Questions from General Taxation

Q: Argonaut Corporation sustained considerable damage to one of its warehouses during a

Argonaut Corporation sustained considerable damage to one of its warehouses during a recent hurricane. It expects to pay $200,000 to replace the roof of the building and repair other damage. It is unc...

Q: Natalie appeared on a game show last year and won a car

Natalie appeared on a game show last year and won a car valued at $30,000. After driving it for six months, she sold it for $24,000.

Q: In October 2017, Firm G completed a consulting engagement and received

In October 2017, Firm G completed a consulting engagement and received a $200,000 cash payment for its services. In December, the client notified Firm G that it was unsatisfied with the work and deman...

Q: Corporation WJ began business in 2019 and elected S corporation status.

Corporation WJ began business in 2019 and elected S corporation status. This year, it operated at a significant loss, flowing through $(624,000) of ordinary business loss to its sole shareholder, Will...

Q: BL and TM are both calendar year corporations. On January 1

BL and TM are both calendar year corporations. On January 1, 2019, BL purchased TM’s entire business (all TM’s balance sheet assets), and TM’s shareholders dissolved the corporation under state law. A...

Q: Corporation DS owns assets worth $550,000 and has $

Corporation DS owns assets worth $550,000 and has $750,000 outstanding debts. One of DS’s creditors just informed DS that it is writing off a $15,000 account receivable from DS because it believes the...

Q: In 2018, Company W elected under Section 179 to expense $

In 2018, Company W elected under Section 179 to expense $19,300 of the cost of qualifying property. However, it could deduct only $15,000 of the expense because of the taxable income limitation. In 20...

Q: Two years ago, a professional theater company paid $300 to

Two years ago, a professional theater company paid $300 to an antique dealer for an old oil painting that the company used as a prop. This year, the company’s prop manager was cleaning the painting an...

Q: BL Inc. has been in business since 2000. This year

BL Inc. has been in business since 2000. This year BL’s new CPA discovered that it is using an incorrect accounting method for a certain page 6-39 expense. BL is willing to change to the correct accou...

Q: Company A, a calendar year taxpayer, has always used the

Company A, a calendar year taxpayer, has always used the cash method of accounting. It completed an engagement for a major client in November 2019 and submitted a bill for its $160,000 fee. Because Co...