Taxation For Decision Makers 2019 9th Edition Shirley Dennis Escoffier, Karen A. Fortin - Solutions

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George has $96,200 in salary from his full-time position and $43,000 in net income in 2019 from his sole proprietorship. What is his self-employment tax? What portion of this can he deduct?
Go to www.taxfoundation.org (the website for the Tax Foundation).a. What is Tax Freedom Day?b. When were Tax Freedom Days in 2017 and 2018.
What is a tax? How does a tax differ from a fine?
Define tax expenditure.
Clara and Charles decide to form a business. Clara plans to contribute $9,000 for a 30 percent interest and Charles plans to contribute $21,000 for a 70 percent interest. The business will borrow $20,000 to cover the balance of its working capital needs. In their business plan, Clara and Charles
What is nexus?
If a taxpayer has $140,000 of employee salary, how much will be withheld for the Social Security and Medicare taxes in 2019?
Determine Amy’s taxable income for 2019 if she has $40,000 of salary income, is single, and claims the standard deduction.
Determine George and Mary’s taxable income and tax liability for 2019 if George has $65,000 and Mary has $45,000 of salary income, they have $20,000 of allowable itemized deductions, no dependents, and file a joint tax return.
Define gross income.
Compare a C corporation to an S corporation.
If a taxpayer has $40,000 of employee salary in 2019, how much will be withheld for the Social Security and Medicare taxes?
Sally and Jim are married and have taxable income in 2019 of $700,000. If they could file their income tax as single individuals, each of them would have taxable income of $350,000. Do they have a marriage when they file their joint return? If so, what is the amount of the penalty?
Go to the IRS website and click on About IRS, and then click on Tax Statistics. What sub headings appear under the “Statistics of Income”?
Carol has recently incorporated her sole proprietorship and is considering making an S election. The corporation has $200,000 of gross revenue and expenses of $75,000 before Carol’s salary. She plans to take a gross salary of $40,000 from the business and this will be her only income for the
Jeremy is setting up a service business. He can either operate the business as a sole proprietorship or he can incorporate as a regular C corporation. He expects that the business will have gross income of $80,000 in the first year with expenses of $12,000 excluding the following. He plans to take
John and Martha are planning to be married. Both are professionals each with taxable incomes of $360,000 annually. They are deciding on a wedding date. They have two dates to choose from: December 14, 2019, or January 11, 2020. If they marry on December 14, 2019, they will have to choose between
What is the maximum income tax rate that applies to the employee salary, the employment tax rate(s) on the salary, and the capital gain rate(s) on the long-term capital gains, for these four single individual taxpayers in 2019 (excluding Medicare surtaxes)?a. Employee Salary = $27,000; Capital Gain
Search the IRS website for TCE. Briefly describe this program. Consult the IRS website (www.irs.gov).
Go to www.taxsites.com/state-links.html and locate your state. Find and read your state’s filing requirements for forming an LLC and write a one-paragraph summary of these requirements. Does your state recognize a single member LLC?
Locate a recent appellate court case that has reversed a Tax Court decision regardinga Partnership or S corporation tax issue.a. Summarize the facts, issues, and conclusions of the case.b. Explain why the appellate court reversed the Tax Court.c. Explain the impact this decision has on tax planning
Two years ago, Herbert, a widower, made a gift of marketable securities to his 35-year-old daughter, Sabrina, on which he paid a federal gift tax of $3 million. When Herbert died in December 2017, his estate had been greatly reduced in value due to his having given away most of his assets over his
When Chet died on March 12, 2018, he owned $900,000 in stock of ABC Corporation and $100,000 in City of Omaha bonds. The ABC Corporation declared a cash dividend on March 1 that was payable to shareholders of record on March 15. In early April, the executor of Chet’s estate received the
Identify the issues or problems suggested by the following situations. State each issue as a question.Jorge is a resident and citizen of Spain. He invests $500,000 in Miami Beach real estate. When Jorge died in 2018, he owned $12,000,000 in assets in Spain in addition to the Miami Beach real estate.
For 2018–2025, Congress increased the lifetime exclusion amount for estate and gift taxes to $11,180,000 with inflation indexing. What (if any) changes do you think Congress might make in this area in the future?
Oscar (age 70) and Maggie (age 60) were married and jointly owned a personal residence valued at $3,800,000 when Oscar died in 2018. Oscar also owned stocks valued at $6,700,000; an art collection valued at $4,400,000; a retirement account valued at $900,000 (contributions were entirely from pretax
When Godfrey died in 2018, his assets were valued as follows:The executor sold the stock two months after the decedent’s death for $5,200,000. The bonds were sold seven months after the decedent’s death for $4,630,000. What valuation should be used for the gross estate? Date of death valuation
Your client, Ted, would like your assistance in selecting one of the following assets to give to his 16-year-old daughter.The corporate stock pays only $100 in dividend income each year but has doubled in value since Ted purchased it three years ago. The S corporation has generated a profit of
Julie had a gross estate of $13 million when she died in 2018. Her funeral expenses were $26,000; her administrative expenses were $30,000; her charitable deduction was $350,000; and her marital deduction was $600,000. She made no prior taxable gifts. What is her net estate tax liability?
Sondra and Jason, a wealthy married couple, won $96 million in a 2018 Power ball drawing. They decided to share some of this new wealth immediately with some of their friends and family. They paid $4,800,000 on a new home for Sondra’s parents, titling the home jointly in the parents’ names;
Steven had a taxable estate of $14,850,000 when he died in 2018. If he had no prior taxable gifts, what is his net estate tax liability?
Benjamin has made no previous taxable gifts. Determine his gift tax if he makes $14,000,000 (after annual exclusions) in taxable gifts in 2018.
Cherry’s 62-year-old widowed mother, Nancy, had to quit working for health reasons and now her only income is $1,100 per month from Social Security. Cherry recently became partner of a law firm and has moved into the 32% marginal tax bracket. Cherry’s mother steadfastly insists on living
Jessica owns investment land currently worth $8,000,000. She paid $3,000,000 for the land 10 years ago. She expects that the land will probably increase in value to at least $12,000,000 before she dies. She has not previously given any taxable gifts.a. If Jessica gives the land to her son Mark now,
Samson’s gross estate was valued at $3 million when he died. Determine the value of his taxable estate before any credits using the following information:• The executor’s fees were $16,000.• His funeral expenses were $15,000.• A cash donation of $110,000 was given to San Jose State
Cindy, an 18-year-old full-time student, has $5,000 interest income from a trust established by her grandparents. Cindy also earned $6,000 working at a part-time job. She lives at home with her parents and has no itemized deductions.a. What is Cindy’s taxable income and how much income tax does
Lenny, age 12, has $5,500 interest income from a trust established by his uncle. This is Lenny’s only source of income for 2018.a. What is Lenny’s taxable income and how much income tax does he owe?b. How would your answers change if Lenny were age 24?
Joan is 15 and a dependent of her parents. If she has $4,900 income from her trust fund this year, how much income tax will she pay for 2018 if her parents have $150,000 of taxable income?
On January 15, 2018, Eileen, age 24, receives stock worth $30,000 as a gift from her parents. Her parents jointly purchased the stock six years ago for $14,000. During the year, Eileen receives $2,100 dividend income on the stock. In December, she sells the stock for $41,000.a. Assuming this is
During 2018, Cherie gives $34,000 cash to her daughter, Helen, and a remainder interest in investment land to her sister, Silvia. The remainder interest is valued at $40,000. In the same year, John, Cherie’s husband, gives Dan $18,000 in marketable securities. What is the total dollar amount of
In 2018, Marah gives $20,000 cash to Sam, $60,000 of stock to Craig, and $100,000 of bonds to Lynn. In the same year, Marah’s husband, Bryan, gives land valued at $120,000 to Jerry.a. What are Marah and Bryan’s taxable gifts if they do not elect gift splitting?b. What are the couple’s taxable
Ginny made the following gifts during 2018. Her husband, Ken, made no gifts during the year.• Gift of land valued at $250,000 to her husband• Gift of $20,000 in stock to her daughter• Gift of $32,000 to her sister to pay for medical expensesa. How much are Ginny’s taxable gifts if gift
John gave $32,000 to each of his 10 grandchildren this year. Lisa, his wife, made no gifts during 2018.a. How much are John’s taxable gifts if gift splitting is not elected?b. How much are John’s taxable gifts if gift splitting is elected?
Which of the following are completed gifts? Determine the value of each gift before any exclusions?a. In March, Stephanie deposits $40,000 cash into a joint checking account for herself and her boyfriend, Michael, who deposits nothing into the account. In July, Michael withdraws $16,000 from the
Determine the taxable gift for each of the following transfers made in 2018.a. In February, Cynthia transferred $200,000 into a revocable trust. In October, the trustee distributes $18,000 of income to the beneficiary, Eileen.b. Carrie prepared the tax returns at no charge for the elderly in a
Which of the following are completed gifts? How much is the value of each gift before any exclusions?a. Hughlene sold stock worth $90,000 to her son for $30,000.b. Ken deposits $16,000 into a savings account in his name and his daughter’s name as joint owners.c. Jim transferred $800,000 into a
Mary is John’s surviving spouse. He used $450,000 of his gift and estate tax exclusion for his lifetime gifts and his estate used $2,300,000 of his estate tax exclusion in closing his estate in 2017. What is Mary’s estate tax exclusion when she dies in 2018 if she and John elected to gift split
Determine the credit for the gift and estate tax exclusion if the indexed exclusion in 2019 is $11,300,000.
Five years before his death, Troy purchased a $8 million whole life insurance policy on his life and named his son, Don, the beneficiary. Shortly after purchase, Troy transferred the policy to an irrevocable trust, naming his son as trustee. Troy retained no incidents of ownership.a. Has Troy made
Explain the basic provisions of a Section 529 qualified tuition plan
Explain why Congress added the kiddie tax provisions and which taxpayers are affected by it.
What is the lifetime unified credit amount for 2018 and its related exclusion equivalent?
Lorraine created a trust by transferring $500,000 of stock and bonds into it on January 1, year 1. The trust is to provide her mother with income for her lifetime, with the remainder interest going to Lorraine’s son. Lorraine retained the power to revoke both the income interest and the remainder
According to the provisions of the decedent’s will, the following disbursements were made by the estate’s executor:1. Payment of the decedent’s funeral expenses2. Payment of a charitable bequest to a local charityWhat is deductible in determining the decedent’s taxable estate?a. 1 onlyb. 2
Which of the following transactions is a taxable gift?a. Mack transfers $5,000 to his favorite political organization.b. Sonia gives $25,000 in stocks to her church.c. Veronica gives $25,000 to her husband, Jose.d. Carla transfers $40,000 into an irrevocable trust for the benefit of her two
Which of the following transfers is a taxable gift?a. Alex sold land to an unrelated party for less than its fair market value because he needed cash in a hurry.b. After a friend’s death, Nicole wrote a check to the university to pay the college tuition for the friend’s son.c. Melissa wrote a
Marta placed $50,000 into a savings account in her name and the name of her son. Later this year, the son withdraws $17,000 from the account. Marta made no other gifts to her son this year. Marta has made a taxable gift ofa. $2,000b. $11,000c. $17,000d. $25,000e. $35,000
John Forsythe (SSN 555-55-5555) began a custom cabinet manufacturing business, John’s Cabinets (EIN 86-1122334 and Business Code 321000), July 1, 2013. John incorporated the business, and the corporation made a timely election to be taxed as an S corporation.The business has been highly
The Rite-Way Plumbing Company began business March 1, 2014 in Sarasota. Its business address is 124 Division Lane, Sarasota, FL 33645. Its employer identification number is 69-3456789. Its principal business activity is residential plumbing repairs and maintenance; its business code is 238220. It
Go to the IRS website (www.irs.gov) and print out copies of Schedule C for Form 1040, Schedule SE, and the first page of Form 1040 for 2017. Using the information in problem 25, complete these schedules and forms to the extent possible from the information given.Data From Problem 25John Mason
Walter Williams, a travel writer, has worked for a well-known publication for a number of years as a private contractor. Last year a friend suggested he become an S corporation, but he failed to make the election. During the current year, the business had the following income and expenses from
An S corporation shareholder has contacted you for advice. His S corporation is going to pass a very large loss through to him that would otherwise offset other income, except for the fact that he lacks sufficient stock basis to absorb the loss. The shareholder is coming to your office tomorrow to
Bob is a 50 percent owner of Barco Enterprises. During 2018, Barco earned $80,000 in net income after subtracting Bob’s $50,000 salary. Bob also withdrew $20,000 from Barco during the year. Bob would like to know the amount of the FICA taxes and by whom they would be paid ifa. Barco is a general
Roberto is single and has taxable income of $530,000 in 2018. As a 25 percent partner in a partnership that produces $820,000 of ordinary income from manufacturing a product, his share of partnership income is $205,000. The partnership paid $210,000 of W-2 wages and the total unadjusted basis of
Lynn, who is single, is allocated $500,000 of income and $790,000 of deductions in 2018 from ABC Partnership. How much of this loss can Lynn deduct in 2018 and what does she do with the excess loss?
The Snap-It-Open Corporation incorporated and began operations on January 15, 2017. Its address is 3701 Commerce Drive, Baltimore, MD 23239. Its employer identification number is 69-7414447. It elects to file its initial tax return as a calendar-year corporation and uses the accrual method of
Susanna is single with taxable income in 2018 of $185,000 of which $130,000 is attributable to her consulting sole proprietorship. She paid W-2 wages of $60,000 to her employees. Compute her qualified business income deduction.
In 2018, John is single and is the owner of a proprietorship with $650,000 of gross income and $970,000 of deductions, resulting in a $320,000 loss for the year. How much of this loss can John deduct in 2018 and what does he do with the excess loss?
Although partners can generally deduct their share of losses from a partnership, what four things can limit their ability to deduct these losses on their current year’s tax return?
What is the purpose of the qualified business income deduction? Explain how it is calculated.
Describe the new limitation for net business losses. What are the threshold amounts for 2018?
Explain the principal difference between an LLP and an LLC.
William and Joan form an S corporation with William owning 30 percent of the stock and Joan the remaining 70 percent. Joan contributed $80,000 cash and services valued at $4,000. William contributed $6,000 cash and property valued at $30,000 that has a basis of $20,000. At the end of the year, the
Using the information in question 3, what is Joan’s basis in her partnership interest at year-end?a. $140,100b. $120,600c. $110,100d. $99,600
William and Joan form a partnership with William having a 30 percent interest and Joan the remaining 70 percent. Joan contributed $80,000 cash and services valued at $4,000. William contributed $6,000 cash and property valued at $30,000 that has a basis of $20,000. At the end of the year, the
Refer to the information in question 1 and assume the entity is an S corporation. What is the corporation’s net income excluding separately stated items?a. $22,600b. $22,300c. $21,800d. $21,600
Lauren Cooper had a beauty shop in the basement of her home. During the current year, she had gross receipts of $32,000. She spent $3,500 for supplies, paid an assistant $4,200, incurred allocated utility expenses of $800, depreciation expense of $1,200, a Section 1231 gain of $800, and a
How does a private foundation reduce the excise tax on a prohibited transaction?
What distinguishes a private foundation from other tax-exempt organizations?
What are at least three examples of prohibited transactions?
Distinguish between an unrelated business and a related business for an exempt organization. Suggest examples.
Why is an exempt organization taxed on its unrelated business income?
What alternatives does the federal government have when an exempt organization engages in a prohibited transaction?
What can cause an exempt organization to lose its exempt status?
Comprehensive Individual Return Problem. Cletus and Josepha Mayor have been married for twelve years and currently live at 2907 Seven Oaks Lane, Columbia, SC 29210. Their Social Security numbers are 223-34-4444 and 322-32-2222, respectively. They have two daughters, Sheena, age 10, (SSN
Locate and print Form 4684 (Casualties and Thefts). Enter the following information and complete the form to the extent possible: Howser Corporation, a calendar-year corporation, discovered in January that its bookkeeper (who was fired late last year) had embezzled $45,000 from the company. The
Jenkins Corporation had $675,000 of taxable income for 2017 and $575,000 for 2018. What is the minimum amount that it must submit for each estimated quarterly tax payment to avoid any penalty for underpayment?
The Falcon Corporation has $68,000 in taxable income for 2017. Its accountant uncovered $87,000 in net positive adjustments and $2,000 of preference items for its alternative minimum taxable income. What are the corporation’s AMTI and AMT for 2017?
Mondial Corporation’s financial accounting records show it had gross revenue of $980,000, cost of goods sold of $420,000, operating expenses of $380,000, and $4,000 of dividends received from a 40-percent-owned owned corporation. Its operating expenses included the following: $6,000 of life
Donut Corporation has $400,000 of taxable income for 2018. What is its net tax liability if it has a $120,000 general business credit available?
What is a corporation’s income tax if its taxable income is $14,000,000:a. For 2017?b. For 2018?
The Jingle Corporation has income from operations of $459,000. It has dividend income of $68,000 from a corporation in which it owns 5 percent.a. What is the corporation’s taxable income for 2018?b. How would your answer change if Jingle owns 35 percent of the corporation paying the dividend?
The Crane Corporation issues $1,500,000 in bonds with a 7.5 percent interest rate. If its tax rate is 21 percent, what is its after-tax cost of the debt?
The Little D Corporation has $150 in current earnings and profits and $100 in accumulated earnings and profits. It makes a $400 distribution to its sole shareholder whose stock basis is $100. What are the shareholder’s tax consequences?a. $250 dividendb. $250 dividend; $50 capital gainc. $250
Beggin Corporation had $100,000 of regular taxable income in 2017. It had $40,000 of positive adjustments and a $50,000 preference item. What was the corporation’s alternative minimum tax liability for 2017?a. $38,000b. $30,000c. $9,750d. $0
Walter Corporation reports $500,000 of taxable income for 2018. Determine its book income if tax depreciation was $15,000 more than book depreciation, its deductible business meal expenses were $40,000, and it had $10,000 of tax-exempt income.a. $500,000b. $485,000c. $380,000d. $285,000
Refer to the information in the previous problem. What is Glass Corporation’s income tax liability for 2018?a. $17,640b. $20,790c. $25,200d. $32,760Information from Previous problemThe Glass Corporation has $156,000 of income from operations. It has a $21,000 capital loss and a net operating loss
The Glass Corporation has $156,000 of income from operations. It has a $21,000 capital loss and a net operating loss from the prior year of $36,000. What is its taxable income for 2018?a. $156,000b. $120,000c. $99,000d. $84,000
What does continuity of interest mean?
Which reorganization is used by a corporation filing for bankruptcy?

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Taxation For Decision Makers 2019 9th Edition Shirley Dennis Escoffier, Karen A. Fortin - Solutions

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