Questions and Answers of Concepts in Federal Taxation 2021

In 2020, RayeAnn acquires a car for $14,000. She uses the car in her advertising business and for personal purposes. Her records indicate the car is used 70 percent for business and that her total
Assume that the building in problem 68 is an apartment building held for investment. In addition to the sale of the building, Anton has the following capital gains and losses during 2020:Short-term
Return to the facts of problem 48. Assume that Yorgi purchased the qualified small business stock in Gnu Company, Inc., on September 15, 2009, and sells the shares for $400,000 on December 30,
Assume that in problem 37, the United Express Company sells a truck that cost $50,000 in 2020 for $15,000 in June 2023. Assume that none of the truck was expensed in 2020. Compute the adjusted basis
Ernie’s Farm and Garden Implement Store sells, repairs, and services farm and garden equipment. In 2019, the state attorney general began to investigate customers’ complaints that Ernie’s was
Marjorie is a software systems engineer for Hacker Corporation. In November 2017, she inherited two parcels of land in Brower Township from her grandfather. Her grandfather’s estate valued the
Omega Investments, Inc., was formed in 2002 by 10 unrelated individual investors. It operates a chain of electronics stores. The corporation suffered losses in its early years but has become
Rick and Maria had been married for 20 years before their divorce in 2019. At that time, they made the usual property settlement: Maria got the house, the van, and the cat; Rick got the mortgage, the
Henry invests $50,000 in an entity called Forward Investments on January 20, 2019. Under the terms of the investment agreement, the $50,000 is considered a loan that Forward will use to invest in
Adrian is a salesperson who represents several wholesale companies. On January 2, 2020, she receives by mail a commission check from Ace Distributors in the amount of $10,000 and dated December 30,
Gary is an internal auditor for Bodine Information Systems (BIF). In 2017, BIF opened a large production plant in Las Vegas, Nevada. Subsequently, Gary has had to spend several months each year at
Use any print or CATR service to find the following information about the Tax Cuts and Jobs Act of 2017.a. The public law number and enactment dateb. A reference to the full text of the actc. A
What are revenue rulings? revenue procedures?
Nina is the auditor for Geiger Construction, a local builder. Geiger recently renovated a historic building in downtown Kingston. The building, which consists of five shops, is owned by the Restoring
The Duncan Corporation, a domestic corporation, owns 70 percent of Wildflower, a foreign corporation. Duncan’s pro rata share of post-1986 undistributed U.S. earnings is $2,500,000 of which
The Collins Corporation, a domestic corporation, owns 65 percent of O’Dwyer, a foreign corporation. During the current year, Logo receives $120,000 in dividends. O’Dwyer’s post-1986
Joan and Matthew are married, have two children, and report the following items on their 2020 tax return:Determine Joan and Matthew’s regular tax liability and, if applicable, the amount of their
Alice and Frank have the following items on their 2020 tax return:Determine the amount of the adjustments that Alice and Frank will have to make in computing their alternative minimum tax. Adjusted
Lavinia owns an advertising agency. In February 2020, she purchases a building for $125,000. Lavinia spends $275,000 rehabilitating the building for use as her advertising agency office. The
Sonya owns 60 percent and her sister Karen owns 40 percent of the Tanglewood Group. They inherited their ownership from their mother, who died in 2019. Sonya is the president and chief financial
On July 1, 2020, Howard is granted the right to acquire 500 shares of Matoney Corporation stock for $15 per share. The option qualifies under the company’s incentive stock option plan. The current
Return to the facts of problem 64. Assume that Louise sells the stock on October 31, 2021, for $35 per share. Determine the tax consequences for Louise and Somerton on the date of sale.Data from
Return to the facts of problem 63. If the stock is subject to substantial restrictions, what are the tax consequences for both Louise and Somerton on the date Louise is granted the stock option and
On May 10, 2020, Somerton, Inc., grants Louise a nonqualified stock option to acquire 700 shares of the company’s stock for $11 per share. The fair market value of the stock on the date of grant is
Return to the facts of problem 61. On November 30, 2021, when the fair market value of the stock is $30, Albert sells the stock. Determine the tax consequences to both Albert and Beaconsfield
On September 1, 2020, Beaconsfield Corporation grants Albert a nonqualified stock option to acquire 500 shares of the company’s stock for $8 per share. The fair market value of the stock on the
Juan and Angel, ages 56 and 54, respectively, decide to establish Roth IRAs. Juan and Angel are married, and both are covered by pension plans where they work. Their adjusted gross income is in 2020
Glenna is retired from Cherry Hills Corporation. When she retired at age 68, she decided to take her pension as a lump-sum distribution and roll over the proceeds tax-free into her IRA. On January 1,
Ross is single and maintains an IRA. During a trip to Las Vegas in 2020, he wins $15,000 at the roulette wheel. He decides to put half his earnings in his IRA and spend the other half on a trip to
Hector is a single taxpayer with adjusted gross income of $129,000. What is the maximum contribution that he can make to a Roth IRA for the current year?
Suresh is a sales representative for Swinley Manufacturing. The corporation maintains a defined contribution profit-sharing plan on behalf of its employees. It contributes 15 percent of each
Felicia is a single taxpayer who retired from her job as a sales executive wit Waynesville Associates, LLC. During 2019, she turns 701/2 and begins withdrawing the $320,000 in assets (balance as of
Ghon is a married taxpayer who retired from his job at Smithfield Printing in 2018. During 2019, he turns 701/2, and begins withdrawing the $215,000 (balance as of December 31, 2018) in assets in his
In October 2018, Clark Corporation decides to establish a SIMPLE-401(k) for its employees. Clark meets all requirements for establishing a SIMPLE. The company has notified its employees that in 2020,
Lenore, a single taxpayer with an adjusted gross income of $69,000 in 2020, is covered by her employer’s pension plan. She makes a $6,000 contribution to her IRA during the current year.a. How much
Zorica and Pierre are married and file a joint return. Zorica earns $59,500, and Pierre earns $45,000. Their adjusted gross income is in 2020 $110,000. Determine the maximum IRA contribution and
What is meant by the term owner-partner?
Powell owns a 20 percent interest in Cooke Partnership. At the beginning of 2019, Powell’s basis is $22,000. Cooke reports a $90,000 operating loss in 2019, and Powell withdraws $10,000 from the
Charger, Inc., has the following items for the current year:Net operating income $150,000Dividend income (50 percent-owned corporation) 40,000Charitable cash contributions 20,000Net operating loss
The Viking Corporation has the following items of income for 2020:Operating income ..............................................................$350,000Dividend income (12 percent-owned
Lacy Corporation sells equipment and a building during the current year. The equipment, which cost $14,000 in 2017, is sold for $9,000. The equipment was expensed using the Section 179 election in
The Boo-Ball Corporation receives dividend income of $200,000 from Flew-Ball, a domestic corporation. Boo-Ball owns 70 percent of Flew-Ball. Boo-Ball’s net income from operations is $50,000. What
What type of entities are allowed a deduction for Qualified Business Income (QBI), and are there any limitations and/or restrictions on the deduction?
Claude is a CPA and a partner with SKH and Associates, a regional public accounting firm. In September 2018, Brokaw Technologies approached one of his clients, Walter Fenner, about acquiring 100
Ken and Helen own a bed and breakfast in Vermont. They acquired the property in 2005 for $190,000, and their adjusted basis in it is $95,000. The property is worth $260,000, and they have a mortgage
In October 2020, fire completely destroys the principal residence of Olaf, who is 63 and single, and lives in Bemidji, Minnesota. He owned the home for 16 years; his adjusted basis is $58,000. Olaf
On July 8, 2018, Joe and Jill sell their principal residence for $650,000. Their adjusted basis in the property is $275,000. To complete the sale, Joe and Jill have to take back a second mortgage for
Will owns residential rental property that is destroyed by a tornado in March 2019. He files a claim with his insurance company and receives $90,000 for the property. The building is fully
Eva and Mario are married on June 14, 2019. They use Eva’s home as their principal residence. Eva purchased the home for $97,000 in 2016. On January 13, 2020, Eva and Mario are divorced. As part of
Harvey sells his personal residence on March 18, 2020, for $78,000. He paid $86,000 for it on April 22, 2018.
Laurie bought a home in 2017 for $65,000. On November 2, 2020, she sells it for $114,000. Laurie uses the proceeds to purchase a duplex costing $200,000. She uses one unit in the duplex as her
Inez is a freelance artist. She purchased 10 acres of land in 2015 for $5,000. On July 15, 2020, the land is condemned by the county government to build a new courthouse and jail facility. The county
Bonnie wants to trade her Snow Bird, Utah, condominium, which she has held for investment, for investment property in Steamboat Springs or Crested Butte, Colo. On April 20, 2020, she transfers title
Gary and Gertrude are married on April 8, 2019. They use Gertrude’s home as their residence. Gertrude purchased the home on November 14, 2017, for $60,000. On February 19, 2020, Gertrude is killed
Kerri and John are married. On May 12, 2020, they sell their home for $190,000 and purchase another residence costing $225,000. What are Kerri and John’s realized gain and recognized gain in each
Aretha sells her house on June 9, 2020, for $220,000 and pays commissions of $10,000 on the sale. She had purchased the house for $60,000 and made capital improvements costing $15,000. What are
In each of the following cases, determine the amount of realized gain or loss and the recognized gain or loss:a. Cheryl sells her house for $73,000 and pays $4,000 in commissions on the sale. She
Refer to the facts of problem 30. Write a letter to Grant Industries explaining why it might want to recognize the entire gain on the condemnation.Data from Problem 30Grant Industries’ warehouse is
Grant Industries’ warehouse is condemned by the city on August 18, 2020. Because of widespread publicity leading up to the condemnation, Grant anticipates it and purchases a replacement warehouse
Which of the following are qualified replacement properties for properties involuntarily converted? Explain.a. The city of Marble River announces plans to condemn Heima’s rental apartment complex
On July 8, 2020, Cynthia and her daughter Constance agree to exchange land they held for investment. Both tracts are worth $18,000. Cynthia acquired her land 4 years earlier for $9,000. Constance
Define what qualifies as a like-kind exchange.
You are a CPA who works for a local accounting firm. While having lunch at Willie’s Diner last Thursday, you overheard Beth Murray describe how Bart (her spouse) was able to get a $2,000 business
As a gift for her granddaughter Ella’s 13th birthday, Melanie bought 500 shares of Soft’n Sales Corporation stock on September 25, 2015. Melanie bought the stock directly from the underwriter for
Jeremiah owns farm land that he paid $20,000 for in 2008. In 2019, he planted a winter wheat crop on the land, incurring $35,000 of expenses. Jeremiah deducted the $20,000 of planting expenses that
On April 3, 2019, Arlene sells land that she holds as an investment to a construction company. The deed conveying the land to the construction company contains a covenant restricting construction on
Return to the facts of problem 50. How would your answer change if Yorgi purchased the qualified small business stock in Gnu Company, Inc., on September 15, 2012, and sells the shares for $400,000 on
During August 2015, Madeline invests $400,000 in Qual Company, Inc., buying 100,000 shares of stock. Her broker tells her this will be an excellent investment because the securities are qualified
In 2010, RAD Partnership was organized by three equal partners: two individuals (Rachael and Adam) and Depesh Corporation. On January 10, 2011, RAD Partnership purchases 18,000 shares of qualified
Marnie buys 500 shares of qualified small business stock in H.R. Pizza, Inc., on September 10, 2008, for $20,000. She sells the 500 shares for $120,000 on October 2, 2020. Marnie’s other capital
Ansel sells 400 shares of Sharpe, Inc., common stock on October 12, 2020, for $11,800 and pays $600 in commissions on the sale. He acquired the stock for $18,400 plus $800 in commissions on July 8,
Opal’s neighbor, Jilian, persuades her to invest in Schaake Corporation, a new venture, on March 4, 2019. Opal pays $15,000 for 3,000 shares of common stock. On February 6, 2020, Schaake
In 2020, Sondra Corporation recognizes $18,000 in Section 1231 gains and 10,000 in Section 1231 losses. In 2015, Sondra reported $12,000 in Section 1231 losses and no Section 1231 gains. No other
Dawn started her own rock band on January 2, 2018. She acquired all her equipment on January 2, 2018, and did not dispose of any of it before 2020. On April 15, 2020, the band’s amplifiers,
Rhinelander Corporation has the following net Section 1231 gains and losses for 2015 through 2019:2015 ........$ 8,0002016 .........(6,000)2017 .......(13,000)2018 ........11,0002019 ........15,000a.
The Gladys Corporation buys office equipment costing $1,114,000 on May 12, 2020. In 2023, new and improved models of the equipment make it obsolete, and Gladys sells the old equipment for $34,000 on
Avalon, Inc., buys equipment costing $150,000 in 2017, and sells it in 2020. Avalon deducts $94,000 in depreciation on the equipment before the sale. What is the character of the gain or loss on the
Anton purchases a building on May 4, 2002, at a cost of $270,000. The land is properly allocated $30,000 of the cost. Anton sells the building on October 18, 2020, for $270,000. What is the character
Thuy bought a rental house in 2012 for $75,000. In 2020, she sells it for $86,000. Thuy properly deducted $22,000 in depreciation on the house before its sale.a. What is the amount and character of
Marino inherits antique pottery from the estate of his grandmother on March 10, 2020. He immediately sells the pottery for $15,000 to a collector who had made the offer to the executor of the estate
Carter owns 1,200 shares of Echo Corporation stock. He purchased 400 shares of the stock on December 23, 2018, for $48,000, and the other 800 shares on October 31, 2019, for $84,000. On August 14,
Martina purchases 10,000 shares of Monrovia Corporation stock for $90,000 on November 14, 2019. On June 18, 2020, Monrovia declares bankruptcy. Because the corporation’s assets are less than its
Tawana purchased real property in 2018 at a cost of $200,000. In 2020, she is experiencing cash-flow problems and sells the property for $220,000. The adjusted basis of the property is $185,000.
In 2019, Nuts & Seeds Inc., purchased a new “high-tech” shelling machine from Soft-Core Corporation. Nuts and Seeds paid $1,000 in cash and gave Soft-Core a $29,000 note. The note is
Return to the facts of problem 48. Assume that Yorgi has a net capital loss of $80,000 from her other capital asset transactions in 2020. What is the effect of the sale of the stock on Yorgi’s tax
Yorgi purchases qualified small business stock in Gnu Company, Inc., on September 15, 2008, for $50,000. She sells the shares for $400,000 on December 30, 2020. The stock retains its qualified small
For each of the following capital asset dispositions, determine whether the taxpayer has realized a gain or loss and whether that gain or loss is short-term or long-term:a. Larry’s aunt June dies
For each of the following capital asset dispositions, determine whether the taxpayer has realized a gain or loss on the disposition and whether that gain or loss is short-term or long-term.a. Ari
Mort begins investing in stocks in 2019. Listed here are his stock transactions for 2019 and 2020. Determine Mort’s gain or loss on his stock transactions for 2019 and 2020. In addition, for each
Spencer purchases 100 shares of Reality Virtual Corporation common stock for $1,200 on July 30, 2020. He sells 75 shares of this stock for $525 on December 27, 2020. On January 12, 2021, Spencer
During the current year, James sells some land he purchased in 2015 as an investment. He had paid $4,000 in cash and borrowed $22,000 to buy the land. He had paid legal fees of $440 and commissions
Steem Advertising Corporation acquires 100 laptop computers in 2019 for its account executives to use. Steem pays $300,000 for the computers. You are the newly hired CPA and you expect to advise
Joan is interested in buying a special diagnostic machine for use in her medical practice. The machine will cost her $16,000 and will have a $2,000 salvage value at the end of its 8-year life. Joan
During 2020, Schottenheim Corporation buys laptop computers and desktop computers to use in its general sales offices. Schottenheim buys laptops for $42,000 on March 29, additional laptops for
Bailey Construction Company purchases a bulldozer on December 20, 2020. An ice storm delays delivery until December 24. Because of the holidays, the equipment is not used until January 2.
On April 18, 2020, Petros buys all the assets of Brigid’s Muffler Shop. Included in the purchase price of $295,000 is a payment of $20,000 to Brigid not to open a competing shop in the state for a
On June 2, 2020, Lokar Corporation purchases a patent for $68,000 from the inventor of a new extrusion process. The patent has 12 years remaining on its legal life. Also, Lokar purchases
On May 15, 2020, Lurlene buys a used automobile for $20,000. She drives it 9,000 miles for business and 3,000 miles for personal trips during the year. What is Lurlene’s maximum cost recovery for
On June 1, 2020, Kirsten buys an automobile for $60,000. Her mileage log for the year reveals the following: 20,000 miles for business purposes; 7,000 miles for personal reasons; and 3,000 miles
On March 1, 2020, Babar Inc., pays $1,200,000 for a store building, moves into the building, and begins business on April 1. Babar properly allocates $1,000,000 of its cost to the building and

Showing 1 - 100 of 263