Questions from General Taxation

Q: Acme is an accrual basis corporation. Mrs. T, Acme’s

Acme is an accrual basis corporation. Mrs. T, Acme’s chief financial officer, is a cash basis individual. In December 2018, Acme’s board of directors decided that Mrs. T should receive a $20,000 bonus...

Q: At the beginning of its 2019 tax year, Hiram owned the

At the beginning of its 2019 tax year, Hiram owned the following business assets. On July 8, Hiram sold its equipment. On August 18, it purchased and placed in service new tools costing $589,000; th...

Q: In April 2019, Lenape Corporation completed security, fire, and

In April 2019, Lenape Corporation completed security, fire, and heating system improvements to existing nonresidential real property with a total cost of $1,275,000. Assuming these improvements are 39...

Q: MG is an accrual basis corporation. In 2018, it wrote

MG is an accrual basis corporation. In 2018, it wrote off a $65,000 account receivable as uncollectible. In 2019, it received a $65,000 check from the creditor in full payment of this receivable. a. W...

Q: TRW Inc. began business in 2019 and incurred net operating losses

TRW Inc. began business in 2019 and incurred net operating losses for its first two years. In 2021, it became profitable. The following table shows TRW’s taxable income before consid...

Q: Zelda owns a 60 percent general interest in YZ Partnership. At

Zelda owns a 60 percent general interest in YZ Partnership. At the beginning of 2018, the adjusted basis in her YZ interest was $95,000. For 2018, YZ generated a $210,000 business loss, earned $14,600...

Q: Refer to the facts in the preceding problem. In 2019,

Refer to the facts in the preceding problem. In 2019, YZ generated $7,000 ordinary business income and $18,000 dividend and interest income. The partnership made no distributions. At the end of the ye...

Q: Evan, a single individual, operates a service business that earned

Evan, a single individual, operates a service business that earned $110,000 in 2018. The business has no tangible property and paid no W-2 wages. a. Compute Evan’s QBI deduction, assuming his overall...

Q: At the beginning of 2019, Ms. P purchased a 20

At the beginning of 2019, Ms. P purchased a 20 percent interest in PPY Partnership for $20,000. Ms. P’s Schedule K-1 reported that her share of PPY’s debt at year-end was $12,000, and her share of ord...

Q: On January 1, 2018, Leo paid $15,000

On January 1, 2018, Leo paid $15,000 for 5 percent of the stock in BLS, an S corporation. In November, he loaned $8,000 to BLS in return for a promissory note. BLS generated a $600,000 operating loss...