Ali owns 100 shares of Brown Corporation stock. He purchased the stock at five different times and at five different prices per share as indicated. / On April 28, 2021, Ali will sell 40 shares of Brown stock for $40 per share. All of Ali’s shares are held by his stockbroker. The broker’s records track when the shares were purchased. May Ali designate the shares he sells? If so, which shares should he sell? Assume that Ali wants to maximize his gain because he has a capital loss carryforward.
> A seller and a buyer agree that the sales/purchase price for land is $1,500,000 down and two annual payments of $1,500,000 each to be made over the next two years. The buyer intends to construct a building on the land that will be used as the buyer’s war
> Mallard Corporation was formed in December 2021 and plans to use the cash basis of accounting. Mallard incurred one-half of its organizational expenses in December 2021 and one-half in January 2022. The payment of these expenses also occurred in these tw
> What conditions cause the golden parachute rules to apply?
> Sanjay Henry calls you and asks about setting up a savings incentive match plan for his employees (SIMPLE). Prepare a memo for the tax files with your response.
> Bob is notified by the city public housing authority on May 3, 2021, that his apartment building is going to be condemned as part of a commercial development project. On June 1, 2021, Stella offers to buy the building from Bob. Bob sells the building to
> Maize Corporation (a calendar year taxpayer) was formed on April 1, 2021. Calculate the maximum deduction for organizational expenses for 2021 if these costs were: a. $4,000. b. $24,000. c. $54,000. d. $64,000. e. Using spreadsheet software such as Micro
> Green Corporation, a calendar year taxpayer, has ordinary income of $10,000 and a long-term capital loss of $12,000 in 2021. Green incurred a long-term capital gain of $2,500 in 2018 and a long-term capital gain of $5,000 in 2020. a. How much of the long
> On April 5, 2019, Gustavo was granted an NQSO for 200 shares of common stock at $50 per share. On the date of the grant, there was no readily ascertainable fair market value for the option. Gustavo exercised the options on March 31, 2020, when the stock
> Zaire Corporation granted an ISO for 250 shares of its stock to Bruno on July 20, 2020, for services rendered. The option price was $130 and the fair market value was $130 on the date of the grant. Bruno exercised the option on September 1, 2020, when th
> Samantha, an accrual basis taxpayer, subscribes to a service that updates a database used in her business. In December 2021, Samantha paid the $120,000 subscription for the period January 2021 through December 2022. What is Samantha’s deduction for 2021?
> Shondee Corporation uses the lower of cost or market and FIFO inventory methods. At the end of 2020, the FIFO cost of the ending inventory was $181,000, and the market value of the inventory was $160,000. The corporation switched to LIFO in 2021. As a re
> In 2021, Cao’s compensation before his employer’s contribution to a SEP is $66,000. Up to what amount can Cao’s employer contribute and deduct in 2021?
> Shumpert, Inc., entered into a contract that was to take two years to complete, with an estimated cost of $900,000. The contract price was $1,300,000. Costs of the contract for 2020, the first year, totaled $675,000. a. What was the gross profit reported
> Jebali Corporation, a calendar year taxpayer utilizing the completed contract method of accounting, constructed a building for Samson, Inc., under a longterm contract. The gross contract price was $2,300,000. Jebali finished construction in 2021 at a cos
> Farhad canceled a note issued by Emma (Farhad’s niece) that arose in connection with the sale of property. At the time of the cancellation, the note had a basis to Farhad of $30,000, a face amount of $55,000, and a fair market value of $42,000. Presuming
> In 2021, Skylar sold an apartment building for $20,000 cash and a $300,000 note due in two years. Skylar’s cost of the property was $250,000, and he had deducted depreciation of $150,000, $60,000 of which was in excess of what the straight-line amount wo
> On December 30, 2021, Whitney sold a piece of property for $85,000. Her basis in the property was $40,000, and she incurred $1,200 in selling expenses. The buyer paid $5,000 down with the balance payable in $10,000 installments over the next eight years.
> For 2021, Essence Company, a calendar year taxpayer, will change from the cash method for tax purposes to the accrual method. At the end of 2020, Essence showed the following items. Accounts receivable …………………………………$200,000 Accounts payable …………………………………
> In 2021, Chaya Corporation, an accrual basis, calendar year taxpayer, provided services to clients and earned $25,000. The clients signed notes receivable to Chaya that have a fair market value of $22,000 at year-end. In addition, Chaya sold a 36-month s
> In 2021, Aurora received a $25,000 bonus computed as a percentage of profits. In 2022, Aurora’s employer determined that the 2021 profits had been incorrectly computed, and Aurora had to refund the $8,000 in 2022. Assume that Aurora was in the 35% tax br
> Near the end of 2021, Byron realizes that he has a net short-term capital loss of $13,000 for the year. Byron has taxable income (not including the loss) of $123,000 and is single. He owns numerous stocks that could be sold for a long-term capital gain.
> Mina, who is single, would like to contribute $6,000 to her Roth IRA. Her AGI is $131,000. What is the maximum amount that Mina can contribute? Show your answer in Microsoft Excel.
> Myers, who is single, has compensation income of $73,000 in 2021. He is an active participant in his employer’s qualified retirement plan. Myers contributes $6,000 to a traditional IRA. Of the $6,000 contribution, how much can Myers deduct?
> Shannon owns two items of business equipment. Both were purchased in 2017 for $100,000, both have a 7-year MACRS recovery period, and both have an adjusted basis of $37,490. Shannon is considering selling these assets in 2021. One of them is worth $60,00
> On August 31, 2020, Nolan and Lei, who file a joint return and live in Charleston, South Carolina, sell their personal residence, which they have owned and lived in for 10 years. The realized gain of $292,000 was excluded under § 121. They purchased anot
> Renata Corporation purchased equipment in 2019 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2021 for $110,000. What is the amount and character of Renata’s gain or loss?
> Omar, who is single, sold his principal residence on April 10, 2021, and excluded the realized gain under § 121 (exclusion on the sale of a principal residence). On April 12, 2021, he purchased another principal residence, which he sells on January 12, 2
> Gary, who is single, sells his principal residence (owned and occupied by him for seven years) in November 2021 for a realized gain of $148,000. He had purchased a more expensive new residence eight months prior to the sale. He anticipates that he will o
> On February 24, 2021, Allison’s building, with an adjusted basis of $1,300,000 (and used in her trade or business), is destroyed by fire. On March 31, 2021, she receives an insurance reimbursement of $1,650,000 for the loss. Allison invests $1,550,000 in
> Elliott has the following capital gain and loss transactions for 2021: Short-term capital gain …………………………………………$ 1,500 Short-term capital loss ………………………………………….(3,600) Long-term capital gain (28%) ………………………………..12,000 Long-term capital gain (25%) …………………
> On June 5, 2021, Brown, Inc., a calendar year taxpayer, receives cash of $750,000 from the county upon condemnation of its warehouse building (adjusted basis of $500,000 and fair market value of $750,000). a. What must Brown do to qualify for § 1033 post
> Golf Corporation generates a $40,000 net operating loss in 2021. Leo Trees, the Golf CEO, expects to offset all of the 2022 taxable income with the NOL. Explain to Leo whether that is possible.
> Coline has the following capital gain and loss transactions for 2021: Short-term capital gain …………………………………..$ 5,000 Short-term capital loss …………………………………….(2,100) Long-term capital gain (28%) …………………………….6,000 Long-term capital gain (15%) ……………………………..2
> On May 9, 2021, Glenna purchases 500 shares of Ignaz Company stock for $7,500. On June 30, 2021, she writes a call option on the stock, giving the grantee the right to buy the stock for $9,000 during the following 12-month period. Glenna receives a call
> In June 2021, Sue exchanges a sport-utility vehicle (adjusted basis of $16,000; fair market value of $19,500) for cash of $2,000 and a pickup truck (fair market value of $17,500). Both vehicles are held for business use. Sue believes that her basis for t
> Zack, a sole proprietor, has earned income of $85,000 in 2021 (after the deduction for one-half of self-employment tax). What is the maximum contribution Zack may make to a defined contribution Keogh plan?
> Joanna, age 44, defers $24,000 in a qualified Solo § 401(k) plan in 2021. a. What amount must be returned to Joanna and by what date? b. In what year will the amount be taxed? c. What percent of the tax will be imposed on Joanna if excess contributions a
> Osprey Corporation, an accrual basis taxpayer, reported taxable income for 2021 and paid $40,000 on its estimated state income tax for the year. During 2021, the company received a $4,000 refund upon filing its 2020 state income tax return. The company f
> Determine the percentage of vesting for the following employees. See Exhibits 19.1 and 19.2. a. Jun has five years of service completed as of September 23, 2021, her employment anniversary date. If her defined benefit plan has a five-year cliff vesting s
> Reba, a calendar year taxpayer, owns an office building that she uses in her business. The building is involuntarily converted on November 15, 2021. On January 5, 2022, Reba receives enough proceeds to produce a realized gain. What is the latest date she
> If depreciable equipment used in a business is sold at a recognized gain on July 10, 2021, and it was purchased on August 21, 2020, does $1245 depreciation recapture apply to the asset? Explain.
> Joey, who is single, is not covered by another qualified plan and earns $127,000 at his job in 2021. How much can he contribute to a traditional IRA or to a Roth IRA in 2021?
> During his senior year in college, Sandy is drafted by the Los Angeles Dodgers. When he graduates, he expects to sign a five-year contract in the range of $1,700,000 per year. Identify some tax benefits of a nonqualified deferred compensation plan, which
> Review Examples 4 and 6 in the text. In both examples, the taxpayer’s AGI is $129,400 even though in Example 6 there is $700 of nonrecaptured § 1231 loss from 2020. Explain why the two AGI amounts are the same.
> Steven established a sole proprietorship in 2015. He sold $1231 assets at a loss in 2019 and 2020. He had only sold $1231 assets at a gain before 2019. In 2021, he could sell a $1231 asset at a gain and would like to have the gain taxed as a long-term ca
> Fred, a cash basis taxpayer, received a $15,000 bonus from his employer in 2021. The bonus was based on the company’s profits for 2020. In 2022, the company discovered that its 2020 profits were computed incorrectly. As a result, Fred received an additio
> Clyde had worked for many years as the chief executive of Red Industries, Inc., and had been a major shareholder. Clyde and the company had a falling out, and Clyde was terminated. Clyde and Red executed a document under which Clyde’s stock in Red would
> A law practice was incorporated on January 1, 2021, and expects to earn $25,000 per month before deducting attorney Shonda’s salary. Shonda owns 100% of the stock in the practice. The corporation and Shonda both use the cash method of accounting. The cor
> Penny plans to retire in 2022 at age 70. Identify any issues that Penny faces with respect to distributions from her qualified retirement plan.
> Which of the following would be considered a tax benefit or advantage of a qualified retirement plan? a. Certain distributions may be subject to capital gain treatment. b. Employer contributions are deductible by the employer in the year of contribution.
> Determine whether each of the following independent statements best applies to a defined contribution plan (DCP), a defined benefit plan (DBP), both (B), or neither (N). a. The amount to be received at retirement depends on actuarial calculations. b. For
> Would a calendar or fiscal year be more suitable for a ski lodge? Why?
> In 2021, the taxpayer became ineligible to use the cash method of accounting. At the beginning of the year, accounts receivable totaled $240,000, accounts payable for merchandise totaled $80,000, and inventory on hand totaled $320,000. What is the amount
> Susie purchased her primary residence on March 15, year 4, for $550,000. She sold it on October 15, year 7, for $240,000. What amount of loss from the sale is recognized on her year 7 income tax return? a. $0 b. $60,000 c. $250,000 d. $310,000
> Can chatbot technology be used by a CPA firm to help clients and potential clients understand the similarities and differences among business entity types? How would this work, what are the benefits, and what cautions should the firm note for users?
> Send your instructor a graph for tax years 2000 and every five years thereafter that shows the number of tax returns filed by C corporations, S corporations, and partnerships/LLCs. Include in your graph the results for the latest tax year for which infor
> Gray, Inc., a C corporation, has taxable income from operations of $1,452,000 for 2021. It also has a net long-term capital loss of $355,000 from the sale of a subsidiary’s stock. The year 2021 is the first year in the last 10 years that Gray has not had
> Zariat has the retirement assets listed below. She plans to retire and start withdrawing amounts on which to live. Rank the accounts in the order from which she should make withdrawals so that tax deferral is maximized. Roth IRA ……………………………………….$923,408
> Using the chart below, determine the appropriateness of the type of retirement plan for the four types of entities. Use the following notations: H: highly appropriate, M: moderately appropriate, L: lightly or not appropriate, NA: not applicable. In addit
> Find two stories online about transactions to which you believe the involuntary conversion rules could apply. Do not limit your search to individual taxpayers. In an e-mail to your instructor, describe the transactions and explain whether the §1033 elect
> For 2021, Maddie has gross income of $38,350 and a $5,000 long-term capital loss. She claims the standard deduction. Maddie is 35 years old and unmarried with two dependent children. How much of Maddie’s $5,000 capital loss carries over to 2022?
> Three C corporations reported the following results for the calendar tax year 2021. a. Determine each corporation’s Federal income tax liability. b. Construct a single Microsoft Excel formula that will produce the correct answer for all
> Dan, a professional basketball player, is to receive a bonus of $2,000,000 for signing an employment contract. An NQDC plan is established to postpone the income beyond Dan’s peak income years. In 2021, his employer transfers the bonus to an escrow agent
> In December 2021, Nell, Inc., an accrual basis taxpayer, paid $12,000 for insurance premiums for the 2022 calendar year. How much of the premiums can Nell, Inc., deduct in 2021?
> Locate the most recent data available from the IRS on Form 8824 filings (irs.gov/statistics). In a Microsoft Excel spreadsheet, use this information to provide a summary of these transactions through time [e.g., the number of like-kind exchanges that hav
> Gabriella, age 34, and Beth, age 32, have been married for nine years. Gabriella, who is a college student, works part-time and earns $1,500. Beth is a high school teacher and earns a salary of $34,000. a. What is the maximum amount Gabriella can contrib
> Louis is a participant in the SIMPLE IRA of his employer Brown, Inc. During 2021, he contributes 8% of his salary of $63,000, and his employer contributes 3%. What is the total amount that will be vested in his account at the end of 2021?
> Jacob Patterson is limited from making a fully deductible $6,000 IRA contribution because of his income level. Instead, he makes a $3,500 nondeductible IRA contribution to his traditional IRA. Find out how Jacob reports this on his return, and complete t
> Jimmy establishes a Roth IRA at age 47 and contributes $89,600 over 18 years. The account is now worth $112,000. How much of these funds may Jimmy withdraw tax-free?
> Carla was the owner of vacant land that she was holding for investment. She paid $2,000,000 for the land in 2018. Raymond was an investor in vacant land. He thought Carla’s land might be the site of an exit ramp from a new freeway. Raymond gave Carla $83
> Harvey is a self-employed accountant with earned income from the business of $120,000 (after the deduction for one-half of his self-employment tax). He uses a defined contribution Keogh plan. What is the maximum amount Harvey can contribute to his retire
> Quentin’s roadside vegetable stand (adjusted basis of $275,000) is destroyed by a tractor-trailer accident. He receives insurance proceeds of $240,000. Quentin immediately uses the proceeds plus additional cash of $45,000 to build another roadside vegeta
> Consuela was a tenant in a campus apartment. She is a student at State University. Her lease began on August 1, 2021, and was due to expire on July 31, 2022. However, her landlord sold the building, and the new owner wanted to demolish it to build a reta
> Using the legend provided below, classify each statement under 2021 tax law. a. A child care credit is available. b. The deduction of charitable contributions is subject to percentage limitation(s). c. Excess charitable contributions can be carried forwa
> The U.S. tax system allows many businesses to use the cash method of accounting. Find another country that allows some businesses to use the cash method, and explain how that system compares to the U.S. system. E-mail your answer to your instructor, also
> Lee inherits a traditional IRA at the end of 2021. a. If Lee inherits the IRA from her spouse when the value is $231,050, how must the balance be distributed to her? b. If Lee inherits the IRA from her brother, how must the balance be distributed to her?
> Kim is a 40% shareholder in Taupe, a calendar year S corporation. During 2021, Taupe had an operating loss of $200,000. If Kim has a basis of $50,000 in his stock and has made a loan to Taupe of $20,000, how much of the loss can he deduct for 2021?
> Cheng is age 77, and the balance in her traditional IRA account at the end of December of the prior year is $231,000. Using Exhibit 19.3, calculate Cheng’s required minimum distribution for 2022.
> In 2021, Emily receives a distribution of $125,000 from her wholly owned calendar year corporation. As of January 1, 2021, the corporation has accumulated E & P of $15,000 and for 2021 has current E & P of $65,000. Emily’s basis in her stock is $35,000.
> Enzo is a single taxpayer with the following gains and losses for 2021: • $2,100 short-term capital loss. • $24,000 long-term capital gain from sale of stock. • $14,000 § 1231 gain that is all unrecaptured § 1250 gain. What is the amount and character of
> Neal uses the percentage of completion method to report his gross income from long-term contracts that were to begin in 2021. In 2022, he completes a contract for more than the estimate of total costs that was used in the prior year. What are the tax acc
> An apartment building was acquired in 2012. The depreciation taken on the building was $123,000, and the building was sold for a $34,000 gain. What is the maximum amount of 25% gain?
> Tom and Alice Honeycutt, ages 45 and 46, respectively, live at 101 Glass Road, Delton, MI 49046. Tom is a county employee, and Alice is a self-employed accountant. Tom’s Social Security number is 111-11-1111; Alice’s Social Security number is 123-45-6789
> Devon Bishop, age 45, is single. He lives at 1507 Rose Lane, Albuquerque, NM 87131. His Social Security number is 111-11-1117. Devon did not engage in any virtual currency transactions during the year, and he does not want $3 to go to the Presidential El
> Glen and Diane Okumura (both age 48) are married, file a joint return, and live at 39 Kaloa Street, Honolulu, HI 96815. Glen’s Social Security number is 111-11-1111, and Diane’s is 123-45-6789. The Okumuras have two dependent children, Amy (age 15) and J
> Justin Stone was an employee of DataCare Services, Inc. His salary was $45,000 through November 10, 2020, when he was laid off. DataCare Services provided medical insurance for Justin and his family during his employment and agreed to continue this cover
> Anthony Barrone is a graduate student at State University. His 10-year-old son, Jamie, lives with him, and Anthony is Jamie’s sole support. Anthony’s wife died in 2020, and Anthony has not remarried. Anthony received $
> Purple Corporation purchases residential rental property for $1,000,000 (disregarding any allocation to the land) on March 9, 2018. Straight-line cost recovery of $130,295 is taken before the property is sold on October 23, 2021, for $1,000,000. a. What
> Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Bill lives with Ashley, and she fully supports him. Bill
> Wally, Inc., sold the following three personal property assets in year 6: / What is Wally’s § 1245 recapture in year 6? a. $500 loss b. $300 gain c. $800 gain d. $1,600 gain
> Wally, Inc., sold the following three personal property assets in year 6: What is Wally’s net § 1231 gain or loss in year 6? a. $500 loss b. $300 gain c. $800 gain d. $1,600 gain
> Yanling owns a 150-unit motel that was constructed in the late 1960s. It is located on 10 acres on the main highway leading into the city. Yanling renovated the motel three years ago. Yanling’s motel is condemned by the city, which is going to use 2 of t
> Randall owns an office building (adjusted basis of $250,000) that he has been renting to a group of physicians. During negotiations over a new seven-year lease, the physicians offer to purchase the building for $900,000. Randall accepts the offer with th
> Does your state impose income tax on an S corporation in addition to imposing tax on the shareholders? Elaborate.
> Scott and Brooke are the sole shareholders of Tananger Company, a calendar year S corporation. After several loss years, in December 2021, Tananger is forced to borrow $300,000 for working capital purposes. Robin State Bank makes the loan to Tananger, bu
> During 2021, Jayden Steele received a distribution of $24,000 on stock he owns in Razorbill Corporation. He had planned to report this amount as dividend income until he talked to his father-in-law, Jim. According to Jim, who had examined Razorbill’s fin
> Prepare an outline of a speech on the topic “Should a Millennial Establish a Roth IRA and Contribute to It?” for your school’s Investment Club.
> Find the full IRS RMD table, and compute the 2022 required minimum distribution in each of the following situations. a. Anya’s IRA balance is $215,000, and she is 76 years old. b. Anya is 78 years old, and her IRA balance is $196,000. c. Anya, age 72, is
> Jacob purchased business equipment for $56,000 in 2018 and has taken $35,000 of regular MACRS depreciation. Jacob sells the equipment in 2021 for $26,000. What is the amount and character of Jacob’s gain or loss?
> Prepare two PowerPoint slides for each of the following items to present to your school’s Accounting Club. a. What is an inherited IRA? b. If you inherit an IRA, can you make additional contributions to it? c. Do an inherited IRA’s funds remain tax defer
