Questions and Answers of Federal Taxation

Limited liability companies (LLCs) are very popular today as a form of organization. Assume a client asks you to explain what this type of organization is all about. Prepare a brief description of
Discuss what is meant by the term “double taxation” of corporations. Develop an example of double taxation using a corporation and shareholder.
The Bruin Corporation, a C corporation, is owned 100% by John Bean and had taxable income in 2017 of $500,000. John is also an employee of the corporation. In December 2017, the corporation has
Sally and Tom are married, have three dependent children, and file a joint return in 2017. If they have adjusted gross income (AGI) of $90,000 and itemized deductions of $10,000, what is their
Distinguish between taxpaying entities and flow through entities from the standpoint of the federal income tax law.
If the objectives of the federal tax system are multifaceted and include raising revenues, providing investment incentives, encouraging certain industries, and meeting desired social objectives, is
The primary objective of the federal income tax law is to raise revenue. What are its secondary objectives?
Two commonly-recognized measures of the fairness of an income tax structure are “horizontal equity” and “vertical equity.”a. Discuss what is meant by horizontal equity and vertical equity as
A “good” tax structure has five characteristics.a. Briefly discuss the five characteristics.b. Using the five characteristics, evaluate the following tax structures:1. Federal income tax2. State
The three different levels of government (federal, state, and local) must impose taxes to carry out their functions. For each of the types of taxes below, discuss which level of government primarily
Most estates are not subject to the federal estate tax.a. Why is this the case?b. Do you believe most estates should be subject to the federal estate tax?
Latesha, a single taxpayer, had the following income and deductions for the tax year 2017:INCOME:Salary $ 80 Business Income25 Interest income from bonds10 Tax-exempt bond
Explain how a computer can assist a tax practitioner in tax planning activities and making complex tax calculations.
Is the principal goal of tax planning to absolutely minimize the amount of taxes that a taxpayer must pay?
Many tax professionals have moved into the field of financial planning for their clients.a. How do taxes impact financial planning for a client?b. Why do tax professionals have a perfect opportunity
During 2017, Julio attended school for much of the year but was supported by his parents. Julio married Jillian in December 2017. Julio graduated and began working full-time in 2018. Jillian worked
Carolyn operates a consulting business as a sole proprietor (unincorporated). Carolyn has been approached by one of her major clients to become an employee. If she accepts the new job, she would no
Indicate which of the following taxes are generally progressive, proportional, or regressive:a. State income taxesb. Federal estate taxc. Corporate state franchise taxd. Property taxese. State and
Cathy, who is single, makes gifts of $50,000 to each of her two adult children.a. Who is primarily liable for the gift tax on the two gifts, Cathy or the two children?b. If Cathy has never made a
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 2017. The alternate valuation
Why are the gift and estate taxes called wealth transfer taxes? What is the tax base for computing each of these taxes?
Carmen has computed that her average tax rate is 16% and her marginal tax rate is 25% for the current year. She is considering whether to make a charitable contribution to her church before the end
The governor of your state stated in a recent political speech that he has never supported any income tax increases as the tax rates have remained at the same level during his entire term of office.
Congressman Patrick indicates that he is opposed to tax proposals that call for a flat tax rate because the structure would not tax those individuals who have the ability to pay the tax. Discuss the
Why was pay-as-you-go withholding needed in 1943?
The Supreme Court in 1895 ruled that the income tax was unconstitutional because the tax needed to be apportioned among the states in proportion to their populations. Why would the requirement of

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