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business
federal taxation 2019

Questions and Answers of Federal Taxation 2019

Lutz Corporation acquired a 100% business-use automobile (MACRS 5-year recovery) on July 1, 2018 for $64,000. The company did not elect Sec. 179 expensing and elects out of bonus depreciation. What
Tammy acquired an automobile for $20,000 on July 1, 2015. Her business use of the vehicle is 70% in 2015, 70% in 2016, 40% in 2017, and 35% in 2018. The property's MACRS recovery period is 5 years,
Assume the same facts as in Problem I:10-35, except Trish is an employee who uses the automobile for her employment-related activities. While such use is helpful for her employer, it does not require
Trish is a self-employed CPA ,vho purchases an automobile for $72,000 and places it into service in 2018. Calculate Trish's current year MACRS depreciation deduction, assuming she does not elect Sec.
In 2018, Wabash Corporation purchases two assets and places them into service (both have a 7-year MACRS recovery period):• Asset #1: $1,260,000 cost; placed in service in February.• Asset #2:
In 2018, Richmond Corporation purchases and places into service a machine. Richmond elects Sec. 179 expensing for $1 million of its $1.2 mill ion cost. The machine has a 7-year MACRS recovery period.
Tampa Corporation sold the following assets in 2018:a. What is the depreciation deduction for each asset in 2018?b. Compute the gain or loss on each asset sold. Depreciation/ Cost- Recovery Original
In 2018, 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
Sid purchased an automobile for personal use on January 18, 2014 for $20,000. On January 1, 2018, Sid starts a small business and begins to use the automobile exclusively in the business. The
Sandy acquired business machinery (which qualified as 7-year MACRS property) on July 15, 2015, for $10,000. In 2015, Sandy claimed a $1,429 regular MACRS depreciation deduction and she elected not to
Paula is planning to either purchase or lease a $75,000 automobile. She anticipates that business use of the auto will be 60% for the first two years but will decline to 40% in years three through
Georgia Corporation acquires a business automobile for $60,000 on December 31 of the current year but does not actually place the automobile into service until January 1 of the following year. What
On March 1, 2018, Sarah entered into a three year lease of an automobile used exclusively in her business. The automobile's FMV was $58,500 at the inception of the lease. Sarah made ten monthly lease
Your client is a self-employed attorney who is considering the purchase of a $65,000 automobile that \Viii be used 80% for business.a. What depreciation method and recovery period are used under
Rhonda acquires and places into service 5-year and 7-year property to use in her sole proprietorship. Rhonda's marginal tax rate currently is 24%, but she expects it to increase to 37% because her
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
Goodrich Corporation uses the calendar year as its tax year. It acquires and places into service two depreciable assets during 2018:• Asset #1: 7-year property; $950,000 cost; placed into service
In 2018, 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 2018 and 2019 in each of the
Bender Corporation grants a nonqualified stock option to Penny, an employee, on January 1, 2018, that entitled Penny to acquire 1,000 shares of Bender stock at $80 per share. On this date, the stock
Stock Options. Bell Corporation grants an incentive stock option to Peggy, an employee, on January 1, 2018, when the option price and FMV of the Bell stock is $80. The option entitles Peggy to buy 10
Jack and Katie have five grandchildren, ages 19, 16, 15, 12, and 10. They have established Coverdell Education Savings Accounts (CESA) for each of the grandchildren and would like co contribute the
Chatham Mae is single, age 35, and ,vanes co make a contribution to an IRA for the year ended December 31, 2018. She is an active participant in a qualified retirement plan sponsored by her employer.
Phil, age 30, is married and files a joint return with his spouse. On February 15, 2019, Phil establishes a traditional IRA for himself and a spousal IRA for his spouse with a $11,000 contribution,
On February 15, 2019, Jamal, who is single and age 30, establishes a traditional IRA and contributes $5,500 to the account. Jamal's adjusted gross income is $69,000 in 2018 and $58,000 in 2019. Jamal
In 2018, Bear Corporation transfers 100 shares of its stock to its employee Patrick. The stock is valued at $10 per share on the issue date. The stock is subject to the following restrictions:•
Pat is a participant in a qualified pension plan. She retires on January 1, 2018, at age 63, and receives pension payments beginning in January 2018. Her pension payments, which will be received
Identify whether each of the following plan features is associated with a qualified pension plan, a qualified profit-sharing plan, an employee stock ownership plan, a nonqualified plan, or none of
Nancy is a self-employed consultant who uses 10% of her residence as an office. The office is used exclusively for business and is frequented by customers on a regular basis. Nancy also uses her den
Anne works for a CPA firm as a secretary/receptionist and earns approximately $27,000 per year. About five years earlier, she had completed 70 credit hours at State U. To increase her career
For each of the following independent situations, determine whether any of the expenditures qualify as deductible education expenses in connection with a trade or business (Reg. Sec. 1.162-5). Are
Michael graduates from New York University and on February 1, 2017, accepts a position with a public accounting firm in Chicago. Michael is a resident of New York. In March, Michael travels to
Latrisha is an employee of the Cooper Company and incurs significant employment-related expenses. During the year, she incurred the following expenses in connection with her job:Travel: Airfare
Beach Corporation purchases tickets to sporting events and uses them to entertain customers. In both 2017 and 2018 Beach Corporation purchases the following tickets:100 tickets to football games
Milt, a self-employed attorney, incurs the following expenses in 2017:Dues paid to the local chamber of commerce$ 1,000Business lunches for clients and prospective clients (Milt does not believe in
Amelie is an employee who uses her personal automobile in connection with her job. During 2017, Amelie drove her car a total of 28,000 miles. Her business log shows that she drove 22,400 miles for
Michelle is an employee who must use her personal automobile for employment-related business trips. During 2017, Michelle drives her car 60% for business use and incurs the following total expenses
Maxine incurs the following employment-related business expenses in the current year:Professional dues and subscriptions .............................................................................
In 2017, Mike's AGI is $50,000. Mike has no miscellaneous itemized deductions other than the employment-related expenses listed below. Mike attends a professional trade association convention in Los
Marilyn, a business executive who lives and works in Cleveland, accepts a temporary out-of-town assignment in Atlanta for a period of ten months. Marilyn leaves her husband and children in Cleveland
Mary is an employee of ABC corporation and incurs $3,600 of unreimbursed employment-related travel and entertainment expenses during 2017. These business expenses include the
Monique is a self-employed manufacturer's representative (i.e., an independent contractor) who solicits business for numerous clients and receives a commission based on sales. She incurs the
Mike incurs the following employment-related expenses in 2017: Actual automobile expenses$ 2,500Moving expenses (deductible under Sec. 217)4,000Entertainment expenses1,500Travel expenses
David is on the audit staff of a national accounting firm. He has been with the firm for three years and is a CPA. David has applied and been accepted into a prestigious MBA program. The program is
Jeremy is an executive for Columbia Corporation, which is going through a restructuring of its corporate headquarters operations. Columbia has offered to relocate Jeremy from its New York
Georgia is an executive who recently completed an assignment with her employer at an away-from-home location. It was realistically expected that the assignment would be completed in 15 months but the
Martin is a tax accountant employed by a public accounting firm. He incurs the following expenses:CPA review course$ 400Law school tuition and books4,000Accounting continuing education course
Bass Corporation purchases 10 tickets co the Super Bowl in February 2017 for entertaining its customers. Due co unusually high demand, the tickets have to be purchased from scalpers for $15,000 (10 x
Louis incurs "directly related" entertainment expenses of $4,000, but he is reimbursed by his employer for only $3,000 after an adequate accounting is made.a. How are these amounts reported on
Are deductions allowed for entertainment expenses in 2017 and 2018?
Len incurs $5,000 of deductible moving expenses in the current year and is fully reimbursed by his employer in the same year. a. How are the expense deduction and the reimbursement reported on
What are the two basic requirements that must be met to permit a deduction for moving expenses? Discuss both 2017 and 2018.
Discuss the reporting procedures for both 2017 and 2018 that should be followed by an employee co report employment-related expenses on his or her tax return under the following conditions:a.
If an employee receives a specific monthly amount from his or her employer as a reimbursement for employment-related entertainment, travel, and transportation expenses, why is it necessary to
Louie is a full -time employee for a large corporation and also an investor in the stock market in his spare time. In the current year, Louie incurs $2,500 of travel expenses and $1,000 in
Latoya, a college professor, takes a nine-month leave of absence from her employment at a college in Ohio and accepts a visiting professorship (temporary assignment) at a college in Texas. Latoya
In each of the following cases involving travel expenses, indicate how each item is reported on the tax·payer's tax return for both 2017 and 2018. Include any limitations that might affect its
Kelly is an employee who incurs $2,200 of business meal expenses in connection with business travel, none of which are reimbursed by her employer. $500 of the business meal costs are considered to be
Determine whether the following expenses are either deductible for AGI or from AGI or nondeductible on an employee's return for the tax years 2017 and 2018. Indicate whether the expenses are subject
Jace Seaton is a single taxpayer living in Eugene, Oregon. From 2014 to 2017, he worked as the CEO of Wengren & Jeffers, a local architectural firm. In 2018, he left the firm to start his own
In 2015, Annie Cook and several family members formed Treehouse Rentals, Inc., in Denver, Colorado. Treehouse is a closely held C corporation engaged in the rental real estate business. Treehouse
During the current year, Kenneth, who is married, reports the following income/loss from his business activities:Gross income from sole proprietorship$ 7,850,000Gross expenses from sole
During 2018, Karen, a single taxpayer, reports the following income and expense items relating co her interior design business:Revenues$52,000Cost of goods sold41,000Advertising3,300Office
Michelle and Mark are married and file a joint return. Michelle owns an unincorporated dental practice. Mark works part-time as a high school math teacher, and spends the remainder of his time caring
Assume the same facts as in Problem I:8 -53, except that Becky and Ken are not related and that under the terms of the loan Ken agrees to repay Becky the $5,000 plus interest (at a reasonable stated
During 2018, Pam incurred the following casualty losses:All of the items were destroyed in the same casualty, which resulted from a federally declared disaster. Before considering the casualty items,
In 2018, Julie, a single individual, reported the following items of income and deduction:Salary
In 2017, Mark purchased t,vo separate activities. Information regarding these activities for 2017 and 2018 is as follows:The 2017 losses were suspended losses for that year. During 2018, Mark also
The Tax Cuts and Jobs Act changed the NOL carryover rules. Prior to the tax la,v change, taxpayers could carry back an NOL for 2 years and carry forward for 20 years. After the tax law change,
How are excess business losses calculated? Does the limitation apply to passive activities as well as nonpassive activities?
Joyce is a single, cash-method taxpayer. On April 11, 2017, Joyce paid $120 in state income taxes with her 2016 state income tax return. During 2017, Joyce had $1,600 in state income taxes withheld.
Mr. Cougar Owns 1,000 shares of Western Corporation common stock, which it purchased on March 8, 2011, for $12,000. On October 3, 2018, Cougar purchases an additional 300 shares for $3,000. On
John Broward Owns 1,500 shares of Silver Fox Corporation common stock.John purchased the 1,500 shares on April 17, 2011, for $21,000. On December 8, 2017, John sells 750 shares for $5,000. On January
Assume the same facts as in Problem 1:6-40, except that Big Bang LLC incurs $51,000 in expenses, and it does not already own the other entertainment galleries and it does not own anything similar.a.
During January and February of the current year, Big Bang LLC incurs $13,000 in travel, feasibility studies, and legal expenses co investigate the feasibility of opening a ne,v entertainment gallery
Betty incurs the following transactions during the current year. Without considering the transactions, her 2018 AGI is $92,000. Analyze the transactions and ans,ver the following questions:• On
In 2013, the Ryan Corporation sold a capital asset and incurred a $40,000 LTCL that was carried forward to subsequent years. That sale was the only sale of a capital asset that Ryan made until 2018,
Without considering the following capital gains and losses, Charlene, who is single, has taxable income of $660,000 and a marginal tax rate of 37%.During the year, she sold stock held for nine months
On January 1, 2017, Sean purchased an 8%, $100,000 corporate bond for $92,277. The bond was issued on January 1, 2017, and matures on January 1, 2022. Interest is paid semiannually, and the effective
Dan owns 500 shares of Rocket Corporation common stock. The stock was acquired t\vo years ago for $30 per share. On October 2, 2018, Dan writes five calls on the stock, which represent options to buy
On February 10, 2018, Gail purchases 20 calls on Red Corporation for $250 per call. Each call represents an option to buy 100 shares of Red stock at $42 per share any time before November 25, 2018.
Capital Gains and Losses. During 2018, Gary receives a $90,000 salary and has no deductions for AGL In 2017, Gary had a $5,000 STCL and no other capital losses or capital gains. Consider the
On January 1, 2016, Swen paid $184,000 for $200,000 of the 8%, 20-year bonds of Penn Corporation, issued on January 1, 2012, at par. The bonds are held as an investment. Determine the gain and the
On December 31, 2017, Phil purchased $20,000 of newly issued bonds of Texas Corporation for $16,568. The bonds are dated December 31, 2017. The bonds are 9%, 10-year bonds paying interest
To better understand the rules for offsetting capital losses and how to treat capital losses carried forward, analyze the following data for an unmarried individual for the period 2015 through 2018.
An investor in a 32% tax bracket and a 15%, rate on ANCG owns land that is a capital asset with a $50,000 basis and a holding period of three years. The investor who is single wishes to sell the
Computing the Tax. Mr. and Mrs. Sedlock file a joint return and have taxable income of $370,000 without considering the following information below. Determine the increase in their tax liability for
Donna files as a head of household in 2018 and has taxable income of $110,000, including the sale of a stock held as an investment for two years at a gain of $20,000. Only one asset was sold during
Martha Lou owns 100 shares of Blain Corporation common stock. She purchased the stock on July 25, 1998, for $4,000. On May 2 of the current year, she receives a nontaxable distribution of 100 stock
Kathleen owns 500 shares of Buda Corporation common stock which was purchased on March 20, 2000, for $48,000. On October 10 of the current year, she receives a distribution of 500 stock rights. Each
Daniel receives 400 shares of A&M Corporation stock from his aunt on May 20, 2018, as a gift when the stock has a $60,000 FMV. His aunt purchased the stock in 2008 for $42,000. The taxable gift
Phil, a cash-basis taxpayer, sells the following marketable securities, which are capital assets during 2018. Determine whether the gains or losses are long-term or short-term. Also determine the net
Jim inherits stock (a capital asset) from his brother, who died in March of 2018, when the property had a $15.3 million FMV. This property is the only property included in his brother's gross estate
In 2008, Ellen purchased a house for $150,000 to use as her personal residence. She paid $30,000 and borrowed $120,000 from the local savings and loan company. In 2010 she paid $20,000 to add a room
Assume that it is December 31, and that Jake is considering making a $1,000 charitable contribution. Jake currently is in the 37%, tax bracket, but expects that his tax bracket will be 24%, next
Kamal owns a restaurant that operates as an S corporation. The business earns $100,000 per year after paying Kamal a salary of $50,000. Kamal and his wife Padma report the income from the restaurant
Gary earned $97,000 as an executive. Gary, who is single, supported his half sister, who lives in a nursing home. Gary received the following interest: $400 on City of Los Angeles bonds, $200 on a
Matt and Sandy reside in a community property state. Matt left home in April 2018 because of disputes with his wife, Sandy. Subsequently, Matt earned $15,000. Before leaving home in April, Matt
Ken and Lynn paid $5,000 to purchase Series EE bonds in the name of their 11-year-old son. The son has no other income, and they are in the 24% tax bracket. The taxable interest th is year \Viii be
Bart and Kesha, who are in the 37% tax bracket, are interested in reducing their taxes. They are currently considering several alternatives. For each, indicate how much tax, if any, they would
Stan rented an office building to Clay for $3,000 per month. On December 29, 2017, Stan received a deposit of $4,000 in addition to the first and last months' rent. Occupancy began on January 2,

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