Questions and Answers of Federal Tax Research

In 2016, Tom Morello established an S Corporation, RATM, to purchase a small apartment building in Cocoa Beach, FL. Tom borrowed $500,000 and contributed the same to RATM as a loan. From 2016 to
Pam Rummey had been involved in the equestrian activity of dressage for almost two decades. She has owned several horses and participated in dressage competitions. Her expertise was in the
Keegan is a self-employed computer programmer and has been your client for 10 years. Keegan’s business is a sole proprietorship. Because of the impending collapse of the global financial system,
You have recently been hired by a new client, Julie, who presents you with one income document: a 1099-MISC indicating nonemployee compensation from the National Intelligence Agency for $150,000.
James has just completed a postgraduate degree at Expensive University. James financed his degrees using $200,000 in student loans. Major tech companies have courted James for the last several years
Malcolm is disabled and during the 2020 tax year receives Social Security disability payments of $12,000 per year, $8,000 in alimony, and $3,000 in interest. Can Malcolm contribute to an IRA for the
Susan is mostly deaf. Despite her condition, Susan is gainfully employed as a sign language instructor at a local college. She spends $4,000 during the year on adaptive technology, software, and
Felicity is a minister for a local church. Felicity’s employer does not withhold or pay any Social Security or Medicare tax on her behalf. Felicity has not filed for an exemption from Social
Michael and Amber are married. In late 2018, Amber becomes pregnant. Their daughter, Zoey, is born in 2019. Following Zoey’s birth, Amber takes six weeks of maternity leave, while Michael takes
Karen is in ill health and has been hospitalized repeatedly over the last several years. She purchases a hospital indemnity insurance policy from a private insurance broker that pays her $1,000 per
Jim Jones owns 50 percent of the stock of an S corporation. In 2020, Jim obtains a health insurance plan providing coverage for himself, his wife, and their two children. Jim makes all premium
Sal was born male but diagnosed with gender identity disorder. As a result, he suffered persistent psychological discomfort with his gender and decided to have a sex-change operation. As part of the
Four individuals formed Triangle Properties as a C corporation in 2014. The corporation is domiciled in North Carolina. The corporation invested in commercial rental properties that generated
For the completion and filing of his 2019 federal income tax return, Ron retains the services of a tax preparer. Because of a particularly hectic tax preparation season, the preparer does not
Gold Partners wanted to complete a like-kind exchange just before it liquidated. Accordingly, it sold the real estate it meant to transfer to the other party, and a qualified intermediary held the
Dean and Robin owned a family business, each holding the shares as community property. When they were divorced in 2017, the court did not force them to split the shares, citing damage to the business
Duane paid his 2014 federal income taxes in January 2017 in the amount of $10,000, and then paid $4,000 interest and penalties on this amount in May 2018. In April 2020, Duane filed a claim for
CPA Myrna forgot to tell her client, Freddie, to accelerate the payment of state income and property taxes in a year when Freddie was in an unusually high tax bracket. Upon discovering the error, the
Prudence was named a shareholder in her law firm, which operates as an S corporation. Her payments into the firm’s capital were to start in approximately nine months, when an audit would determine
Katie is a one-third owner of an S corporation. After a falling out with the other shareholders, Katie signed an agreement early in January 2020. Under the terms of the agreement, Katie took $200,000
Professor White operates a popular CPA exam review course as a sole proprietor. He charges $2,000 tuition to each student, and he guarantees a full refund of the tuition if the student passes an
Austin Towers is a convicted former spy for the former Soviet Union. Austin received a communication from a current Russian agent that $2 million had been set aside for him in an account upon which
Ike and Tina were married in 2013 and shortly thereafter purchased a home by taking out a $300,000 mortgage. In 2017, Ike and Tina divorced. The divorce decree gave sole possession and ownership of
Cary Bean is a product manager for a high-tech firm, Apps R Us, that develops apps for smart phones. The Global Conference on Technology is being held in Sint Maarten in 2020 and her employer agrees
A business purchases a five-year asset for $1,000 that qualifies for the new 100 percent special depreciation allowance for property acquired after September 27, 2017. It is placed in service in
As mentioned previously, Anh really enjoyed the lifestyle in southern California. After living in student housing her first year, she immediately moved off campus into a nearby apartment. Over time,
Blanche filed her 2019 income tax return on April 4, 2020. On December 14, 2020, she learned that 100 shares of stock that she owned had become worthless in 2019. Because she did not deduct this loss
Michal accidentally omitted from her 2019 tax return $4,000 of gross receipts she collected as the owner of a restaurant. Her 2019 return indicated collective gross receipts of $35,000. The IRS no
Ozzie and Sherrie Johnson lived in Bishop, California. The Johnson’s 15-year-old son, Jack, was addicted to illegal drugs and experienced both physical and behavioral problems. In 2018, without the
Candidate Feldman ran for Congress in 2020, raising $4.7 million for the campaign, including $800,000 in federal matching amounts. Five months after his opponent was sworn into office, auditors
Dewin Auer Best (DAB) CPAs has an audit and tax client named Meyers, Inc. Meyers is a closely held C corporation whose majority shareholder, Alicia Meyers, is also its CEO. Alicia also is a tax
Colbert has been a waiter at the Burger Report in Starkville, Mississippi for four years. The Burger Report treats its employees well, allowing them a 60 percent discount for any food that they buy
Robert has been a CPA for over 20 years, primarily doing tax compliance engagements for individuals. One of his long-time clients indicates that she is considering a transaction that would involve
Paul Monroe, CPA, has been in public practice and a member of the AICPA for 25 years. He signs over 300 individual tax returns each year, most of which have been initially prepared by his staff and
Virginia was an English language instructor for high school students in the state of South Carolina. In 2014, she retired from the school district and started taking assignments in foreign countries
Sarah Smart, CPA, is a member of the AICPA and has been in practice for over 10 years. She recently acquired a new tax compliance client, NewCo, Inc. NewCo’s in-house accountant (not a CPA) had
Carla and Scott were married some years ago and have six-year-old twin daughters, Jackie and Kara. In 2015, they divorced. Their divorce decree includes a court order indicating that Carla is to have
Howie’s Halloween Costumes sells Halloween costumes to consumers throughout the U.S. through its website. One of Howie’s most popular costumes for customers in Alabama is the Bear Bryant in honor
Staff Sergeant G. I. Jane was a soldier in the Iraq War. Her salary was $2,600 per month, and she was in the war zone for eight months. How much of her salary is taxable for the eight months? In
Carol received a gift of stock from her favorite uncle. The stock had a fair market value of $30,000 and a basis to the uncle of $10,000 at the date of the gift. How much is taxable to Carol from
Maria is an independent long-haul trucker. She receives a speeding ticket for $500, which she pays. Can Maria deduct the cost of the ticket on her Schedule C? In answering this case, use only the
Over the last year Mary purchased a variety of birth-control devices. She tried birth-control pills as prescribed by her physician but did not like the side effects. She also tried the contraceptive
Meghan operates a small proprietorship in South Carolina with net income of $120,000. Meghan’s spouse Jeff works for the local school district and earns wages of $60,000. What are the appropriate
Mariana is a marine stationed at Camp Pendleton, California. Mariana enlisted immediately out of high school in her hometown of Houston, TX, and lists Texas as her home of record state with the
The IRS acquires vast amounts of sensitive information about individual taxpayers. The government is required to keep this information confidential. May a state child-support agency obtain access
High-Top Financing charges its personal-loan holders a 2 percent fee if the full loan principal is paid prior to the due date. What is the tax effect of this year’s $50,000 of prepayment penalties
Bruce wanted to be an Olympic skater. His family paid $12,000 in 2019 and $14,000 in 2020 for travel and training expenses related to skating practices and competitions. Bruce made the 2022 U.S.
On July 1, 2018, Tom Brown placed in service in his business qualified seven-year property that cost $450,000, and that he acquired before September 28, 2017. He did not elect to claim a § 179
Homer and Marge Owner are married and file jointly. Seven years ago, Homer and Marge bought a new home that they have lived in since. The home cost $640,000 for which they paid $120,000 as a down
BigEtailer.com is one of the world’s fastest growing online merchants. They sell goods on their website and ship globally. BigEtailer.com’s smallest state for sales is North Carolina, where the
Harrison operates a successful business in Virginia for many years. In 2016, Harrison’s business fails and Harrison incurs a 2016 net operating loss for federal and Virginia purposes of $3.5
Olivia works for a big-4 accounting firm in New York City; however, she lives in New Jersey. Due to the high cost of office rent in New York City, the firm has determined that it no longer wants
Apache and Alice Swearingen moved to Minnesota in 2015. Apache retired in early 2018, and the Swearingens purchased a motor home, started traveling extensively, and put their Minnesota home up for
Chuck Taylor owns a fish-processing plant in Alaska. Some of the processing chemicals and fish remains could be considered hazardous wastes. What possible state and local taxes does Chuck need to be
Lorraine Newman, CPA, has developed considerable tax expertise in business acquisitions and is widely recognized in her geographic practice area as the go-to person for such transactions. She is
Crazy Freddie’s is a mail order and Internet-based electronic retailer incorporated and based in GrandRapids, Michigan. Crazy Freddie’s takes significant measures to avoid triggering income tax
For the last 10 years, Ricky, 40, and Lucy, 35, were married, and you prepared their joint tax returns for those years. Last year they divorced, and both remained as your tax client. Under the
Tom and Katie divorced in 2014. Under the divorce decree, Tom is required to pay alimony of $3,000 per month and child support for their daughter, Suri, of $2,000 per month. In 2019, at age 17, Suri
As a result of the income she generated from her on-campus job, Anh found herself with a small amount of disposable income. In early 2019, she took $1,000 of her disposable income and purchased
Mimi had $40,000 in federal income taxes withheld in 2019. Because of a sizable amount of itemized deductions, she figured that she had no further tax to pay for the year. For this reason and because
White Corporation estimates that its 2021 taxable income will be $800,000 and its tax liability will be $168,000. For each of the following independent cases, compute the minimum quarterly
Kold Corporation estimates that its 2021 taxable income will be $900,000, resulting in a tax liability of $189,000. For each of the following independent cases, compute the minimum quarterly
Joan filed her unextended 2020 tax return on November 15, 2021, paying the $5,000 amount due at that time. Joan has no reasonable cause for failing to file the return by October 15 or for failing to
Jim received a six-month extension (to October 15, 2021) to file his 2020 tax return. Jim actually filed the return on October 20, 2021, paying the $20,000 amount due at that time. He has no
Julie filed a valid extension for her 2020 tax return, giving her until October 15, 2021, to file her return. She filed her return on November 1 and paid $2,000 of tax due. For what period of time
Jack and Jill filed a joint return in 2018 showing Jill’s wages of $50,000 and Jack’s self-employment income of $30,000. Jack and Jill divorced in 2019. In 2020, the IRS audited their return and
Jenna and Sam sold a piece of property for $300,000, claiming that their basis was $150,000 and report a taxable gain of $150,000. Their 2019 return filed in February 2020 reported gross income of
David accidentally omitted from his 2019 tax return $40,000 of the gross receipts that he collected as the owner of a restaurant. His 2019 return indicated collective gross receipts of $25,000. The
Carl purposely omitted from his 2020 tax return $40,000 of the gross receipts that he collected as the owner of a restaurant. His 2020 return indicated collective gross receipts of $25,000. The IRS
Ace filed her 2019 income tax return on January 25, 2020. There was no material understatement of income on her return, and the return was properly signed and filed. The statute of limitations for
In early 2020, the IRS selected Amber’s 2017 return for audit with respect to Schedule C expenses and employee business expenses claimed on the return. Amber met with an IRS agent, who disallowed
Update Exhibit 12-2 for the most recent year and comment on any changes you see in audit activity over the past few years. EXHIBIT 12-2 Various Audit Statistics Type of Return Changes of Audit
Use AnswerConnect to answer the following questions:a. How is a resident of Bermuda defined in its treaty with the United States?b. How does Azerbaijan deal with intercompany transfer pricing?c. What
Locate the pronouncement at 2007-17 IRB 990.a. What is the number assigned to this written determination?b. What is the subject matter discussed in this written determination?
The IRS’s budget has been severely cut in recent years. The budget cuts have led to reductions in the number of enforcement staff and the delay of upgrades to information technology systems. Write
It is late 2019, and you are a successful executive working in New York for a large company. Tomorrow morning you will have the opportunity to negotiate receiving a $100,000 bonus at the end of the
Prepare a 7-minute oral presentation on the U.S. tax system’s treatment of income earned abroad by individual taxpayers and compare the U.S. system of worldwide taxation to a territorial-type
Prepare a 7-minute oral presentation on the primary sources of tax revenue for your state. How has the mix of revenue sources changed over the last five years? Pay particular attention to the
Prepare a 7-minute oral presentation on the federal estate tax, including statistics on who pays it and how much has been collected over the last several years. Pay particular attention to the
Prepare a 7-minute oral presentation on the distribution of income and federal income tax in the United States. Pay particular attention to the guidelines for the effective use of visual aids as
Prepare a 7-minute oral presentation on the tax gap. Pay particular attention to the guidelines for the effective use of visual aids as noted in the chapter.
In a meeting with her tax adviser, a taxpayer indicated that she recently sold depreciable real property and would like her adviser to review the transaction and provide advice on the potential tax
Are CPAs required to communicate tax advice and the results of research projects to clients in writing?
What are the two pathways to a country’s international tax information in AnswerConnect?
Describe the fundamentals of the U.S. system of taxation for a multinational corporation.
Explain whether one can find editorial explanations of tax law in Nexis Uni.
Describe the areas of coverage provided in Bloomberg State analyses.
Describe how an Internet-based retailer might use P.L. 86-272 to avoid income taxation by states.
Use AnswerConnect to answer the following questions:a. What does IRS Notice 2016-55 discuss? On what date was it issued?b. Who is the author of “Canceled S Corporation Debt and Deemed NOLs” in
Use the AnswerConnect Federal Tax database to answer the following questions:a. Find the history of IRC § 1. Does this history explain what the highest amount of taxable income a single taxpayer
Use the current IRC in the AnswerConnect Federal Tax database to answer the following questions:a. Which code sections result from a search for “tackle box” in the current code?b. Examine the
Use a keyword search in AnswerConnect to answer the following questions:a. What is the title of I.R.C. § 265?b. How many regulations exist related to § 265?c. Is a gain realized by a corporation
Use AnswerConnect Federal Tax Topics to answer the following questions:a. How many subtopics are presented under the Kiddie Tax topic?b. For purposes of the Kiddie Tax, is interest from tax exempt
Drill down into the All Federal Tax in the Federal Tax practice area and answer the following questions:a. What is the title of IRC § 641?b. How many Committee Reports are there for IRC § 448?c.
Explain how a researcher can identify and find instances of key terms used in a keyword search.
Describe the types of documents in AnswerConnect that are secondary sources.
Describe how search results are sorted.
Describe the secondary source databases contained in AnswerConnect.
Describe how to find a specific code section in AnswerConnect using a keyword search.
Describe the three common search methods used in AnswerConnect.

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