Questions and Answers of Fundamentals Of Taxation

Carlton holds undeveloped land for investment. His adjusted basis in the land is $200,000, and the FMV is $325,000. On November 1, 2021, he exchanges this land for land owned by his son, who is 31
Chang Company is trying to determine how often it needs to deposit payroll taxes for calendar year 2021The company made the following quarterly payroll tax deposits during the last two years:a. What
Adenike has two jobs and earned $123,984.20 from the first job and $20,612.40 from the second job. How much total FICA taxes will Adenike have withheld from working two jobs?a. $10,327.50.b.
Dewoun has two jobs, and both employers withheld FICA tax. From the first job, 111,670.45 was earned and from the second job,$32,186.90 was earned. How much can Dewoun claim as an additional payment
Amour Company started its business on July 23, 2021. On August 6, it paid wages for the first time and accumulated a tax liability of $48,000. On Friday, August13, it incurred a tax
Kimearned $75 in tips in September. When must the employer be informed of the tips on Form 4070 for federal income tax and FICA withholding purposes?a. By September 30.b. By October 10.c. By
Household employees are subject to FICA withholding if they are paid at least what amount during any calendar quarter in 2021?a. $2,000.b. $2,100.c. $2,200.d. $2,300.
Employers pay a maximum federal unemployment tax of 6.0% on how much of an employee’s taxable wages for 2021a. $1,800.b. $3,800.c. $5,800.d. $7,000.
Lucia is a self-employed attorney with net earnings (profit) from the practice of $106,800. Lucia’s self-employment taxes for the year are:a. $13,117.76.b. $13,338.85.c. $14,204.40.d. $15,090.36.
Akio works for ABC Company and earned $63,000 for the entire 2021 year. How much in FUTA tax is the employer required to withhold in Akio’s name? Assume that the employer receives the maximum
Hao has $20,000 in a traditional IRA at a bank. He decided to change trustees from a bank to a financial services firm. He requests, and receives, a check from the bank that he intends to take to the
A participant in a 401(k) plan under the age of 50 may contribute up to what amount in 2021?a. $6,000.b. $13,500.c. $19,500.d. $58,000.
Thomas is a self-employed plumber under the age of 50. His earnings from self- employment, before the Keogh deduction but after deducting half of the self-employment tax, are $80,000. What
Terri is single and age 32. She reported AGI of $70,000 in tax year 2021. She is an active participant in her employer’s pension plan. What is the maximum deductible IRA contribution she
Eli and Adriana, both under age 50, file a joint return. Neither is covered under an employer pension plan. Adriana earned compensation of $53,000 in 2021. Eli worked part-time and earned $1,200.
Juan is single and retired on January 1, 2021at age 62. He is entitled to receive monthly payments of $1,500 over his life from his employer’s qualified pension plan. The payments began January 1,
Pedro sells investment land on September 1, 2021. Information pertaining to the sale follows:Each installment payment is due on September 1 of 2022, 2023, 2024, and 2025 (ignore interest). Determine
Mark, who is single, must start making distributions from his pension plan beginning April 1, 2022. At the end of 2020 when Mark was 71 years old, the plan had a balance of $220,000. He will use a
Juanita, age 62, retired in 2021. During the year,she received distributions of $9,000 from her IRA. She made nondeductible contributions of $20,000 to the IRA in prior years and has never received a
A warehouse with an adjusted basis of $125,000 was destroyed by a tornado on April 15, 2021. On June 15, 2021, the insurance company paid the owner $195,000. The owner reinvested $170,000 in another
A warehouse with an adjusted basis of $250,000 was destroyed by a tornado on April 15, 2021. On June 15, 2021, the insurance company paid the owner $395,000. The owner reinvested $470,000 in a new
Kyla owns a convenience store with an adjusted basis of $215,000 that was destroyed by a flood on August 15, 2021. Kyla received a check for $275,000 from her insurance company on January 10, 2022,
On June 15, 2021, Allen sold land held for investment to Stan for $50,000 and an installment note of $250,000 payable in five equal annual installments beginning on June 15, 2022, plus interest at
On July 1, 2021, Andrea sold land held for investment to Taylor. Andrea’s land had a $300,000 basis and was subject to a $150,000 mortgage. Under the contractual agreement, Taylor will pay Andrea
A taxpayer who sells their personal residence in 2021 may exclude some or all of the gain on the sale if the residence was owned and lived in for.a. At least four years before the sale
Daniel, who is single, purchased a house on May 15, 1998, for $115,000. During the years he owned the house, he installed a swimming pool at a cost of $24,000 and replaced the driveway at a cost of
On June 1, 2021, Nigel sells land (basis $55,000) to his daughter Ana for $40,000, the land’s fair market value on the date of the sale. On September 21, 2021, Anasells the land to an unrelated
Bryce owns 200 shares of Basic Company stock that he purchased for $8,000 three years ago. On December 28, 2021, Bryce sold 100 shares of the stock for $2,500. On January 3, 2022, Bryce
Jessica’s office building is destroyed by fire on November 15, 2021. The adjusted basis of the building is $410,000. She receives insurance proceeds of $550,000 on December 12, 2021. a.
Reid’s personal residence is condemned on September 12, 2021, as part of a plan to add two lanes to the existing highway. His adjusted basis is $300,000. He receives condemnation proceeds of
On February 1, 2021, Mariah buys a new residence for $150,000. Three months later, she sells her old residence for $310,000 (adjusted basis of $120,000). Selling expenses totaled $21,000.
The Subchapter S status of a calendar year corporation is statutorily terminated on August 12, 2021. The Subchapter S status is deemed to be terminated on what date? What is the answer if the status
Sofia contributed the following business assets to S & S Partnership on March 3, 2021:What is the basis in the equipment and the accounts receivable to S&S?a. Equipment $0; Accounts
Allie contributed the following business assets to ASW Partnership on August 1, 2021:What is the holding period for the building and the inventory to ASW Partnership?a. Building – long-term
Calvin purchased a 40% partnership interest for $43,000 in February 2019. His share of partnership income in 2019 was $22,000, in 2020 was $25,000, and in 2021 was $12,000. He made no additional
A calendar year corporation properly files a Subchapter S election on January 10, 2021. On what date is the election effective? What if the election were filed on June 1, 2021?
Explain the business interest expense limitation rules for 2021.
Explain the rules associated with the carryback and carryforward of net operating losses created in 2017.
Katlin contributes land to a partnership with a basis of $44,000 and a FMV of $56,000 in 2019. In 2021, when the FMV of the land is $58,000, the partnership distributes the land to Bailey,
Styron is a partner in Styron, Lee, & Jane Partnership. Styron owned 25% from January 1, 2021 to June 30, 2021, when he bought Lee’s 25% interest. He owned 50% for the rest of the year. The
William is not married, nor does he have any dependents. He does not itemize deductions. His taxable income for 2021 was $87,000 and his regular tax was $14,907. His AMT adjustments totaled $125,000.
How does a partner’s share of partnership liabilities affect their outside basis?
Arnold exercised an incentive stock option in 2018, acquiring 1,500 shares of stock at an option price of $80 per share. The FMV of the stock at the date of exercise was $110 per share. In 2020, the
Clay Company uses the completed contract method on a contract that requires 14 months to complete. The contract is for $750,000, and has estimated costs of $425,000. At the end of 2021, $210,000 of
Jackson invested $190,000 in a passive activity five years ago. On January 1, 2019, his at-risk amount in the activity was $45,000. His share of the income and losses in the activity were $52,000
Jacob is single with no dependents. During 2021, he has $48,000 of taxable income. He also has $28,000 of positive AMT adjustments and $12,000 of tax preferences. Jacob does not itemize his
Alcott invested $20,000 for a 25% interest in a partnership (not a passive activity) on January 1, 2021. The partnership borrowed $100,000 (with full recourse to the partners) on January 15, 2021, to
Leonardo invests $10,000 cash in an equipment-leasing activity for a 15% share in the business. The 85% owner is Rebecca, who contributes $10,000 and borrows $75,000 to put in the business. Only
In 2021, Kirsten invested $20,000 for a 10% partnership interest (not a passive activity). The partnership has losses of $150,000 in 2021and $250,000 in 2022. Kirsten’s share of the
On January 1, 2021, Antonio sells stock that has a $50,000 FMV on the date of the sale (basis $75,000) to his son Tiana. On October 21, 2021, Tianasells the stock to an unrelated party. In each of
Crystal owns 150 shares of Carson, Inc., stock that has an adjusted basis of $100,000. On December 18, 2021, she sells the 150 shares for FMV ($88,000). On January 7, 2022, she purchases 200 shares
Dominique is a manager for a regional bank. He is being relocated several states away to act as a temporary manager while a new branch is interviewing for a permanent manager. He will leave on May 1,
Jose purchased a vehicle for business and personal use. In 2021, he used the vehicle 18,000 miles (80%) for business and calculated his vehicle expenses using the standard mileage rate (mileage was
Yakov sells a parcel of land for $75,000 cash and the buyer assumes Yakov’sliability of $10,000 on the land. Yakov’s basis is $64,000. What is the gain or loss on the sale?a. $1,000 loss.b.
Patel Industries, a sole proprietorship, sold the following assets in 2021:a. The following questions relate to the sale of the warehouse:(1). What is the adjusted basis of the warehouse?(2). What is
All of the following increase the basis of stock held for investment except.a. Commission fees on the purchase of the stock.b. Stock splits.c. Stock dividends from a dividend reinvestment plan.d. All
In 2018 Grant purchased land for $103,000 for use in a business. Grant sold it in 2021 for $114,000. What are the amount and type of gain on this sale, before netting of any other gains
On May 20, 2020, Jessica purchased land for $105,647 to use in a business. Jessica sold it on May 21, 2021 for $102,595. What are the amount and type of loss on this sale if Jessica does not have any
In 2007, Duncan purchased 2,000 shares of stock for $50,000 in a midsize local company with gross assets of $15,000,000. In2021, Duncan sold the stock for $68,000. How is the gain treated for tax
Medhat and Neveen, married filing jointly, have $420,000 in MAGI and $101,000 of net investment income (NII). They will pay a surtax of:a. $0.b. $3,268.c. $3,458.d. $3,838.
Mishka sold the following stocks in2021: 200 shares of Dearborn Investments purchased May 15, 2020, for $3,050 and sold on January 9, 2021 for $4,135; and 40 shares of State Street Investments,
Rayna bought an apartment building in July 2015 for $360,000 and sold it for $480,000 in 2021. There was $77,994 of accumulated depreciation allowed on the apartment building. If Rayna is in the 35%
Alton received a Form 1099-B that shows a net sales price of $3,750 on the sale of 600 shares of FNP Company. The stock was bought on October 21, 2020 and sold on October 22,2021.The basis in the
In 2021 Ann received 1,000 shares of stock as a gift from Tim, who purchased them in 2012. At the time of the gift, the FMV of the stock was $29,300 and Tim’s basis was $31,000. If Ann sells the
In 2020 Ann received 1,000 shares of stock as a gift from Tim, who purchased them in 2012. At the time of the gift, the FMV of the stock was $29,300 and Tim’s basis was $31,000. If Ann
In 2021,Rosalva sold stock considered short-term for a gain of $1,631and stock considered long-term for a loss of $2,537.Rosalva also had a $3,000 short-term loss carryover from 2020 and a $1,350
A taxpayer has $4,000 of qualified employment-related expenses paid on behalf of one qualifying child. Determine the maximum and minimum amount of child and dependent care tax credit available to the
Paul and Olivia filed a joint tax return and reported modified AGI of $142,000. They have two qualifying children, ages 7 and 9, for the purposes of the child tax credit. What is the amount of their
Allie and Buddy are married, file a joint return, and have one son, Zack, age 5. Buddy has earned income of $48,000 and Allie was a full-time student for nine months (with no income). They paid a
Darren paid the following expenses during November 2021 for his son Sean’s college expenses for spring 2022semester,which begins in January 2022:Tuition............................
Thomas and Stephani are married with four qualifying children. Their earned income is $29,500. Calculate their EIC using the EIC formula.a. $4,626.b. $5,879.c. $6,213.d. $6,728.
Tim and Martha paid $17,900 in qualified employment-related expenses for their three young children who live with them in their household. Martha received $1,800 of dependent care assistance from her
In 2021, Jeremy and Celeste who file a joint return, paid the following amounts for their daughter, Alyssa, to attend University of Colorado, during academic year 2021-2022. Alyssa was in her first
After two and one-half years of working with the orphanage and the government, Jake and Nikki adopted a two-year-old girl from Korea. The adoption process, which became final in January 2021,
Reggie, who is 55, had AGI of $32,000 in 2021. During the year, he paid the following medical expenses:Reggie received $500 in 2021 for a portion of the doctors’ fees from his insurance. What is
For 2021, how can the amount of the sales tax deduction be determined?
For 2021, the amount of the sales tax deduction is calculated by:a. Determining the actual sales tax paid during the year.b. Using the IRS sales tax deduction calculator.c. Using the sales
For 2021, the deduction by a taxpayer for investment interest expense isa. Not limited.b. Limited to the taxpayer’s net investment income for 2021.c. Limited to the investment
Referring to the previous question, what is the treatment for the interest expense that Tarik could not deduct in 2021?a. It is lost.b. It cannot be used except as a carry back to previous
In 2021, the president of the United States declared a federal disaster due to brushfires in the Southwest. Lisa lives in that area and lost her home in the fires. What choice does she have regarding
Shannonand Rosa, both under 65 and married, have a combined AGI of $45,000 in year 2021. Due to certain heart issues, Shannon has been prescribed Lipitor® by a physician. For year 2021, Shannon
In 2021, Amelia’s pleasure boat that she purchased in 2014 for $48,500 was destroyed by a hurricane in a part of Florida that was declared a federal disaster area. Her loss was not totally covered
On May 5, 2016, Jillian purchased equipment for $40,000 to be used in her business. She did not elect to expense the equipment under Section 179 or bonus depreciation. On January 1, 2021, she sells
On June 30, 2021, Dion purchased an apartment building for $500,000. Determine the cost recovery deduction for 2021:a. $4,925.b. $5,335.c. $6,955.d. $9,850.
Jasmine purchased a $70,000 BMW in 2021 and used it 80% for business. What is her maximum cost recovery on the BMW in 2021.a. $11,200b. $14,480c. $56,000.d. $70,000.
In 2019, Gerald loaned Main Street Bakery $55,000. In 2020, he learned that he would probably receive only $6,400 of the loan. In 2021, Gerald received $3,000 in final settlement of the loan.
Janet purchased her personal residence in 2011 for $250,000. In January 2021 she converted it to rental property. The fair market value at the time of conversion was $210,000. a. Determine
On June 10, 2021, Huron purchased equipment (seven-year class property) for $75,000. Determine Huron’s cost recovery deduction for computing 2021 taxable income. Assume Huron does not make the
Brittany purchased a building for $500,000 on January 1, 2013. The purchase price does not include land. Calculate the cost recovery for 2013 and 2021 if the real property is:a. Residential real
Havel and Petra are married and will file a joint tax return. Havel has W-2 income of $38,588 and Petra has W-2 income of $49,381. What is their tax liability? Determine their tax liability using
The W-2 income of Sandra, a single taxpayer, was $77,243. Using the tax tables, determine Sandra’s tax liability.
Determine the amount of the standard deduction for each of the following taxpayers for tax year 2021:a. Christina, who is single.b. Adrian and Carol, who are filing a joint return. Their son is
How are dividends taxed?
Sam owns all of the stock in a newly formed corporation. During 2021, the first year of operation, the corporation realized current earnings and profits of $10,000.
What is an employer-provided fringe benefit?
In 2016, Anna borrowed $10,000. In 2021, the debt was forgiven. Anna does not believe she should report the forgiveness of debt as income because she received nothing at the time the debt was
Determine the amount of taxable income that should be reported by a cash-basis taxpayer in 2021 in each of the following independent cases:a. A taxpayer completes $500 of accounting services in
Each of the following taxpayers received a state income tax refund in 2021. In all cases, the taxpayer has a filing status of married filing jointly. What amount of the refund is properly included in
Dulari, a single member of the military, was stationed at Camp Pendleton, California. On July 1, 2021, her army company transferred her to Washington, DC, as a permanent duty station. Dulari worked
On July 1, 2021, Rene, a cash-basis taxpayer, purchased $500,000 of the newly issued bonds of Acce Corporation for $452,260. The 10-year bonds carry an interest rate of 8% and were sold to yield

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