Questions and Answers of Taxation of Individuals and Business Entities 2021

Brooklyn files as a head of household for 2020. She claimed the standard deduction of $18,650 for regular tax purposes. Her regular taxable income was $80,000. What is Brooklyn’s AMTI?
In 2020, Carson is claimed as a dependent on his parent’s tax return. His parents report taxable income of $200,000 (married filing jointly). Carson’s parents provided most of his support. What
Lacy is a single taxpayer. In 2020, her taxable income is $42,000. What is her tax liability in each of the following alternative situations?a. All of her income is salary from her
What are the three types of tax credits? Explain why it is important to distinguish between the different types of tax credits.
In 2020, Jasmine and Thomas, a married couple, have taxable income of $150,000. If they were to file separate tax returns, Jasmine would have reported taxable income of $140,000 and Thomas would have
In 2020, Lisa and Fred, a married couple, have taxable income of $300,000. If they were to file separate tax returns, Lisa would have reported taxable income of $125,000 and Fred would have reported
Whitney received $75,000 of taxable income in 2020. All of the income was salary from her employer. What is her income tax liability in each of the following alternative situations?a. She files under
In 2020, for a taxpayer with $50,000 of taxable income, without doing any actual computations, which filing status do you expect to provide the lowest tax liability? Which filing status
George recently received a great stock tip from his friend, Mason. George didn’t have any cash on hand to invest, so he decided to take out a $20,000 loan to facilitate the stock acquisition. The
In 2020 Tom and Amanda Jackson (married filing jointly) have $200,000 of taxable income before considering the following events:a) On May 12, 2020, they sold a painting (art) for $110,000 that was
During the current year, Ron and Anne sold the following assets:Capital AssetMarket ValueTaxBasisHolding Period L stock$50,000$41,000> 1 year M stock 28,00039,000> 1 year N
George bought the following amounts of Stock A over the years:Date PurchasedNumber of SharesAdjusted BasisStock A11/21/19941,000$24,000Stock A3/18/20005009,000Stock A5/22/200975027,000On October 12,
Matt and Meg Comer are married and file a joint tax return. They do not have any children. Matt works as a history professor at a local university and earns a salary of $68,000. Meg works part-time
John bought 1,000 shares of Intel stock on October 18, 2016 for $30 per share plus a $750 commission he paid to his broker. On December 12, 2020, he sells the shares for $42.50 per share. He also
What is a “wash sale”? What is the purpose of the wash sale tax rules?
Shauna Coleman is single. She is employed as an architectural designer for Streamline Design (SD). Shauna wanted to determine her taxable income. She correctly calculated her AGI. However, she
Read the following letter and help Shady Slim with his tax situation. Please assume that gross income is $172,900 (which consists only of salary) for purposes of this problem.December 31, 2020To the
Jackson is 18 years old and has a dog-sitting business. Calculate the 2020 standard deduction Jackson will claim under the following independent circumstances.a. Jackson reported $2,000 of earnings
Stephanie is 12 years old and often assists neighbors on weekends by babysitting their children. Calculate the 2020 standard deduction Stephanie will claim under the following independent
Tim is age 45 years old and is considering enrolling in an insurance program that provides for long-term care insurance. He is curious about whether the insurance premiums are deductible as a medical
This year Jack intends to file a married-joint return. Jack received $172,500 of salary, and paid $5,000 of interest on loans used to pay qualified tuition costs for his dependent daughter, Deb. This
Hardaway earned $100,000 of compensation this year. He also paid (or had paid for him) $3,000 of health insurance (not through an exchange). What is Hardaway’s AGI in each of the following
Smithers is a self-employed individual who earns $30,000 per year in self-employment income. Smithers pays $2,200 in annual health insurance premiums (not through an exchange) for his own medical
Fred currently earns $9,000 per month. Fred has been offered the chance to transfer for three to five years to an overseas affiliate. His employer is willing to pay Fred $10,000 per month if he
Grady is a 45-year-old employee with AMUCK Garbage Corporation. AMUCK pays group-term life insurance premiums for employees, and Grady chose the maximum face amount of $120,000. What amount, if any,
Janet is a cash-basis, calendar-year taxpayer. She received a check for services provided in the mail during the last week of December. However, rather than cash the check, Janet decided to wait
Camille Sikorski was divorced in 2018. She currently owns and provides a home for her 15-year-old daughter. Kaly lived in Camille’s home for the entire year and Camille paid for all the costs of
Doug Jones submitted his 2020 tax return on time and elected to file a joint tax return with his wife, Darlene. Doug and Darlene did not request an extension for their 2020 tax return. Doug and
Janice Traylor is single. She has an 18-year-old son named Marty. Marty is Janice’s only child. Marty has lived with Janice his entire life. However, Marty recently joined the Marines and was sent
The Samsons are trying to determine whether they can claim their 22-year-old adopted son, Jason, as a dependent. Jason is currently a full-time student at an out-of-state university. Jason lived in
Aishwarya’s husband passed away in 2019. She needs to determine whether Jasmine, her 17-year-old stepdaughter who is single, qualifies as her dependent in 2020. Jasmine is a resident but not a
David and Lilly Fernandez have determined their tax liability on their joint tax return to be $2,100. They have made prepayments of $1,900 and also have a child tax credit of $2,000. What is the
How do parents determine who claims the child as a dependent if the child is a qualifying child of both parents when the parents are divorced or file separate tax returns?
What federal income-related taxes are (or might) taxpayers (be) required to pay? In general terms, what is the tax base for each of these other taxes on income?
Using the IRS Web site (www.irs.gov/uac/The-Tax-Gap), how large is the current estimated “tax gap” (i.e., the amount of tax underpaid by taxpayers annually)? What group of taxpayers represents
Do after-tax rates of return for investments in either interest- or dividend-paying securities increase with the length of the investment? Why or why not?
What are the two basic timing strategies? What is the intent of each?
What is Circular 230?
Under what circumstances would the IRS issue an acquiescence? A nonacquiescence? An action on decision?
Compare and contrast the three types of tax law sources and give examples of each.
Compare and contrast the three trial-level courts.
Agua Linda, Inc. is a calendar-year corporation. What is the original due date for the corporate tax return? What happens if the original due date falls on a Saturday?
Using the facts in problem 43, what interest rate does Surething Inc. need to offer to make Hugh indifferent between investing in the two bonds?Problem 43Hugh has the choice between investing in a
Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda could have invested the $200,000 in a bond recently issued by Surething Inc. that pays 8 percent
The federal income tax scores very high on the economy criterion because the current IRS budget is relatively low compared to the costs of a typical collection agency.” Explain why this statement
What are unemployment taxes?

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