; $$950,000$ cost;placed into
Jose is considering acquiring a new luxury automobile costing $$70,000$ that will be used 100% in his business. The salesperson at the automobile dealership states that Jose will be entitled to
In recent years, Congress has enacted provisions in the tax law that permitted bonus depreciation for certain assets.a. What types of assets typically qualified for bonus depreciation?b. How does
On March 1, 2023, Sarah enters into a three year lease for an automobile worth $$83,000$.The monthly lease payment is $$850,$ and she uses the automobile only for her sole proprietorship.What
Woburn purchases and places into service $$2.3$ million of depreciable property during 2023:You are working in Woburn’s tax department and are trying to decide how to make the Sec. 179 election
Sandy acquired business machinery (7-year MACRS property; half-year convention) on July 15, 2020, for $$10,000.$ For 2020, Sandy claimed a $$1,429$ regular MACRS depreciation deduction and did
Sid purchased an automobile for personal use on January 18, 2019 for $$30,000.$ On January 1, 2023 (when its fair market value is $$18,000),$ Sid starts a small business and begins to use the
In 2023, Silver Corporation purchases the following properties to use in its business:Silver claims the maximum allowed Sec. 179 expensing and bonus depreciation, and it uses the calendar year as its
Large Corporation acquired and placed in service the following 100% business-use assets. Large did not claim Sec. 179 or bonus depreciation expensing on any of these properties.• Truck (light-duty,
Turner Corporation uses the calendar year as its tax year. It purchases and places into service $$2.27$ million of property during 2023 to use in its business:What is Turner’s total depreciation
In 2023, Tish acquires and places into service in her business 7-year MACRS property costing $$40,000$ and 5-year MACRS property costing $$165,000.$ Tish elects Sec. 179 expensing for all of the
Tampa Corporation sold the following assets in 2023:a. What is the depreciation deduction for each asset in 2023?b. Compute the gain or loss on each asset sold. Depreciation/ Cost- Recovery Date
In 2023, Richmond Corporation purchases and places into service a machine. Richmond elects expensing for $$1.16$ million of its $$1.36$ million cost. The machine has a 7-year MACRS recovery

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