Questions and Answers of Concepts In Federal Taxation

Esmeralda is an attorney. Before 2022, she is employed by the law firm of Ellis and Morgan (E&M). Esmeralda is not a partner in E&M; her compensation consists of a fixed salary and a
For each of the following situations determine the proper year for recognition of the income or deduction if the taxpayer is (1) a cash basis taxpayer and (2) an accrual basis taxpayer:a. Tindle
Tim has state income taxes of $4,500 withheld from his salary during 2020. On his 2020federal income tax return, Tim properly deducts the $4,500 as state taxes paid. Later, when he files his
Jamal Corporation is an accrual basis taxpayer. = In 2020, Jamal writes off a $1,000 account receivable from a customer who has died. In 2022, the former customer's estate sends Jamal a check for
For each of the following tax treatments, determine the concept, construct, or doctrine that provides the rationale for the treatment:a. Lester purchases some stock for a total cost of $2,500. On
Postum Partnership purchases a building in 2018for $250,000. It deducts $5,600 in depreciation on the building in 2018, $6,400 in 2019, $6,400 in 2020, and $3,200 in 2021. It sells the building in
Chelsea, who is single, purchases land for investment purposes in 2017 at a cost of $22,000. In 2021, she sells the land for $38,000. Chelsea's taxable income without considering the land sale is
George purchases stock in Dodo Corporation in 2017 at a cost of $50,000. In 2021, he sells the stock for $32,000. What is the effect of the sale of stock on George's taxable income? Assume that
Consider the following two situations. Although they are similar, their treatments are exactly opposite. Identify the concept underlying both treatments, and explain why the concept treats the two
Nina leases a building to Downtown Computer Systems for $5,000 per month under a 5-year lease. The terms of the lease provide that any improvements to the building made by Downtown revert to Nina
Determine the taxpayer's adjusted basis in each of the following situations. If any changes are made in the original basis of the asset, explain why they are necessary.a. Simone purchases 300 shares
Ahmed bought some stock several years ago for $8,000. He is thinking of selling and has 2 offers. His broker told him he could sell the stock for $8,300 and would have to pay a $600 commission, for a
Henrietta is the president and sole shareholder of Clutter Corporation. In 2018, Henrietta transferred ownership of her personal residence to the corporation. As part of the transfer, Clutter
Jerry and his husband, Antonio, own a successful concrete company that is organized as a corporation. Jerry spends all his time running the company, whereas Antonio has a full-time job as a legal
Aretha is an executive vice president of Franklin, Inc. On December 18, 2021, the Franklin, Inc., board of directors awards her a $20,000 bonus. Aretha asks Franklin's controller to delay processing
Biko owns a snowmobile manufacturing business, and Miles owns a mountain bike manufacturing business. Because each business is seasonal, their manufacturing plants are idle during their respective
Jasmine's 2021 income tax calculation is as follows:Before filing her return, Jasmine finds an $8,000 deduction that she omitted from these calculations. Although the item is clearly deductible, she
Explain the pay-as-you-go system.
Haru is studying finance at State University. To complete the finance major, he has to take a basic income tax course. Because Haru does not intend to be a tax expert, he considers the course a waste
Nora and Vanessa are married and have 2 dependent children. This is a summary of their 2021 tax return:a. Assuming thatNora and Vanessa's 2021 adjusted gross income will increase at the 2.5% rate of
Inga, an attorney, completed a job for a client in November 2021. If she bills the client immediately, she will receive her $10,000 fee before the end of the year. By delaying the billing for a
Art is in the 24% marginal tax bracket for 2021. He owes a $10,000 bill for business expenses. Since he reports taxable income on a cash basis, he can deduct the $10,000 in either 2021 or 2022,
Marla had $2,100 in state income taxes withheld from her 2021 salary. When she files her 2021 state income tax return, her actual state tax liability is $2,300.

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