Questions from Federal Taxation

Q: State Construction Company is owned equally by Andy, Bill, and

State Construction Company is owned equally by Andy, Bill, and Charlie. Andy works in the corporation full-time, and Bill and Charlie work elsewhere. Andy’s employment contract with State specifies a...

Q: Ken and Lynn paid $5,000 to purchase Series EE

Ken and Lynn paid $5,000 to purchase Series EE bonds in the name of their 11-year-old son. The son has no other income, and they are in the 28% tax bracket. The taxable interest this year will be $400...

Q: Carmen opens a retail store. Her sales during the first year

Carmen opens a retail store. Her sales during the first year are $600,000, of which $30,000 has not been collected at year-end. Her purchases are $400,000. She still owes $20,000 to her suppliers, and...

Q: In 2013, Harry and Mary purchased Series EE bonds, and

In 2013, Harry and Mary purchased Series EE bonds, and in 2017 redeemed the bonds, receiving $500 of interest and $1,500 of principal. Their income from other sources totaled $30,000. They paid $2,200...

Q: If the objectives of the federal tax system are multifaceted and include

If the objectives of the federal tax system are multifaceted and include raising revenues, providing investment incentives, encouraging certain industries, and meeting desired social objectives, is it...

Q: As a result of their divorce, Fred agrees to pay alimony

As a result of their divorce, Fred agrees to pay alimony to Tammy of $20,000 per year. The payments are to cease in the event of Fred’s or Tammy’s death or in the event of Tammy’s remarriage. In addit...

Q: Brad owns a successful corporation that has substantial earnings and profits.

Brad owns a successful corporation that has substantial earnings and profits. During the year, the following payments were made by the corporation: a. Salary of $250,000 to Brad. Officers in other co...

Q: Stan rented an office building to Clay for $3,000

Stan rented an office building to Clay for $3,000 per month. On December 29, 2016, Stan received a deposit of $4,000 in addition to the first and last months’ rent. Occupancy began on January 2, 2017....

Q: Ed owns Oak Knoll Apartments. During the year, Fred,

Ed owns Oak Knoll Apartments. During the year, Fred, a tenant, moved to another state. Fred paid Ed $1,000 to cancel the two-year lease he had signed. Ed subsequently rented the unit to Wayne. Wayne p...

Q: Susan’s salary is $44,000 and she received dividends of

Susan’s salary is $44,000 and she received dividends of $600. She received a statement from SJ partnership indicating that her share of the partnership’s income was $4,000. The partnership distributed...