Questions from Federal Taxation

Q: Zorn conducted his professional practice through Zorn, Inc. The corporation

Zorn conducted his professional practice through Zorn, Inc. The corporation uses a fiscal year ending September 30 even though the business purpose test for a fiscal year cannot be satisfied. For the...

Q: In 2017, Juan entered into a contract to write a book

In 2017, Juan entered into a contract to write a book. The publisher advanced Juan $50,000, which was to be repaid out of future royalties. If the book was not completed by the end of 2018, however, J...

Q: Heather owns 400 shares of Diego Corporation common stock for which she

Heather owns 400 shares of Diego Corporation common stock for which she paid $4,000. She receives a nontaxable stock dividend of 20 shares of preferred stock on her common stock. The fair market value...

Q: Gold, Inc., is an accrual basis taxpayer. In 2018

Gold, Inc., is an accrual basis taxpayer. In 2018, an employee accidentally spilled hazardous chemicals on leased property. The chemicals destroyed trees on neighboring property, resulting in $30,000...

Q: Compute Mary's income or deductions for 2018 using (1) the

Compute Mary's income or deductions for 2018 using (1) the cash basis and (2) the accrual basis for each of the following: a. In May 2018, Mary paid a license fee of $1,200 for the period June 1, 2018...

Q: Blue Company, an architectura1 first has a bookkeeper who maintains a

Blue Company, an architectura1 first has a bookkeeper who maintains a cash receipts and disbursements journal. At the end of the year (2018), the company hires you to convert the cash receipts and dis...

Q: How do the all events and economic performance requirement apply to the

How do the all events and economic performance requirement apply to the following transactions by an accrual basis taxpayer? a. The company guarantees its product for six months. At the end of 2018, c...

Q: Raven Finance Company experiences bad debts of about 3% of its

Raven Finance Company experiences bad debts of about 3% of its outstanding loans. At the end of the year, the company had outstanding receivab1es of $18 million. This balance included $2 million of ac...

Q: Jeffrey Boyd, the president of Eagle Furniture Company (average annual

Jeffrey Boyd, the president of Eagle Furniture Company (average annual gross receipts of $30 million), has prepared the company's financial statements and income tax returns for the past 15 years. In...

Q: Ted purchased equipment and used materials to develop a patent. The

Ted purchased equipment and used materials to develop a patent. The development costs were deducted on prior returns. The bases and fair market values of the assets are presented below. Sarah has ma...