Questions from Taxation

Q: Sandy Assam enjoys betting on horse and dog races. This year

Sandy Assam enjoys betting on horse and dog races. This year, she won $4,308 and lost $6,735 on her gambling activities. If Sandy’s marginal tax rate is 24 percent, compute the after-tax cost of her g...

Q: Ms. Queen, age 21, is a full-time

Ms. Queen, age 21, is a full-time college student with an athletic scholarship that provides the following annual benefits. Tuition payment………………………………$12,800 Fees and books………………………..…………..3,500 Roo...

Q: During the audit of Mr. and Mrs. Jessel’s 2015 and

During the audit of Mr. and Mrs. Jessel’s 2015 and 2016 tax returns, the revenue agent learned that they kept two sets of books for their sole proprietorship. A comparison of the two revealed that Mr....

Q: Mr. Leon filed his 2016 Form 1040 on March 29,

Mr. Leon filed his 2016 Form 1040 on March 29, 2017. In 2019, the IRS issued a notice of deficiency to Mr. Leon, in which it assessed $7,700 of additional 2016 income tax. Compute the total amount tha...

Q: Ms. Imo, who is single, purchased her first home

Ms. Imo, who is single, purchased her first home in 1991 for $85,000 and sold it in May 2000 for $178,500. She purchased her second home in July 2000 for $385,000 and sold it this year for $700,000. a...

Q: Mr. and Mrs. Kilo purchased their first home in 2003

Mr. and Mrs. Kilo purchased their first home in 2003 for $240,000. They sold this home in 2007 for $210,000. They purchased their second home in 2008 for $435,000 and sold it this year for $1,150,000....

Q: On January 12, 2016, Mr. and Mrs. Nixon

On January 12, 2016, Mr. and Mrs. Nixon moved out of their old residence (where they had lived for 22 years) and into a new residence purchased nine days earlier on January 3. They finally sold their...

Q: Mrs. Gomez, a widow, paid $148,000

Mrs. Gomez, a widow, paid $148,000 for her home 20 years ago. She recently sold this home and moved in with her son on a permanent basis. Compute Mrs. Gomez’s recognized gain or loss on the sale assum...

Q: Ms. Barth is a professional tax return preparer. Three years

Ms. Barth is a professional tax return preparer. Three years ago, she prepared the Form 1120 for Denver Inc. Her fee for the preparation was $14,850. Upon audit of the return, the IRS disallowed a $11...

Q: Tom and Allie Benson (ages 53 and 46) are residents

Tom and Allie Benson (ages 53 and 46) are residents of Fort Worth, Texas, and file a joint federal income tax return. They provide the entire support for their three children, ages 19, 18, and 14. On...