Questions from Federal Taxation

Q: Because expenses incurred both in a business and for the production of

Because expenses incurred both in a business and for the production of investment income are deductible, why is it important to determine in which category a particular activity falls?

Q: The timing of when the economic performance test is satisfied depends on

The timing of when the economic performance test is satisfied depends on the type of transaction and whether the transaction is recurring. a. When does economic performance occur for a taxpayer who m...

Q: Under Sec. 267, current deductions may not be taken for

Under Sec. 267, current deductions may not be taken for certain transactions between related parties. a. Who is considered a member of a taxpayer’s family under the related party transaction rules of...

Q: Dale purchased Blue Corporation stock four years ago for $1,

Dale purchased Blue Corporation stock four years ago for $1,000 as an investment. He intended to hold the stock until funds were needed to help pay for his daughter’s college education. Today the stoc...

Q: Dan owns 500 shares of Rocket Corporation common stock. The stock

Dan owns 500 shares of Rocket Corporation common stock. The stock was acquired two years ago for $30 per share. On October 2, 2017, Dan writes five calls on the stock, which represent options to buy t...

Q: Many tax professionals have moved into the field of financial planning for

Many tax professionals have moved into the field of financial planning for their clients. a. How do taxes impact financial planning for a client? b. Why do tax professionals have a perfect opportuni...

Q: Donna files as a head of household in 2017 and has taxable

Donna files as a head of household in 2017 and has taxable income of $90,000, including the sale of a stock held as an investment for two years at a gain of $20,000. Only one asset was sold during the...

Q: On January 1, 2015, Swen paid $184,000

On January 1, 2015, Swen paid $184,000 for $200,000 of the 8%, 20-year bonds of Penn Corporation, issued on January 1, 2011, at par. The bonds are held as an investment. Determine the gain and the cha...

Q: Gus, a football player who was renegotiating his contract with the

Gus, a football player who was renegotiating his contract with the Denver Broncos, paid his ex-girlfriend $50,000 to drop a sexual assault complaint against him and keep the matter confidential. The B...

Q: Calvin, whose tax rate is 35% is considering two alternative

Calvin, whose tax rate is 35% is considering two alternative investments on January 1, 20Y1. He can purchase $100,000 of 10% bonds due in five years or purchase $100,000 of Hobbes, Inc. common stock....