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business
federal taxation

Questions and Answers of Federal Taxation

In two unrelated transactions, Laura exchanges property that qualifies for like-kind exchange treatment. In the first exchange, Laura gives up office equipment purchased in May 2015 (adjusted basis
Bernadette Rosen, a longtime client of yours, is an architect and the president of the local Rotary chapter. To keep up to date with the latest developments in her profession, she attends continuing
Paul and Karen Kent are married, and both are employed (Paul earned $44,000 and Karen earned $9,000 this year). Paul and Karen have two dependent children, Samuel and Joy, both under the age of 13.
Same as Problem 32, except that Jimenez paid $2 million in income taxes to other countries.Problem 32Jimenez Enterprises is incorporated in Arkansas. It generated a $5 million profit on its overseas
Same as Problem 32, except that Jimenez paid $2 million in income taxes to other countries.
Albert, Berry, and Collins formed ABC Partnership in the current year. Collins, a limited partner, contributed $20,000 in cash to the partnership and also pledged $10,000 of personal property as
The following chart applies to Bettelli, an investor who owns two rental activities, Property A and Property B, and has no other involvement in passive activities:Bettelli met the requirements for
Patel bought a rental property in year 1 for $150,000. In year 1, Patel’s adjusted gross income (AGI) was $100,000 and Patel sustained a $15,000 loss on the property. In year 2, Patel’s AGI was
Smith bought a rental property in year 1 for $100,000. In year 1, Smith’s adjusted gross income (AGI) was $125,000 and Smith sustained a $30,000 loss on the property. In year 2, Smith’s AGI was
Lewis is not an active participant in three rental activities, which have turned profits in recent years. The following gain and losses apply to the current year for Lewis:
Lewis is not an active participant in three rental activities, which have turned profits in recent years. The following gain and losses apply to the current year for Lewis:
Anscomb is an employee who also solely owns and actively participates in a rental activity which produced a $20,000 loss in the current year. Anscomb’s W–2 income in the current year is $115,000.
Lee, a married individual, is an employee with three rental properties in which Lee does not actively participate. In 2016, Property 1 had a net loss of $10,000, Property 2 had a net gain of $25,000,
Which of the following deductions for taxes paid may be taken in the same year?a. Real estate taxes, state income taxes, state sales taxes.b. Real estate taxes, property taxes, state income taxes.c.
Aaron has $30,000 of adjusted gross income in 2017. His expenses are as follows:Non-prescription medicine ........................................................ $ 100Prescription medicine
Betty, a salesperson, is an employee with $52,000 AGI who maintains a home office for the convenience of her employer, Smart Systems. The office takes up 5% of Betty’s home and is used exclusively
Addison Parker, single and age 32, lives at 3218 Columbia Drive, Spokane, WA 99210. She is employed as regional sales manager by VITA Corporation, a manufacturer and distributor of vitamins and food
In each of the following situations, indicate whether the 50% reduction for meals and entertainment expenses applies.a. Each year, the employer awards its top salesperson an all-expense-paid trip to
To qualify for the moving expense deduction, a taxpayer must satisfy a time test.a. What is the time test?b. When might the taxpayer be excused from satisfying the time test?c. What reporting
Regarding the tax treatment of a business’s research and experimental (R&E) expenditures, which of the following statements is true?a. A common reason for electing tax deferral for such
Newton, a business owner, signed a ten-year lease beginning in July of 2017 and immediately paid rent for the remainder of 2017, all of 2018, and all of 2019. How much of the rent paid at the lease
How would your answer to Problem 48 differ if Anna had rented the house for 87 days and had used it personally for 13 days?
Janice, age 22, is a student who earns $10,000 working part-time at the college ice cream shop in 2017. She has no other income. Her medical expenses for the year total $3,000. During the year, she
Daniel, age 38, is single and has the following income and expenses in 2017.Salary income .......................................................................................................
Your client, John Butler, is an avid Houston Astros fan. Last March at the Astros’ home opener, as a result of a random drawing of those in attendance at the game, John won 300 Shipley Do-Nut
Laura was recently diagnosed with cancer and has begun chemotherapy treatments. A cancer specialist has stated that Laura has less than one year to live. She has incurred many medical bills and other
Kyle and Elena Smith contributed to the support of their two children, Alexandra and Matthew, and Elena’s divorced father Nick. This year, Alexandra, age 22 and a full-time college student, earned
Parker and his wife Marie would have been filing a joint tax return for 2016; however, Marie died in October 2016. Parker has not remarried and continues to maintain a home for himself and his two
Wesley and Myrtle (ages 90 and 88, respectively) live in an assisted care facility and for the last two years received their support from the following sources.
Determine the number of personal and dependency exemptions in each of the following independent situations.a. Leo and Amanda (ages 48 and 46, respectively) are married and furnish more than 50% of
Compute Aiden’s 2017 taxable income on the basis of the following information. Aiden is married but has not seen or heard from his wife for over three years.Salary
Paul and Sonja, who are married, reported 2017 itemized deductions of $8,200 and $400, respectively. Paul suggests that they file their Federal income tax returns separately—he will itemize his
In the citation Schuster’s Express, Inc., 66 T.C. 588 (1976), aff’d 562 F.2d 39 (CA–2, 1977), nonacq., to what do the 66, 39, and nonacq. refer?
a
Indicate in each of the following independent situations whether the taxpayer can accomplish what is proposed. Provide adequate authority for your answer including any special elections that are
Tango Corporation, a calendar year taxpayer, has been an S corporation for several years. Tango's business activities have become very profitable in recent years. On June 16, 2019, its sole
Orlando Corporation, a calendar year taxpayer, has beer an S corporation for several years. On July 9, 2019, Orlando authorizes a second class of nonvoting preferred stock that pays a 10% annual
Voyles Corporation, a calendar year taxpayer formed five years ago, desires to make an S election beginning in 2020. Sue and Andrea each own one-half of the Voyles stock.a. How does Voyles make the S
On the advice of his attorney, Dr. Andres, a local pediatrician, contributed several office buildings, which he had previously owned as sole proprietor, to a new Andres Partnership in which he became
Distribution of Stock: Split-Oft Parent Corporation has owned all 100 shares of Subsidiary Corporation common stock since 2012. Parent has been in the business of manufacturing and selling light
A complex trust has taxable income of $29,900 in 2019. The $29,900 includes $5,000 of rental income and $25,000 of taxable interest income, re-duced by the $100 personal exemption. The trust makes no
At the beginning of 2019, Silver Corporation has a $95,000 capital loss carryforward from 2018. During 2019, the corporation sells land, held for four years, and realizes an $80,000 gain. Silver has
Arnie, a college student, purchased a truck in 2017 for $6,000. He used the truck 70% of the time as a distributor for the local newspa-per and 30% of the time for personal use. The truck has a
General Corporation owns equipment which cost $70,000 and has a $44,000 adjusted basis. General exchanges the equipment in June of 2019 for other equipment 452,000 FMV) and marketable securities
Leroy owned a truck used in his trade or business that cost $50,000 and had an adjusted basis of $34,000 in 2016 when the truck was exchanged for a new truck that was like-kind property with a FMV of
The LaPoint Corporation placed in service 8350,000 of used equip-ment (seven-year recovery property) on June 3, 2018 and elected to expense $250,000 as Sec. 179 depreciation expense but elected out
Mt Briggs purchased an apartment complex on January 10, 2017, for $2 million with 10% of the price allocated to land. He sells the complex on October 22,2019, for $2.5 million. Assume that 10% of the
Russ has never recognized any Sec. 1231 gains or losses. In December 2019, 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 2019. She is considering the sale of a Sec. 1231 asset held for four years at a $5,000 gain in 2019. She
Sarah, a married taxpayer who files a joint return, is considering a foreign assignment for two years. In 2019, she will earn $120,000 in the foreign country. Sarah has no other income. She will be
Alice is a single mother, 37 years old, and has two qualifying children, ages 3 and 6. In 2019, she earns $20,000 m wages resulting in $20,000 of AGI. Is Alice eligible for the earned income credit?
William and Maria Smith are a married couple filing jointly. They have no children and report the following items in 2019:Taxable income$550,000Tax preferences70,000AMT adjustments related co
Jose, an unmarried taxpayer filing single with no dependents, has AGI of $600,000 and reports the following items in 2019:Taxable income$550,000Tax preferences70,000AMT adjustments related co
Dylan is a single taxpayer with $600,000 of taxable income, which results in a regular tax liability of $186,988 in 2019. Dylan is extremely cautious about being subject to AMT and wants to know how
Allen, an unmarried taxpayer filing single, has no dependents and reports the following items on his 2019 federal income tax return:Adjusted gross income$82,450Taxable income47,950Regular tax
Amelia has wages of $45,000 and net income from a small unin-corporated business of $70,000 for 2019.a. What is the amount of Amelia's self-employment (SE) tax and deduction for AG1 for her SE tax?b.
Arnie and Angela are married and file a joint return in 2019. Arnie is a partner in a public accounting firm. His share of the partnership's incomc in the cur-rent year is $40,000, and he receives
Anita, a single taxpayer, reports the following items for 2019:Salary$20,000Income for serving on the Board of Directors for XYZ Corporation11,000Consulting gross income9,000Expenses related to
In each of the following independent situations, deter-mine the amount of the child and dependent care tax credit. (Assume that both taxpayers are employed and the year is 2019.)a. Brad and Bonnie
Randall and Dianne Wall live in St. Louis, Missouri. Randall and Dianne are each 30 years old, neither smokes, and they have no children or other dependents.Randall is attending law school full time
Carolyn is unmarried and has one dependent child, age 6, who lived with her for the entire year. In 2019, she has income of $16,000 in wages and $6,000 of unearned income (none of which was
Jose is unmarried with no qualifying children. He has $8,800 of 2019 wages and is otherwise eligible for the earned income credit. Jose has $200 of interest income and no (or AG1 deductions.a. What
Latisha is an unmarried taxpayer, filing head of household. She has two dependent children (7-year-old twins) who lived with her all year. Her 2019 earned income was $18,600, her AGI was $22,700, and
Len and Christy Vole, ages 42 and 39 respectively, are married and file jointly in 2018. Len is a contractor operating as a sole proprietorship (EIN 11-1111111). Christy is employed, earning $24,000
Reagan and Grady Wade are married with three qualify-ing children under the age of 17. In 2018, Reagan and Grady had earned income of $50,000 and no adjustments. Line 7 of their 1040 reports AGI of
Self Employment Tax Calculation Short Tax Font Doug is a single taxpayer. In 2018, he had wage income of $115,000 from his employee In addition to his wage income, Doug was a consultant in which he
Barbara was divorced two years ago. However, the final property settlement and determination of alimony payments was not made until February 2019 because of extended litigation. Barbara received a
Lean Corporation was incorporated in 2013 by Bruce Smith, who has served as an officer and member of the Board of Directors. Carl Jones has served as the secretary-treasurer of the company as a
a. What 2015 action (acquiescence or nonacquiescence) did the IRS Commissioner take regarding the 9th Circuit decision in Voss v. Commissioner, 116 AFTR 2d 2015-5529? Consult Actions on Decisions
Net Operating Loss Carryovers. In 2019, Ace Corporation reports gross income of $200,000 (including 5150,000 of profit from its operations and $50,000 in dividends from less•than-20%-owned domestic
Filing the Tax Return and Paying the Tax Liability. Wright Corporation's taxable in-come for calendar years 2016, 2017, and 2018 was $120,000, $150,000, and $100,000, respectively. Its total tax
Mike Barton owns Barton Products, Inc. The corporation has 30 employees. Barton Corporation expects $800,000 of net income before taxes in 2019. Mike is married and files a joint return with his
At the beginning of 2018, 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 October 29, 2018, Miss Joan Seely (SSN 12.3-45-6789) sells her principal residence for $150,000 cash. She purchased the residence on May 12, 2009, for $85,000. She spent $12,000 for capital
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, 2019, and Harper provides a
Consider the following information for Mr. and Mrs. Gomez: • On May 26, 2018, they sold their principal residence, acquired in 2001, for $200,000. They paid $8,000 of selling expenses. Their basis
Consider the following information for Mr. and Mrs. Di Palma: • On June 10, 2018, they sold their principal residence for $80,000 and incur $6,000 of selling expenses. The basis of the residence,
Rental Property. For the last five years, Mr. and Mrs. Cockrell rented their furnished basement to local college students. When determining their taxable income each year, they deducted a portion of
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, 2018, and used it as a personal residence until August 1. 2019.
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
Mr. and Mrs. Kitchens purchased their first home in Ohio for $135,000 on October 1, 2018. Because Mr. Kitchens' employer transferred him to Utah, they sold the house for $160,000 on January 10, 2019.
On January 10, 2019, Kirsten married Joe. Joe sold his personal residence on October 25, 2018, and excluded the entire gain of $175,000. Although they had originally planned to live in the house that
Mr. and Mrs. Rusbarsky purchased a residence on June 12, 2016, for $200,000. On March 12, 2019, they sell the residence for $300,000, and selling expenses amount to $11,000. They purchase another
Involuntary Conversion: Different Methods of Replacement. On September 3, 2019, Federal Corporation's warehouse is totally destroyed by fire. 5800,000 of insurance proceeds are received, and the
Marc, age 45, sells his personal residence on May 15, 2019, 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
On April 27, 2019, an office building owned by the Ava James Corporation, an offshore drilling company that is a calendar-year tax-payer, is destroyed by a hurricane. The basis of the office building
Involuntary Conversion: Replacement Period. The Madison Corporation paid 43,000 for several acres of land in 1995 to use in its business. The land is condemned and taken by the state in March 2019.
Short Tax Form. Barbara B. Kuhn (SSN 987-65-4321) purchases a fourplex on January 8, 2015, for $175,000. She allocates $25,000 of the cost to the land, and she deducts MACRS depreciation totaling
BCD Partnership has, for many years, had a March 31 year-end. The partnership's net income for the fiscal year ended March 31, 2020 is $400,000. Because of its fiscal year, BCD has $100,000 on
On January 30, 2019, Amy sells land to Bob for a stated price of $200,000. The full $200,000 is payable on January 30, 2021. No interest is stated. Amy, a cash-method taxpayer, purchased the land in
Prime Corporation begins operations in late 2019. Prime decides to use the single-pool LIFO method. Year-end inventories under FIFO are as follows:2019$110,0002020134,0002021125,000The price index
In 2017, the Margate Corporation acquired an automobile with a con of S30,000 for use in its business. Shortly thereafter, Margate Corporation experienced a decline in sales. Several employees were
Refer to the facts in Problem 1:10-48 for John and Ellen Brhe. The following information is also available for them:• John and Ellen live at 111 Maple Street, Johnsonville, Colorado 81733.•
Thom Jones (SSN 000-00-1111) is an unincorporated manufacturer of widgets. He uses the LCM method to value his inventory and reports the following for 2018:Sales (less returns and
Helen has operated a sole proprietorship for many years and has tentatively agreed to sell its assets to Blaze Corporation. They are negotiating how to allocate $1.4 million of the transaction's
John and Ellen Brire are married and file a joint return. They have no dependents. John owns an unincorporated specialty electrical lighting retail store, Brite-On. Brite-On had the following assets
Phillips Corporation, a construction company that specializes in home construction, uses special computer software to schedule jobs and keep track of job costs. It uses generic software for
In 2019, Phoenix Corporation acquires a new research facility and hires several scientists to develop new products. No new products are developed until 2020, although the following expenditures were
Troy entered into a three-year lease of a luxury auto-mobile on January 1, 2019, for use 80% in business and 20% for personal use. The FMV of the automobile at the inception of the lease was $61,000,
Tracy acquires an automobile (MACRS 5-year recovery) on March 1, 2019. He uses the automobile 70% in his business and 30% for personal use. The automobile cost $76,000. No amount is expensed under

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