Questions and Answers of Income Tax Fundamentals

Drew Fogelman operates a small business and his payroll records for the second quarter of 2020 reflect the following:Drew’s employee identification number is 34-4321321 and his business is located
What is Sarajane’s basis in the land received in the exchange described in Question 19, assuming her basis in the land given up was $12,000?Question 19Fred and Sarajane exchanged land in a
Philcon Corporation created the following 2020 employee payroll report for one of its employees.a. Complete the following Form W-2 for Louise Chugach from Philcon Corporation.b. Philcon Corporation
Fiduciary Investments paid its employee, Yolanda, wages of $139,000 in 2020. Calculate the FICA tax: Withheld from Yolanda's wages: Paid by Fiduciary: Total FICA Tax Social Security Medicare Social
Which of the following is not true about FICA taxes?a. The FICA tax has two parts, Social Security (Old Age, Survivors, and Disability Insurance) and Medicare.b. In 2020, the maximum wage base for
Terry worked for two employers during 2020. The amount of wages paid to Terry by both employers totaled $168,400 and the employers properly withheld both income and employment taxes. As a result of
Thuy worked as the assistant manager at Burger Crown through August 2020 and received wages of $81,000. Thuy then worked at Up and Down Burger starting in September of 2020 and received wages of
Yeet Inc. has 14 employees in 2020. Yeet’s 2020 second quarter business was 70 percent lower than 2019 due to COVID-related impacts. Yeet was able to stay in business and kept ten of the fourteen
Mitchell, Max, and Romeo form a partnership to operate a grocery store. For each of the following contributions by the partners, indicate (1) the amount of income or gain recognized, if any, by the
Telly, age 38, has a $140,000 IRA with Blue Mutual Fund. He has read good things about the management of Green Mutual Fund, so he opens a Green Fund IRA. Telly asked for a distribution rollover and
In 2020, Tyck Tock Corp. paid wages of $105,000 to employees, none of which make more than the 2020 FICA cap. The Social Security tax (employer and employee share) is $13,020. No employee elected to
Wei has four employees: Anna, Kenny, Stan, and Seth, who were paid $12,000, $5,000, $8,000, and $3,000, respectively. Assuming a full state credit, Wei’s FUTA taxable wages for the year are:a.
Betty owns three separate IRA accounts with different banks. She wishes to consolidate her three IRAs into one IRA in 2020. How many distribution rollovers may Betty make in 2020?a. Oneb. Twoc.
Bonnie is getting close to retirement and realizes she has three different IRA accounts at three different financial institutions. To make life simpler, Bonnie wishes to consolidate her three IRAs
Kele and Nova wish to form the Sioux Partnership. Kele contributes property with an adjusted basis of $70,000, a fair market value of $200,000 that is subject to an $80,000 liability in exchange for
Abigail contributes land with an adjusted basis of $50,000 and a fair market value of $60,000 to Blair and Partners, a partnership. Abigail receives a 50 percent interest in Blair. What is Blair’s
Juanita contributes property with a fair market value of $30,000 and an adjusted basis of $16,000 to a partnership in exchange for an 10 percent partnership interest. a. Calculate the amount of gain
Abigail contributes land with an adjusted basis of $50,000 and a fair market value of $60,000 to Blair and Partners, a partnership. Abigail receives a 50 percent interest in Blair. What is
Walter receives cash of $18,000 and land with a fair market value of $75,000 (adjusted basis of $50,000) in a current distribution. His basis in his partnership interest is $16,000 before the
Meredith has a 40 percent interest in the assets and income of the Gantt Partnership, and the basis in her partnership interest is $60,000 at the beginning of 2020. During 2020, the partnership’s
Kiwi Interests is a partnership with a tax year that ends on September 30, 2020. During that year, Kereru, a partner, received $2,000 per month as a guaranteed payment, and his share of partnership
Janie owns a 30 percent interest in Chang Partnership. Chang has W-2 wages of $20,000 and qualified property of $900,000 in 2020.a. When computing the W-2 wages limitation, what is the amount of
In 2020, Gloria, a single taxpayer, receives a Schedule K-1 from a partnership she is invested in. The K-1 reports ordinary business income of $30,000, dividend income of $500, tax-exempt interest of
Jay is a 30 percent partner in the Closet Partnership. In 2020, Closet paid W-2 wages of $24,000 and held qualified property of $600,000. In 2020, Jay’s QBI deduction is subject to the wage
Ironwood Corporation has ordinary taxable income of $25,000 in 2020, and a shortterm capital loss of $15,000. What is the corporation’s tax liability for 2020?a. $2,100 b. $5,250c. $10,500d.
George Corporation is an S corporation started on January 1, 2020, with 50 shares owned by Trey Martin and 50 shares owned by Brianna Tabor. The corporation is located at 15620 McMullen Hwy SW,
Quince Corporation has taxable income of $285,000 for its calendar tax year. Calculate the corporation’s income tax liability for 2020 before tax credits.$____________
Tayla Corporation generated $400,000 of taxable income in the 2020. What is Tayla’s corporate tax liability?a. $71,400b. $84,000c. $115,600d. $136,000e. None of the above
Ulmus Corporation is an engineering consulting firm and has $1,400,000 in taxable income for 2020. Calculate the corporation’s income tax liability for 2020.$___________
DeMaria Corporation, a calendar year corporation, generates the following taxable income (net operating losses) since its inception in 2017:Assuming DeMaria makes no special elections with regard to
For its current tax year, Ilex Corporation has ordinary income of $250,000, a short-term capital loss of $20,000 and a long-term capital gain of $60,000. Calculate Ilex Corporation’s tax liability
Harrison Corporation generates capital gains/(losses) of ($2,000), $4,000, ($14,000) in 2018, 2019, and 2020, respectively. Harrison started operating in 2018. What is Harrison’s capital loss
Beech Corporation, an accrual basis calendar year taxpayer, was organized and began business on July of the current calendar tax year. During the current year, the corporation incurred the following
Mask Corporation generated a net operating loss of $24,000 in 2020 and taxable income of $10,000 in 2021. How much NOL can Mask use in 2021 to reduce taxable income (assume no carryback is
Mallory Corporation has a calendar year-end. The corporation has paid estimated taxes of $10,000 during 2020 but still owes an additional $5,000 for its 2020 tax year. a. When is the 2020 tax return
Fisafolia Corporation has gross income from operations of $210,000 and operating expenses of $160,000 for 2020. The corporation also has $30,000 in dividends from publicly-traded domestic
Which of the following statements is false regarding corporate tax return due dates?a. Corporate tax returns for 2020 calendar-year corporations are due April 15, 2021.b. Corporate tax returns may
Bill and Guilda each own 50 percent of the stock of Radiata Corporation, an S corporation. Guilda’s basis in her stock is $21,000. On May 26, 2020, Bill sells his stock, with a basis of $40,000, to
Cedar Corporation has an S corporation election in effect. During the 2020 calendar tax year, the corporation had ordinary taxable income of $200,000, and on January 15, 2020, the corporation paid
Which of the following is not required for a corporation to be eligible to make an S corporation election?a. The corporation must have 100 or fewer shareholders.b. The corporation must be a domestic
Which of the following statements is true about the 2020 corporate alternative minimum tax?a. The corporate alternative minimum tax only applies to small corporations.b. The corporate alternative
Any corporate AMT credit carryovers that existed at the end of 2017:a. Can be used to offset tax liability generated in 2018 and thereafterb. Do not expirec. Can generate a refundable credit of any
During 2020, William purchases the following capital assets for use in his catering business:Assume that William decides to use the election to expense on the baking equipment (and has adequate
In 2020, Ben purchases and places in service a new auto for his business. The auto costs $57,000 and will be used 60 percent for business. Assuming the half-year convention applies and Ben elects out
On February 2, 2020, Alexandra purchases a personal computer. The computer cost $2,200. Alexandra uses the computer 75 percent of the time in her accounting business, and the remaining 25 percent of
In 2020, Ben purchases and places in service a new auto for his business. The autocosts $57,000 and will be used 100 percent for business. Assuming the half-year convention applies and Ben does not
Sophie is a single taxpayer. For the first payroll period in July 2020, she is paid wages of $2,200 monthly. Sophie claims one allowance on her pre-2020 Form W-4.. a. Use the percentage method to
Sherina Smith (Social Security number 785-23-9873) lives at 536 West Lapham Street, Milwaukee, WI 53204, and is self-employed for 2020. She estimates her required annual estimated income tax payment
Kana is a single wage earner with no dependents and taxable income of $168,700 in 2020. Her 2019 taxable income was $155,000 and tax liability was $31,375. Calculate the following (note: this
Amy is a single taxpayer. Her income tax liability in the prior year was $3,803. Amy earns $50,000 of income ratably during the current year and her tax liability is $4,315. In order to avoid
Lamden Company paid its employee, Trudy, wages of $61,500 in 2020. Calculate the FICA tax: Withheld from Trudy's wages: Paid by Lamden: Total FICA Tax Social Security Medicare Social Security
Jane is a single taxpayer with a current year AGI of $181,000 and current year income tax liability of $34,968. Her AGI in the prior year was $150,400 and prior year tax liability was $27,247. Jane
Lamden Company paid its employee Trudy, wages of $61,500 in 2020. Of this amount, $2,400 was allocated to sick pay for two weeks due to Trudy’s spouse contracting COVID and Trudy being quarantined.
Floyd Corporation was formed and began operations on January 1, 2020. The corporation is located at 210 N. Main St., Pearisburg, VA 24134 and the EIN is 91-1111111.The corporation’s income
If a taxpayer’s 2020 individual income tax return was filed on March 3, 2021, the statute of limitations would normally run out on:a. April 15, 2023b. March 3, 2022c. April 15, 2024d. March 3,
In the 2020 tax year, Michelle paid the following amounts relating to her 2018 tax return:Which of the above items may be deducted on Michelle’s 2020 individual income tax return? Explain Tax
Indicate the date that the statute of limitations would run out on each of the following 2020 individual tax returns: a. A fraudulent tax return that was filed April 15, 2021 b. A tax return that was
Melodie’s taxable income is $39,000 and she pays income tax of $4,486. If Melodie’s taxable income increases to $43,000, she would pay income taxes of $5,256. What is Melodie’s marginal tax
Using the information from Problem 1A, assume Maria’s birthdate is May 18, 1953 and complete Form 1040-SR for Maria Tallchief for the 2020 tax year.Maria Tallchief is a single taxpayer (birthdate
Maria Tallchief is a single taxpayer (birthdate May 18, 1993) living at 543 Space Drive, Houston, TX 77099. Her Social Security number is 466-33-1234. For 2020, Maria has no dependents, and her
Hardy and Dora Knox are married and file a joint return for 2020. Hardy’s Social Security number is 466-47-3311 and her birthdate is January 4, 1976. Dora’s Social Security number is 467-74-4451
Abigail (Abby) Boxer is a single mother (birthdate April 28, 1982) working as a civilian accountant for the U.S. Army. Her Social Security number is 676-73-3311 and she lives at 3456 S Career Avenue,
Rahul and Ruby are married taxpayers. They are both under age 65 and in good health. For 2020 they have a total of $42,000 in wages and $300 in interest income.Rahul and Ruby’s deductions for
Which of the following tax forms are used by individuals in 2020?a. 1040Ab. 1040-EZc. 1040-SRd. 1120
Jason and Mary Wells, friends of yours, were married on December 30, 2020. They know you are studying taxes and have sent you an e-mail with a question concerning their filing status. Jason and Mary
Xialu is a single taxpayer who is under age 65 and in good health. For 2020, she has a salary of $25,000 and itemized deductions of $7,000. Leslie allows her mother to live with her during the winter
Typical corporate income is reported on:a. Form 1040b. Form 1120c. Form 1040Xd. Form 1065
In 2020, Manon earns wages of $54,000. She also has dividend income of $2,800. Manon is single and has no dependents. During the year, Manon sold silver coins held as an investment for a $7,000 loss.
Diego, age 28, married Dolores, age 27, in 2020. Their salaries for the year amounted to $48,000. They had dividend income of $2,500. Diego and Dolores’ deductions for adjusted gross income
Which of the following is a deduction for adjusted gross income in 2020?a. Personal casualty lossesb. Medical expensesc. Student loan interestd. Mortgage intereste. None of the above
Marco and Tatiana are married and file separate returns for 2020. Tatiana itemizes her deductions on her return. Marco’s adjusted gross income was $18,000, his itemized deductions were $2,400.
All of the following are itemized deductions in 2020 except:a. Charitable contributionsb. Deductible IRA contributionsc. State and local taxesd. Medical expensese. All of the above are itemized
Alicia, age 27, is a single, full-time college student. She earns $13,200 from a part time job and has taxable interest income of $1,450. Her itemized deductions are $845. Calculate Alicia’s
Jonathan is a 35-year-old single taxpayer with adjusted gross income in 2020 of $47,000. He uses the standard deduction and has no dependents. a. Calculate Jonathan's taxable income. Please show your
Ramon, a single taxpayer with no dependents, has adjusted gross income for 2020 of $98,000 and his itemized deductions total $9,000. What taxable income will Ramon show in 2020?a. $74,950b. $85,800c.
Ben is a single taxpayer with no dependents and is 32 years old. What is the minimum amount of income that he must have to be required to file a tax return for 2020?a. $4,200b. $12,400c. $12,000d.
Brock, age 50, and Erin, age 49, are married with three dependent children. They file a joint return for 2020. Their income from salaries totals $50,000, and they received $8,000 in taxable interest,
Jackson, age 35, and Peggy, age 34, are married and file a joint income tax return for 2020. Their salaries for the year total $85,000 and they have dividend income of $4,000. They have no deductions
Joan, who was divorced in 2020, had filed a joint tax return with her husband in 2019. During 2020, she did not remarry and continued to maintain her home in which her five dependent children lived.
Wanda is a single 50-year-old taxpayer with no dependents. Her only income is $41,000 of wages. Calculate her taxable income and her tax liability. Please show your work.
For each of the following situations (none of the taxpayers claim dependents), indicate whether the taxpayer(s) is (are) required to file a tax return for 2020. Explain your answer. a. Helen is a
Nicoula is a server at a La Jolla restaurant. Nicoula received $1,200 in unreported tips during 2020 and owes Social Security and Medicare taxes on these tips. Her total income for the year,
Yasmine and her spouse Carlos, who file married filing jointly, provide all the support for their 16-year-old son, Miguel. If Miguel qualifies as a qualifying child under the dependent rules, Yasmine
Lakota and Dominique file married filing jointly and have a 13-year-old daughter. They also provide 25 percent of the support for Lakota’s 82-year-old mother, who lives in a nursing home nearby.
Beverly and Ken Hair have been married for 3 years. Beverly works as an accountant at Cypress Corporation. Ken is a full-time student at Southwest Missouri State University (SMSU) and also works
Determine from the tax table in Appendix A the amount of the income tax for each of the following taxpayers for 2020: Taxpayer(s) Allen Boyd Caldwell Dell Evans Filing Status Single MFS MFJ H of
For each of the following cases, indicate the filing status for the taxpayer(s) for 2020 using the following legend:A—SingleB—Married filing a joint returnC—Married filing separate
Which of the following taxpayers is not eligible for an economic impact payment in 2020?a. Savannah, a married taxpayer with no children, and has AGI of $75,000 in 2020b. Blake, a single taxpayer
Melissa and Whitney are married taxpayers with taxable income of $106,000. a. When you calculate their tax liability, are you required to use the tax tables or the tax rate schedules, or does it
As a married couple, Yihong and Kaylee’s EIP was $2,400. In 2020, they computed their recovery rebate credit as $2,900 due to the birth of a child in 2020. The 2020 net impact of the EIP and RRC
Morgan is 65 years old and single. He supports his father, who is 90 years old, blind,and has no income. What is Morgan’s standard deduction?a. $12,400b. $14,050c. $20,300d. $18,650e. $20,000
Jessica and Carl were married on July 1, 2020. What are their options for filing status for their 2020 taxes?
Marquez is single and supports his 30-year-old son who has income of $2,000 and lives in his own apartment.a. Can Marquez claim his son as a dependent?b. Can Marquez claim head of household filing
Alex purchased a rental house 4 years ago for $270,000. Her depreciation at the time of the sale is $40,000. Due to a decrease in real estate prices, she sells the house for only $240,000 in 2020.
What is the total dollar amount of personal and dependency exemptions which a married couple with two children (ages 11 and 14, both of which are qualified children) and $80,000 of adjusted gross
Dorit, a single taxpayer, has a long-term capital loss of $7,000 on the sale of bonds in 2020 and no other capital gains or losses. Her taxable income without this transaction is $43,000. What is her
Luke and Vanessa have been married since 2016 and have filed jointly each year since then.Their 2019 EIP was based on their 2019 tax return that was filed in early February 2020. In May 2020, they
Indicate whether each of the items listed below would be included (I) in or excluded (E) from gross income for the 2020 tax year. a. Welfare payments b. Commissions c. Hobby income d. Scholarships
Kristen, a single taxpayer, receives two 2020 Forms W-2 from the two employers she worked for during the year. One Form W-2 lists her wages in Boxes 1, 3, and 5 as $18,700. Her other employer’s
Ken (birthdate July 1, 1989) and Amy (birthdate July 4, 1991) Booth have brought you the following information regarding their income, expenses, and withholding for the year. They are unsure which of

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