Questions and Answers of Principles Taxation Business

At the beginning of the year, Mr. Olsen paid $15 per share for 620 shares of Carmel common stock. He received cash distributions totaling $840. His Form 1099 reported that $700 was a dividend and
Diane Stacy, who has a 32 percent marginal tax rate on ordinary income and a 3.8 percent Medicare contribution tax rate on investment income, owns 13,800 shares in Tobler Mutual Fund. This year, she
Mrs. Buckley, age 74, has $100,000 in a certificate of deposit paying 1.5 percent annual interest. In addition to this interest income, she receives Social Security and a modest pension from her
As of November 30, Ms. Brett had $12,000 capital losses and no capital gains.She owns 4,900 shares of GG stock with a $15 basis and a $45 FMV per share. Ms. Brett plans to hold her stock for three
Rachel Sanchez is a limited partner in HN Partnership, which operates a souvenir shop, and a member in Jams-n-Jellies LLC, which makes specialty food items and sells them at retail. Rachel has no
Mr. Lay, who has a 37 percent marginal tax rate on ordinary income, earned a $22,030 dividend on his investment in Rexford Mutual Fund. Compute the income tax and the Medicare contribution tax on
Ms. Kaspari, who has a 24 percent marginal tax rate on ordinary income, acquired the following blocks of stock in KDS, a closely held corporation.July 12, 2003
Ms. Shaver, who has a 32 percent marginal tax rate on ordinary income, owns Benbow Inc. preferred stock in her investment portfolio. Her Form 1099 reported that she earned $19,580 qualified dividend
Ms. Echols is the owner and beneficiary of a $150,000 insurance policy on her mother’s life. Ms. Echols has paid $46,000 premiums, and the policy is fully paid up (no more premiums are due). She
Mr. Clem invests in Series EE savings bonds. He projects that his sole proprietorship will generate a sizeable loss, and he wants to accelerate income from other sources to offset it. He could elect
Ms. Sturm owns a tax-deferred retirement account with a $200,000 current balance. She intends to roll over this balance into a new Roth IRA before the end of the year. Ms. Sturm's current marginal
Mrs. Lohan, age 64, plans to retire this December. She estimates that the balance in her IRA will be $86,500, which she plans to withdraw to finance the purchase of a condominium. Assuming that her
Mrs. Kwan withdrew the entire $8,000 balance from her Roth IRA this year. Her total contributions to the account were $6,070, and her marginal tax rate is 12 percent. Determine the tax cost of the
Mr. Ballard retired in 2018 at age 69 and made his first withdrawal of $35,000 from his traditional IRA. At year-end, the IRA balance was $441,000. In 2019, he withdrew $60,000 from the IRA. At
Mrs. Shin retired in 2017 at age 63 and made her first withdrawal of $20,000 from her traditional IRA. At year-end, the IRA balance was $89,200. In 2018, she withdrew $22,000 from the IRA. At
Mr. Gilbert is self-employed and makes annual contributions to a Keogh plan. Mrs. Gilbert's employer doesn't offer any type of qualified retirement plan. Each spouse contributes $3,000 to a
Mr. and Mrs. Marlo file a joint tax return. Each spouse contributed $5,000 to a traditional IRA. In each of the following cases, compute the deduction for these contributions. The AGI in each case is
Mr. and Mrs. Davos file a joint tax return. Each spouse contributed $3,800 to a traditional IRA. In each of the following cases, compute the deduction for these contributions. The AGI in each case is
Ms. Ray is age 46 and single. Her employer made a $2,895 contribution to her qualified profit-sharing plan account, and she made the maximum contribution to her traditional IRA. Compute her IRA
Ms. Calhoun is age 51 and single. What is the maximum contribution that she can make to a Roth IRA if:a. Her AGI consists of an $89,400 salary from her employer?b. Her AGI consists of an $89,400
What is the maximum IRA contribution that Mr. Janson can make under each of the following assumptions?a. He is age 20 and single. His only income item is $13,200 interest from a trust fund.b. He is
Mr. and Mrs. Weiss had the following income items.Mr. Weiss's salary ................................................................. $105,000Mrs. Weiss's earnings from self-employment
MN's compensation package for its PEO consisted of a $600,000 salary plus $200,000 unfunded deferred compensation. The PEO will receive the $200,000 when he retires in 2025. He is also a participant
Refer to the facts in the preceding problem. Assume Mrs. Bard retires in 2023 and receives her first $20,000 payment from Lyton Industries.a. How much compensation income does Mrs. Bard recognize in
This year, Mrs. Bard, who is head of Lyton Industries's accounting and tax department, received a compensation package of $360,000. The package consisted of a $300,000 current salary and $60,000
Refer to the facts in the preceding problem. Petro Inc. pays $125,000 deferred compensation to Mr. Gilly in 2025, the year of his retirement.a. How much compensation income does Mr. Gilly recognize
Mr. Gilly is the PFO of Petro Inc. This year, his compensation package was $625,000. Petro paid him a $500,000 salary during the year and accrued an unfunded liability to pay him the $125,000 balance
Ms. Jost participates in her employer's Section 401(k) plan, which obligates the employer to contribute 25 cents for every dollar that an employee elects to contribute to the plan. This year, Ms.
Mrs. Vacco participates in her employer's qualified profit-sharing plan. What is the maximum contribution to her retirement account, assuming that:a. Her annual compensation was $38,200?b. Her annual
Mr. Evon, who has participated in his employer’s qualified definedbenefit plan for 38 years, retired in June. What is his maximum annual pension benefit assuming that:a. His average compensation
Mrs. Kirk withdrew $30,000 from a retirement account and used the money to furnish her new home. Her marginal tax rate is 24 percent. Compute the tax cost of the withdrawal in each of the following
In 2011 (year 0), Mrs. Linsey exercised a stock option by paying $100 per share for 225 shares of ABC stock. The market price at date of exercise was $312 per share. In 2018, she sold the 225 shares
Two years ago, Mrs. Erb was granted a stock option from her corporate employer. At date of grant, the stock was selling at $14 per share, and the strike price was $18 per share. This year, Mrs. Erb
In 2009, BB granted an incentive stock option (ISO) to Mr. Yarnell to buy 8,000 shares of BB stock at $7 per share for 10 years. At date of grant, BB stock was trading on the AMEX for $6.23 per
In 2013, BT granted a non qualified stock option to Ms. Pearl to buy 500 shares of BT stock at $20 per share for five years. At date of grant, BT stock was trading on Nasdaq for $18.62 per share. In
Refer to the facts in the preceding problem. Five years after Gogo granted the option to Mrs. Mill, she exercised it on a day when Gogo stock was selling for $10.31 per share.a. How much income must
This year, Gogo Inc. granted a non qualified stock option to Mrs. Mill to buy 10,000 shares of Gogo stock for $8 per share for five years. At date of grant, Gogo stock was selling on a regional
Refer to the facts in the preceding problem. Stalling Inc. uses a fiscal year ending August 31 for tax purposes. Determine the amount of Stalling's deduction and the taxable year in which Stalling is
Describe the differences between a defined-benefit plan and a defined-contribution plan.
On September 30, 2014, Stalling Inc. issued 2,000 shares of its publicly traded stock as compensation to its employee, Mr. Harry. On the date of issuance, the stock’s fair market value was $40,000.
In 2018, Faro Inc., a calendar year taxpayer, issued 500 shares of its publicly traded stock as a bonus to its employee, Mrs. Doyle. On the date of issuance, the stock's fair market value was
Peet Company provides free on-site day care for its employees with preschool children. Determine the pretax value of the care for each of the following employees:a. Mrs. Udolf, who has a 32 percent
Employees who are compensated with restricted stock or stock options face financial risks not associated with cash compensation. Describe and compare the financial risks of these two types of equity
Mr. Nixon and Mr. Ryan are employed by HD Inc., which provides its employees with free parking. If the parking were not available, Mr. Nixon would pay $35 a month to a city garage. Mr. Ryan uses
Mrs. Eller's corporate employer has a cafeteria plan under which its employees can receive a $3,000 year-end Christmas bonus or enroll in a qualified medical reimbursement plan that pays up to $3,000
This year, publicly held Corporation DF paid its PFO a $1.4 million salary, only $1 million of which was deductible. It also accrued a $200,000 liability for deferred compensation payable in the year
Mrs. Flay, age 57, participates in the group-term life insurance plan sponsored by her corporate employer. According to Treasury tables, the cost of $1,000 of life insurance for a 57-year-old person
Mr. Kim is a U.S. citizen who has been stationed at his employer's Tokyo office for the last six years.a. Compute Mr. Kim's AGI if his only income for the year was his $65,000 salary.b. Compute Mr.
Mr. and Mrs. Soon are the sole shareholders of SW Inc. For the last three years, SW has employed their son as a sales representative and paid him a $30,000 annual salary. During a recent IRS audit,
Mr. Donde has the full-time use of an automobile owned and maintained by his employer. This year, Mr. Donde drove this company car 48,000 miles on business and 22,000 for personal reasons. He is not
Mr. and Mrs. Brock own a bakery. Their marginal tax rate on the bakery's income is 32 percent. The Brocks' 18-year-old daughter Megan works part-time in the bakery. This year, Megan earned $15,284 of
Marlo, a publicly held corporation with a 21 percent tax rate, has agreed to pay an annual salary of $1.3 million to its employee, Mrs. Ryman. In each of the following cases, compute Marlo's
Mr. Remling is entitled to a $5,200 bonus this year (year 0). His employer gives him two options. He can either receive his $5,200 bonus in cash, or the employer will credit him with $4,500 deferred
Ms. Bourne is an executive with GG Inc., an international business operation. She flies more than 150,000 business miles each year and accumulates considerable frequent-flier points from the
Trent Inc. needs an additional worker on a multiyear project. It could hire an employee for a $65,000 annual salary. Alternatively, it could engage an independent contractor for a $72,000 annual fee.
Greg Company agreed to pay Ms. Bilko $45,000 compensation for services performed for the company.a. Compare the income tax consequences to Greg and Ms. Bilko if she is an employee or if she is an
Mr. and Mrs. Brown report taxable income of $130,000 in 2018. In addition, they report the following.Excess Social Security Withholding Credit $ ............................ 2,200Estimate tax
In January, Ms. NW projects that her employer will withhold $25,000 from her 2019 salary. However, she has income from several other sources and must make quarterly estimated tax payments. Compute
Jaclyn Biggs, who files as a head of household, never paid AMT before 2018. In 2018, her regular tax liability was $102,220 which included 39,900 capital gain taxed at 20 percent, and her AMTI in
In each of the following cases, compute AMT (if any). For all cases, assume that taxable income does not include any dividend income or capital gain.a. Mr. and Mrs. Baker's taxable income on their
Mr. and Mrs. Lovejoy are married with no dependent children. Mr. Lovejoy worked for Smart Tech Corporation January through March and for Computer Associates the remainder of the year. Mrs. Lovejoy
Mr. and Mrs. Chaulk have three dependent children, ages 3, 6, and 9. Compute their child credit if AGI on their joint return is:a. $88,300.b. $462,700c. $200,000 and assume that they have one
Ms. Gleason, an unmarried taxpayer, had the following income items.Salary ............................................................. $40,000Net income from a rental house ...............
Mrs. Atkinson is an unmarried taxpayer with one dependent child living in her home. Her AGI is $40,000, and she does not itemize deductions. The 18-year-old child earned $12,480 from a part-time job
Mr. Mason's salary was $397,000, and Mrs. Mason's salary was $344,000. They had no other income items, no above-the-line or itemized deductions, and no dependents.a. Compute their tax on a joint
Mr. and Mrs. Palio celebrated the birth of their third child on November 18. Compute the effect of this event on their tax liability, assuming that:a. Their AGI was $99,000, and their taxable income
Mr. Coleman, an unmarried individual, had the following income items.Interest income ................................................................. $14,200Ordinary loss from an S corporation
Mr. Perry is an unmarried individual with no dependent children. He reports the following information.Wages ..............................................................................
Mr. and Mrs. Simpson have the following income items.Mr. Simpson's Schedule C net profit .................................... $91,320Mrs. Simpson's Schedule C net loss
Mr. and Mrs. Ohlson file a joint income tax return. Determine if each of the following unmarried individuals is either a qualifying child or a qualifying relative.a. Son Jack, age 20, lives in his
Ms. West is an unmarried individual. Determine if each of the following unmarried individuals is either a qualifying child or a qualifying relative.a. Daughter Dee, age 20, is a student at State
Ms. Noteboom, a single taxpayer, projects that she will incur about $13,500 of expenses qualifying as itemized deductions in both 2018 and 2019. Assuming that her standard deduction is $12,000 in
Assume that the tax law allows individuals to claim an itemized deduction for the cost of music lessons for the taxpayer or any member of his family. Instead of this deduction, individuals may claim
Mr. and Mrs. Johnson were married in 2001. This year they traveled to Reno, Nevada, immediately after Christmas and obtained a divorce on December 29. They spent two weeks vacationing in California,
Mr. and Mrs. Wilson are married with one dependent child. They report the following information for 2018.Schedule C net profit ..............................................................
Determine Ms. Arnout's filing status in each of the following independent cases.a. Ms. Arnout and Mr. Eckes have been living together since 2016. They were married on December 13, 2018.b. Ms. Arnout
Dollin Inc. is incorporated under Virginia law and has its corporate headquarters in Richmond. Dollin is a distributor; it purchases tangible goods from manufacturers and sells the goods to
Univex is a calendar year, accrual basis retail business. Its financial statements provide the following information for the year.Revenues from sales of goods
Echo Inc., which has a 21 percent U.S. tax rate, plans to expand its business into Country J. It could open a branch office, or it could create a foreign subsidiary in Country J. The branch office
Minden Corporation wants to open a branch operation in eastern Europe and must decide between locating the branch in either Country R or Country S. Labor costs are substantially lower in Country R
In 1995, Jenson Investments, a Delaware corporation with a 35 percent federal tax rate, formed Bestmark, a wholly owned German subsidiary. Bestmark conducts several profitable businesses in Europe
Visit the website for Federation of Tax Administrators (www.taxadmin.org) under the Taxpayers & Tax Preparers menu, and use the State Tax Agencies link to go to the Illinois Department of Revenue
For many years, Bertrand Inc. owned a foreign subsidiary with over $8 million accumulated foreign source income (on which Bertrand has never paid U.S. tax).Immediately prior to December 31, 2017,
Hastings Corporation has a foreign subsidiary conducting a manufacturing business in Country Z, which has a 15 percent corporate income tax. The IRS recently challenged the transfer price at which
At the beginning of the year, Mr. L could have invested his $50,000 in Business Z with an 8 percent annual return. However, this return would have been ordinary income rather than capital
Norton Inc. is a domestic corporation with several foreign subsidiaries. This year, Norton has $940 million domestic gross receipts and $800 million of allowable deductions. It made deductible
Leming, Inc. is a CFC with total foreign earnings of $90 million, of which $27 million is considered subpart F income. Leming owns tangible business property with an adjusted tax basis of $70
Fairview, Inc. is a CFC with total foreign earnings of $30 million, of which $8 million is considered subpart F income. Fairview owns tangible business property with an adjusted tax basis of $40
Grandmere, a calendar year domestic corporation, owns 50 percent of Petit, Inc., a calendar year controlled foreign corporation. At the end of 2017, Petit has accumulated $26 million of undistributed
Yasmin Corporation, a calendar year domestic corporation, owns 100 percent of Luna Inc., a calendar year controlled foreign corporation. Luna has never paid a dividend and at the end of 2017 has
Refer to the facts in the preceding problem. In 2019, the CFC’s income was $600,000, none of which was subpart F income or GILTI, and it distributed a $300,000 dividend to its shareholders
Jumper Inc., which has a 21 percent tax rate, owns 40 percent of the stock of a CFC. At the beginning of 2018, Jumper's basis in its stock was $660,000. The CFC's 2018 income was $1 million, $800,000
Dixie Inc., a Tennessee corporation, conducts business in South America through two foreign corporations, Dix-Col Inc. and Dix-Per Inc. Dixie formed Dix-Col six years ago and owns 100 percent of its
Omaha Inc. owns 100 percent of the stock in Franco, a foreign corporation. All Franco’s income is foreign source, and its foreign income tax rate is 20 percent. During its fiscal year ended June
This year, Tuna, Inc., a domestic corporation, earned $3 million from sales of goods to unrelated foreign customers. If Tuna has $12 million of depreciable assets, calculate its foreign-derived
Cheeta Corporation earned $5 million this year from both domestic and international operations. Assume $2.2 million of this income qualifies as foreign-derived intangible income (FDII). If Cheeta
Minden Corporation€™s records show the following results for its first three years of operations.In year 4, Minden generated $2 million taxable income ($900,000 of which was foreign source)
Velox Inc. began operations last year. For its first two taxable years, Velox€™s records show the following.Compute Velox€™s U.S. tax for both years, assuming the foreign source
Comet operates solely within the United States. It owns two subsidiaries conducting business in the United States and several foreign countries. Both subsidiaries are U.S. corporations. This year,
Aqua, a South Carolina corporation, is a 20 percent partner in a Swiss partnership. This year, Aqua earned $2 million U.S. source income and $190,000 foreign source income. It paid no foreign income

Showing 400 - 500 of 713