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federal taxation

Questions and Answers of Federal Taxation

In earlier years, neither Hugo nor Wanda, his wife, made any taxable gifts. In 2018, Hugo gave $15,000 cash to each of his nieces, nephews, and grand-children, 30 individuals in total. In 2019, Wanda
In the current year, Louise makes the transfers described below to Lance, her husband, age 47. Assume 4% is the applicable interest rate. What is the amount of her marital deduction, if any,
In March 2019, lien (age 70) transfers a remainder interest in her vacation cabin (with a total value of $100,000) to a charitable organization and retains a life estate in the cabin for
In 2019, Henry and his wife, Wendy, made the gifts shown below. All gifts are of present interests. What is Wendy's gift tax payable for 2019 if the couple elects gift splitting and Wendy's previous
In 2019, Homer and his wife, Wilma (residents of a non—community property state) make the gifts listed below. Homer's previous taxable gifts consist of $100,000 made in 1975 and $1.4 million made
In June 2018, Karen transferred property with a $75,000 FMV and a $20,000 adjusted basis to Hal, her husband. Hal dies in March 2019; the property has appreciated to $85,000 in value by then. His
In March 2019, Ginger Graham, age 46 and wife of Greg Graham, engaged in the transactions described below. Determine Ginger's gift tax liability for 2019 if she and Greg elect gift splitting and Greg
George and Martha, spouses who are both age 60 and in excellent health, made a number of gifts during 2019. Their accountant is trying to help them decide whether to elect gift splitting. If they do
Use the information shown below to prepare a 2018 gift tax return (Form 709) for Joel Bruton. Pages 4 and 5 of the form are not applicable. Joel and his wife Janis, both U.S. citizens, want to elect
Ned Norris, a widower, engaged in the transactions described below during 2018. He made only one earlier taxable gift, $1.2 million in 2014. Use this information to prepare a 2018 gift tax return
Morris Jory, a long-time tax client of the firm that employs you, has made substantial gifts during his lifetime. Mr Jory transferred Jory Corporation stock to 14 donees in December 2018. Each donee
In July of the current year, Horace Hiatt, a widower, transferred $140,000 worth of publicly traded stock to an irrevocable trust with Benton National Bank as trustee. He named his granddaughter,
Your manager advises you that clients Mike and Winona Marsh, residents of Bath, Maine, acquired beachfront property in Maine in 2002 and titled the property in their names as joint tenants with right
Janet Mason timely filed a 2017 gift tax return to report the gift on June 3, 2017, of closely held stock in Mason Meat Co., Inc. The tax return, which your firm prepared, reflected a value of $1,500
Consult the case Estate of Edward S. Redstone, 145 T.C. No. 11 (2016), a rather compli-cated case, and answer just the following uncomplicated questions:a. When did the alleged gift occur, and when
On August 3, 2016 Ginger Grayson, a widow, transferred $55,000 to each of two Sec. 529 plans (qualified tuition programs), one for grandson Greg Grayson and one for granddaughter Gayle Grayson. Her
Marcello Martino, who is single and very wealthy, is considering making his first taxable gifts in the current year. These gifts would approximate $10 million. Because the current large unified
Annie James died early in 2019. All her property passed subject to her will, which provides that her surviving husband, Dave James, is to receive all the property outright. Her will further states
Jeung Hong, a widower, did in March 2019. His gross estate was 514.5 million and, at the time of his death, he owed debts of $60,000. His will made a bequest of $200,000 to his undergraduate alma
Beth died on May 3, 2019. Her executor elected date-of-death valuation. Beth's gross estate included, among other properties, the items listed below. What is the estate tax value of each
Mary died on April 3, 2019. As of this date, Mary's gross estate was valued at $16.5 million. On October 3, Mary's gross estate was valued at $15.8 million. The estate neither distributed nor sold
Sue died on May 3, 2019. On October 1, 2016, Sue gave her son Tom land valued at $7,014,000. Sue applied a unified credit of $2,125,800 against the gift tax due on this transfer. On Sue's date of
Val died on May 13, 2019. On July 3, 2016, she gave a $400,000 life insurance policy on her own life to son Ray. Because the value of the policy was rela-tively low, the transfer did not cause any
In December 2016, Jody transferred stock having an 58,114,000 FMV to her daughter Joan. Jody paid $1,060,000 ($3,185,800 — $2,125,800) of gift taxes on this transfer. When Jody died in January
In December 2016, Curt and Kate elected gift splitting to report 516,228,000 of gifts of stocks Curt made to Curt, Jr. Each paid gift taxes of 11,060,000 by spending his or her own funds. Kate died
John died in 2019. What amount, if any, was included in his gross estate in each of the following situations: a. In 2007, John created a revocable trust, funded it with $400,000 of assets, and
Twelve years ago, Latoya transferred property to an irrevocable trust with a bank trustee. Latoya named Al to receive the trust income annually for life and Pat or Pat's estate to receive the
Ten years ago, Art purchased land for $60,000 and immediately titled it in the names of Art and Ban, joint tenants with right of survivorship. Ban paid no consideration. In 2019, Art died and was
Tai was the sole income beneficiary for life of each of the trusts described below. For each trust, indicate whether and why it was includible in Tai's gross estate. a. A trust created under the
Joy died?on November 5, 2019 soon after joy?s death, the executor discovered the following insurance policies on joy?s life. Joy transferred ownership policies 757 and 848 to her son in 2009. She
When Yuji died in March 2019, his gross estate was valued at $15 million. He owed debts totaling $300,000. Funeral and administration expenses were $12,000 and $120,000, respectively. Yuji willed his
Sam Snider died February 14, 2018, survived by his spouse Janet and several children. Sam had not made any taxable gifts. Sam's gross estate was $7 million. In each of the following independent
Will, a bachelor, died in 2019. At that time, his sole asset was cash of $15 million. Assume no debts or funeral and administration expenses and no charitable bequests. His gift history was as
Bess, a widow, died in October 2019. Her gross estate, which to-taled $12.5 million, included a $100,000 life insurance policy on her life that she gave away in 2017. The taxable gift that arose from
Maria Martinez died in 2019, survived by her spouse, Sergio, and tw( adult children. Her gross estate, all of which passed under her will, was valued at $17.: million. She had Sec. 2053 deductions of
Joseph Jernigan died in 2019 with a taxable estate of $14.1 million. He was survived by his spouse Josephine and several children. He made taxable gift of $100,000 in 1974 and $650,000 in 2000. The
Elaine died on May 1, 2019, Her gross estate consisted of the following items: Elaine's Sec 20153 deductions totaled 5200,000. She had no other deductions.? a. What percentage of Elaine's federal
Giovanni died in 2019 with a gross estate of $13.9 million and debts of $30,000. He made post-1976 taxable gifts of $100,000, valued at $80,000 when Giovanni died. His estate paid state death taxes
Bonnie died on June 1, 2019, survived by her husband, Abner, and two sons, Carl and Doug. Bonnie's only lifetime taxable gift was made in October 2016 in the taxable amount of $6.25 million. She did
Gaylord Gunnison (GC) died January 13, 2019, and his gross estate consisted of three properties—cash, land, and stock in a public company. The amount of cash on the date of his death was $10.9
Prepare an estate tax return (Form 706) for Marcia Miller, who died July 23, 2018. Marcia (born April 2, 1930) resided at 117 Brandywine Way, Eastern City, PA 19000 and was a lifelong Pennsylvania
Steve Silver, a new client, owns stock in HyTeche, Inc., which recently had an initial public offering. In early 2019, his stock is valued at $8 million. His only other asset is $9 million of cash.
Matt Patterson died in early 2019 with a $14.5 million gross estate and no deductions other than a potential marital deduction. He bequeathed all his property to his spouse, Nancy, with the provision
No. The IRS is correct in disallowing the deduction. Unfortunately, under the IRC, Arthur’s good deeds should be “rewarded” with a zero charitable contribution deduction on his estate tax
George Tanner died October 2, 2018, survived by his son Thomas and his daughter Gigi Tanner Stewart and her children, Sam and Cindy. George was the sole stockholder of Tanner, Inc., a C corporation.
Art Rutter sold an apartment building in May 2019 for a small amount of cash and a note payable with payments beginning in 2020. Principal and interest payments are due annu-ally on the note in April
For the first five months of its existence (August through December 2019), the Estate of Amy Ennis had gross income (net of expenses) of $7,000 per month. For January through July 2020, the executor
Suellen Sym.mes died on January 15, 2019. Her estate elected a November 30 year end. The executor projects that the !estate will receive interest income of $50,000 by November 30, 2019, and will have
A simple must had a long-term capital loss of $10,000 for 2018 and a long-term capital gain of $15,000 for 2019. Its net accounting income and DNI are equal. Explain the tax treatment for the 2018
Holly funded the Holly Marx Trust in January 2019. The entire trust income is payable to her adult son Jack for 20 years. At the end of the twentieth year, the trust assets are to pass to Holly's
The following items are relevant for the first income tax return for the Ken Kimble Estate. Mr. Kimble, a cash method of accounting taxpayer, died on July I, 2019. The record dares were June 14 for
Joan died April 17, 2018. Joan's executor chose March 31 as the tax year end for the estate. The estate's only beneficiary. Kathy, reports on a calendar year. The executor of Joan's estate makes the
Dana Dodson died October 31, 2018, with a gross estate of $16.7 million, debts of $200,000, and a taxable estate of $16.5 million. Dana made no taxable gifts. All of her property passed under her
Glorietta Trust is an irrevocable discretionary trust funded by Grant Glorietta. The discretionary income beneficiary for life is Grant's son, Gordon Glorietta (single). Gordon is a partner in a
Cate Cole died in 2017, and her will left her entire estate in equal shares to her two adult children, Calvin and Corrine. Both children anticipate being in the top income tax bracket for at least
Marion Mosley created the Jenny Justice Trust in 2005 with First Rank named as trustee. For 20 years, the trust is to pay out all its income semiannually to the beneficiary, Jenny Justice. At the end
Stan Meadows funded a trust in 2014 and named Merchants Bank as trustee. He paid no gift tax on the transfer. The trustee in its discretion is to pay out income, but not prin-cipal, to Stan's
Arthur Rich, a widower, is considering setting up an irrevocable trust (or trusts) with a bank as trustee and his three minor children as beneficiaries. He will fund the trust at $900,000 (or
Your employer is planning to present a program for clients that will address state income taxation of trusts and their beneficiaries. Each first year staff member has received a short assignment.
Upon audit, the IRS determines Maria's tax liabil-ity to he $40,000. Maria agrees to pay a 47,000 deficiency. Will she necessarily have to pay a sub-stantial understatement penalty? Explain.
Ed's tax liability for last year was $24,000. Ed projects that his tax for this year will be $34,000. Ed is self-employed and, thus, will have no withholding. His AGI for last year did not exceed
Anne Banks is a single, 60-year old retired teacher who does not itemize. Her only income is reported to her on the Fonn 1099-R provided by her retirement plan and the Form 1099-DIV provided by her
In 2019, Andes Corporation purchases $1.5 mil-lion of machinery (7-year property) and places it into service in its business. What are Andes' depreciation deductions for 2019 and 2020 in each of the
Woburn Corporation uses the calendar year as its tax year. Woburn purchases and places into service $1.7 million of depreciable property during 2019: You are working in Woburn's tax department and
Turner Corporation uses the calendar year as its tax year. It purchases and places into service $1.97 million of property during 2019 to use in its business: What is Turner's total depreciation
Tampa Corporation sold the following assets in 2019: a. What is the depreciation deduction for each asset in 2019? b. Compute the gain or loss on each asset sold. Automobile Equipment Building
Stan Bushart works as a customer representative for a large corporation. Stan's job entails traveling to meet with customers, and he uses his personal car 100% for business use. In 2019, Stan must
On March 10, 2016, Elizabeth, a college professor, purchased a house for $300,000. She did not move into the house until August 8, 2016. On August 1, 2017, she accepted a po-sition as a visiting
Not:recaptured Net Sec. 1231 Losses. Consider the following summary of Sec. 1231 gains and losses recognized by Janet during the period 2014-2019. Janet had no nonrecaptured Sec. 1231 losses at the
Corporation incurs a $100,000 NOL in 2019. In 2020, the corporation reports the following items:Gross profit from operations$200,000Operating expenses other than interest expense120,000Business
Brad and Valerie decided to adopt a child and contacted an adoption agency in August 2018. After extensive interviews and other requirements (such as financial status, etc.), Brad and Valerie were
Harold J. Milton (SSN1000-22-1111) is 66 years old and unmarried, filing single with no dependents. He had the following income and deductions for 2018: Complete Milton's 2018 Form 1040, Schedule
Assume the same facts as in Problem 22, except that the trust instrument allocates the capital gain to income.a. How much income is each beneficiary entitled to receive?b. What is the trust’s
The Allwardt Trust is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries (Lucy and Ethel) are entitled to the trust’s annual accounting income in shares
Sanchez incurred the following items.Business income, exclusive of the following items ................................................... $80,000Tax-exempt interest income
The Sterling Trust owns a business and generated $100,000 in depreciation deductions for the tax year. Mona is one of the income beneficiaries of the entity.a. Given the following information,
Using Exhibit 28.4 as a guide, describe the computation of a fiduciary entity’s accounting income, taxable income, and distributable net income.Exhibit 28.4 EXHIBIT 28.4 Accounting Income,
Before her death, Lucy entered into the following transactions.a. Lucy borrowed $600,000 from her brother, Irwin, so that Lucy could start a business. The loan was on open account, and no interest or
Before her death, Lucy entered into the following transactions.a. Lucy borrowed $600,000 from her brother, Irwin, so that Lucy could start a business. The loan was on open account, and no interest or
Grace Lang was employed as a waitress at the Pancake House in Grand Bay, Alabama. While working the morning shift on March 7, 2009, one of Grace’s customers left her a Florida lottery ticket as a
Under Rowena’s will, Mandy (Rowena’s sister) inherits her property. One year later, Mandy dies. Based on the following independent assumptions, what is Mandy’s credit for the tax on prior
Assume the same facts as in Problem 42, except that Gordon and Fawn are husband and wife (not brother and sister).a. What are the gift tax consequences in 2012?b. What are the estate tax consequences
Assume the same facts as in Problem 38 with the following modifications. What amount is included in Alicia’s gross estate?• Mitch is killed in a rock slide while mountain climbing in November,
In each of the following independent situations, indicate whether the alternate valuation date can be elected. Explain why or why not. Value of Gross Estate Estate Tax Liability Date of Six Months
In 2001, Mason buys real estate for $1.5 million and lists ownership as follows: “Mason and Dana, joint tenants with the right of survivorship.” Mason dies first, when the real estate is valued
During the year, Rajeev makes the following transfers: • $1,000 to his mayor’s reelection campaign.• $21,000 to his aunt, Ava, to reimburse her for what she paid the hospital for her
Gus (age 84) and Belle (age 18) are married early in the year. Late in the same year, Belle confronts Gus about his failure to transfer to her the considerable amount of property he previously
Regarding the formula for the Federal estate tax (see Concept Summary 27.2), comment on the following.a. The gross estate includes only property interests owned by the decedent at the time of
The Eggers Corporation filed an amended Form 1120, claiming an additional $400,000 deduction for payments to a contractor for a prior tax year. The amended return was based on the entity’s
Continue with the facts of Problem 44. What are the Federal income tax withholding requirements with respect to Martinho’s sale? Who pays the withheld amount to the U.S. Treasury?Problem
Partin, Inc., a foreign subsidiary of Jones, Inc., a U.S. corporation, reports pretax income of 200,000 euros for the current year. Partin accrues 60,000 euros in foreign taxes on this income. The
Honk, Inc., a U.S. corporation, purchases weight-lifting equipment for resale from HiDisu, a Japanese corporation, for 60 million yen. On the date of purchase, 105 yen is equal to $1 U.S. (¥105:$1).
Enders, Inc., a domestic corporation that invests in foreign securities, reports total taxable income for the tax year of $290,000, consisting of $208,800 in U.S.-source business profits and $81,200
Identify three states considered to be in the same economic region as your own. For each of the three states, answer the following questions.Answers to most can be found at www.taxadmin.org.• What
For your state and one of its neighbors, find the following income tax rules. Place your data in a chart, and e-mail your findings to your instructor.a. To what extent does each state follow the
State E applies a throwback rule to sales, while State F does not. State G has not adopted an income tax to date. Clay Corporation, headquartered in E, reported the following sales for the year. All
Use Exhibit 24.1 to provide the required information for Warbler Corporation, whose Federal taxable income totals $10 million. Warbler apportions 70% of its manufacturing income to State C. Warbler
What is the due date for an exempt organization’s annual information return?a. The 15th day of the fifth month after the organization’s year-end.b. The 15th day of the fourth month after the
Which of the following exempt organizations are required to file an annual information return if gross receipts exceed $50,000 in a year?I. A charityII. A labor unionIII. A churcha. I, II, and IIIb.
The International Association of Accountants (IAA), a labor union, made a one-time donation to a political candidate who is also a member of the organization. In addition, the IAA publicly endorsed

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