Questions and Answers of Federal Taxation 2023 Comprehensive

Bill and Mary plan to marry in December 2022. Bill’s salary is $112,000 and he owns his residence. His itemized deductions total $21,700. Mary’s salary is $94,000. Her itemized deductions total
Which of the following taxpayers must file a 2022 return?a. Amy, age 19 and single, has $8,050 of wages, $800 of interest, and $350 of self employment income.b. Betty, age 67 and single, has a
For the following independent situations, determine the filing status for the years in question (all individuals are U.S. citizens). a. Wayne and Celia had been married for 24 years before Wayne
Virginia is a cash-basis, calendar-year taxpayer. Her salary is $90,000, and she is single. She plans to purchase a residence in 2023. She anticipates her property taxes and interest will total
Pat was divorced from her husband in 2012. During the current year she received alimony of $18,000 and child support of $4,000 for her 11-year-old son, who lives with her. Her former husband had
Assume the same facts as in Problem I:6-40, except that Big Bang LLP incurs $51,000 in expenses, and it does not already own the other entertainment galleries and it does not own anything similar.a.
Bryce, a bank official, is 40 years old, unmarried and has no dependents. During 2022 he engages in the following activities and transactions:a. Being an avid fisherman, Bryce develops an expertise
Ellen is a single taxpayer who is considering two job offers. Ellen considers both accounting firms to be equally desirable in terms of the opportunities for long-term career growth. But the
Deductions for individual taxpayers are classified as either for AGI or from AGI. Discuss the two categories of for AGI deductions.
Are deductions allowed for entertainment expenses of customers or clients in 2022?
Would education expenses incurred by a self employed individual be allowed in 2022 for the following expenses?Cost of a CPA review
Bass Corporation purchases 10 tickets to the Super Bowl in February 2022 for entertaining its customers. Due to unusually high demand, the tickets have to be purchased for $25,000 (10 : $2,500). The
David is an independent contractor who has been in the consulting business for several years. David has applied and been accepted into a prestigious MBA program. The program is two years in duration.
Mary is self-employed and incurs $3,600 of business-related travel and entertainment expenses during 2022 in which she was away from home overnight. These business expenses include the
Mike is an independent contractor in 2022. Mike attends a professional trade association convention in Los Angeles. He spends three days at the meeting and two days vacationing before the meeting.
Michelle is self-employed and uses her personal automobile for business trips. During 2022, Michelle drives her car 60% for business use and incurs the following total expenses (based on 100% use of
Amelie is self-employed and uses her personal automobile in connection with her business. During 2022, Amelie drove her car a total of 28,000 miles. Her business log shows that she drove 22,400 miles
Dana manages real estate and is a cash method taxpayer. She changes to the accrual method in 2023. Dana’s business income for 2023 is $30,000 computed on the accrual method. Her books show the
This tax form/return preparation problem uses the same information as Problem I:7-62EXCEPT it applies to the 2021 tax year rather than 2022. Actual government tax forms for 2022 are unavailable at
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
Kara and Brandon Arnold are married and file a joint return. Their Social Security numbers are 000-00-1111 and 000-00-2222, respectively. Kara and Brandon have one son, Henry, age 3. His Social
On January 30, 2022, Amy sells land to Bob for a stated price of $200,000. The full $200,000 is payable on January 30, 2024. No interest is stated. Amy, a cash-method taxpayer, purchased the land in
BCD Partnership has, for many years, had a March 31 year-end. The partnership’s net income for the fiscal year ended March 31, 2023 is $400,000. Because of its fiscal year, BCD has $100,000 on
Leon has a substantial portfolio of stocks and bonds as well as cash from some bonds that have recently matured. He has been looking at investing $200,000 in corporate bonds that pay 7% interest. The
Linda is selling land she has owned for many years. The land cost $80,000 and will sell for $200,000. The buyer has offered to pay $100,000 down and pay the balance next year plus interest at 8%.
Barbara B. Kuhn (SSN 987-65-4321) purchases a fourplex on January 8, 2018, for $175,000. She allocates $25,000 of the cost to the land, and she deducts MACRS depreciation totaling $16,364. Barbara
When may a sale of real property and a subsequent purchase of real property be treated as a like-kind exchange?
The Nelsons purchased a new residence in 2005 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 1998 to use in its business. The land is condemned and taken by the state in March 2022. The company receives $25,000 from the state.
On April 27, 2022, 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, 2022, 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, Federal elects
Marc, age 45, sells his personal residence on May 15, 2022, 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 residence
Mr. and Mrs. Rusbarsky purchased a residence on June 12, 2019, for $200,000. On March 12, 2022, they sell the residence for $300,000, and selling expenses amount to $11,000. They purchase another
On January 10, 2022, Kirsten married Joe. Joe sold his personal residence on October 25, 2021, and excluded the entire gain of $175,000. Although they had originally planned to live in the house that
Mr. and Mrs. Snell own and live in a house, with an adjusted basis of $300,000, that was purchased in 1998. The house is destroyed by a tornado on March 10 of the current year, and the Snells receive
Mr. and Mrs. Kitchens purchased their first home in Ohio for $135,000 on October 1, 2021. Because Mr. Kitchens’ employer transferred him to Utah, they sold the house for $160,000 on January 10,
In 1971, Mr. and Mrs. Self purchased their first principal residence for $80,000. In 1996, they sold the house for $300,000 and purchased a new residence for $1.5 million. At that time, the Selfs
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, 2021, and used it as a personal residence until August 1, 2022,
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 $7,300.
Consider the following information for Mr. and Mrs. Di Palma:• On June 10, 2021, they sold their principal residence for $80,000 and incur $6,000 of selling expenses. The basis of the residence,
Consider the following information for Mr. and Mrs. Gomez:• On May 26, 2021, they sold their principal residence, acquired in 2002, for $200,000.They paid $8,000 of selling expenses. Their basis in
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, 2022, and Harper provides a
On October 29, 2021, Miss Joan Seely (SSN 123-45-6789) sells her principal residence for $150,000 cash. She purchased the residence on May 12, 2012, for $85,000. She spent $12,000 for capital
Consider the following summary of Sec. 1231 gains and losses recognized by Janet during the period 2017–2022. Janet had no nonrecaptured Sec. 1231 losses at the beginning of 2017. If Janet has no
At the beginning of 2021, 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
On March 10, 2019, Elizabeth, a college professor, purchased a house for $300,000. She did not move into the house until August 8, 2019. On August 1, 2020, she accepted a position as a visiting
When is a net Sec. 1231 gain treated as ordinary income?
At the beginning of 2022, Silver Corporation has a $95,000 capital loss carryforward from 2021. During 2022, the corporation sells land, held for four years, and realizes an $80,000 gain. Silver has
Dillion has taxable income of less than $300,000 without considering the $53,000 Sec. 1231 gain mentioned below, and he has a tax rate of 35%. He has $40,000 of net nonrecaptured Sec. 1231 losses at
Consider three office buildings placed in service as shown below and answer the following true-false questions. Assume all assets are sold by a noncorporate taxpayer at a gain and there are no other
Arnie, a college student, purchased a truck in 2020 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
Brigham is single and is in the 32% marginal income tax bracket. He has the sales or exchanges below. At the beginning of the year, he has nonrecaptured net Sec. 1231 losses of $10,000. Determine the
The LaPoint Corporation placed in service $350,000 of used equipment (seven-year recovery property) on June 3, 2021 and elected to expense $250,000 as Sec. 179 depreciation expense but elected out of
Mr. Briggs purchased an apartment complex on January 10, 2020, for $2 million with 10% of the price allocated to land. He sells the complex on October 22, 2022, for $2.5 million. Assume that 10% of
Ed operates a storage business as a sole proprietorship and owns the following assets acquired in 2003:The FMV of the warehouse and the land are $500,000 and $200,000, respectively. Ed owns 75% of
In 2016, 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 development
Russ has never recognized any Sec. 1231 gains or losses. In December 2022, Russ is considering the sale of two Sec. 1231 assets. The sale of one asset will result in a $20,000 Sec. 1231 gain while
Holly has recognized a $9,000 STCL. She has no other recognized capital gains and losses in 2022. She is considering the sale of a Sec. 1231 asset held for four years at a $5,000 gain in 2022. She
Ralph and Tina are married, file jointly, and have $500,000 of taxable income. They transfer ownership of corporate bonds to Pam, their single daughter. There is $14,000 of interest on the corporate
Prime Corporation begins operations in late 2022. Prime decides to use the single-pool LIFO method. Year-end inventories under FIFO are as
Carlos inherits 100 shares of Allied Corporation stock from his father. The stock cost his father $8,000 and had a $25,000 FMV on the date of his father’s death in 2022. The alternate valuation
Sally and Tom are married, have three young children, and file a joint return in 2022. If they have adjusted gross income (AGI) of $90,000 and itemized deductions of $10,000, what is their taxable
The Bruin Corporation, a C corporation, is owned 100% by John Bean and had taxable income in 2022 of $500,000. John is also an employee of the corporation. In December 2022, the corporation has
Partnerships and S corporations are flow-through entities. In connection with filing annual tax returns, these entities must prepare Schedule K-1s. What is Schedule K-1, what is its purpose, and who
The PDQ Partnership earned ordinary income of $150,000 in 2022. The partnership has three equal partners, Pete, Donald, and Quint. Quint, who is single, uses the standard deduction, and has other
Tax Rates. Based on the amounts of taxable income below, compute the federal income tax payable in 2022 on each amount assuming the taxpayers are married filing a joint return. Also, for each amount
Betty, a married taxpayer, makes the following gifts during the current year (2022): $20,000 to her church, $100,000 to her daughter, and $40,000 to her husband. What is the amount of Betty’s
Clay, who was single, died in 2022 and has a gross estate valued at $8.5 million. Six months after his death, the gross assets are valued at $9 million. The estate incurs funeral and administration
Howard Gartman is a 40% partner in the Horton & Gartman Partnership. During 2022, the partnership reported the total items below (100%) on its Form 1065: Ordinary
a. Explain the distinction between a deduction and a credit.b. Which is worth more, a $200 deduction or a $200 credit?c. Explain the difference between refundable and nonrefundable credits.
Can tax-exempt income qualify as support?
Nell and Nick are married, have a 2-year-old child (Toni), and are in the 35% tax bracket. They heard that taxes could be reduced by shifting income to children. Nell and Nick ask you, their tax
Jim and Pat are married, file jointly, and have one dependent (12-year-old qualifying child). Jim receives a $92,000 salary. Pat is selfemployed. Her sole proprietorship’s revenues are $98,000, and
Mike and Linda are a married couple who file jointly and have $100,000 of taxable income. They have three dependent children who are full-time students in 2022. Mike and Linda provided $8,000 of
Georgia owns all of Peach Corporation’s stock. Peach pays her a $70,000 salary, which reduces its before-tax profit to $30,000. Peach distributes all of its after-tax income to its shareholder,
Gail and her husband have a son when her husband dies unexpectedly on January 1, 2022. Gail asks you, her tax professional, how her husband’s death affects her taxes. Determine Gail’s income tax
Jack is starting a business that he expects to produce $190,000 of income this year before compensating Jack for his services. He has $22,000 of other income and itemized deductions totaling $20,000.
Andrea, who is a head of household and in the 37% tax bracket, is interested in reducing her taxes. She is considering several alternatives. For each alternative listed below, indicate how much tax
John R. Lane (SSN 111-44-6666) lives at 1010 Ipsen Street, Yorba Linda, California 90102. John, a single taxpayer, age 66, provided 60% of his cousin’s support. The cousin lives in Arizona. He
What change did the Tax Cuts and Jobs Act make to the tax treatment of dividends received by U. S. corporations from foreign subsidiaries?
In 2017, Harry and Mary purchased Series EE bonds, and in 2022 redeemed the bonds, receiving $500 of interest and $1,500 of principal. Their income from other sources totaled $30,000. They paid
Stan rented an office building to Clay for $3,000 per month. On December 29, 2021, Stan received a deposit of $4,000 in addition to the first and last months’ rent. Occupancy began on January 2,
USA Corporation hired Jesse to install a computer system for the company and paid him $8,000 for the work. USA soon realized that there were problems with the system and asked Jesse to refund the
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
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 this year will be
Matt and Sandy reside in a community property state. Matt left home in April 2022 because of disputes with his wife, Sandy. Subsequently, Matt earned $15,000. Before leaving home in April, Matt
Gary earned $97,000 as an executive. Gary, who is single, supported his half sister, who lives in a nursing home. His half sister had no income during the year. Gary received the following interest:
Sally W. Emanual, a teacher, had the following dividends and interest during 2021:Acorn Corporation bond interest...............................................$ 700City of Boston bonds
On January 5, 2022 Rita left the United States for Germany, where she had accepted an appointment as vice president of foreign operations. Her employer, USA Corporation, told her the assignment would
Jangyoun is a married taxpayer with a dependent 4-year-old daughter. His employer offers a cafeteria plan under which he can choose to receive cash or, alternatively, choose from certain fringe
In October 2010, Jose acquired 100% of Acorn Corporation common stock by transferring property with an adjusted basis of $1,000,000 and fair market value of $4,000,000. Acorn is a qualified small
Pat was divorced from her husband in 2012. During the current year she received alimony of $18,000 and child support of $4,000 for her 11-year-old son, who lives with her. Her former husband had
A. J. Paige, Social Security number 111-22-3333, is the vice president of marketing (Australia) for International Industries, Inc. (III). III is headquartered at 123 Main Street, Los Angeles,
Alice Johnson, Social Security number 222-23-3334, is a single taxpayer and is employed as a secretary by State University of Florida. She has the following items pertaining to herincome tax return
In 2011, 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 2013 she paid $20,000 to add a room
What is the first day that an individual could sell a capital asset purchased on March 31, 2022 and have a holding period of more than one year?
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 2019 through 2022.
Phil, a cash-basis taxpayer, sells the following marketable securities, which are capital assets during 2022. Determine whether the gains or losses are long-term or short-term. Also determine the net
Sylvia, a dentist with excellent skills as a carpenter, started the construction of a house that she planned to give to her son as a surprise when he returned from military service overseas.
Trisha, who is single and has taxable income of $300,000, sells the following capital assets in 2022 with gains and losses as shown:a. Determine Trisha’s increase in income tax liability as a

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