Alton Newman, age 67, is married and files a joint return with his wife, Clair, age 65. A1ton and C1air are both retired, and during 2018, they received Social Security benefits of $10,000. Both Alton and Clair are covered by Medicare. Alton's Social Security number is 111-11-1112, and Clair's is 123-45-6789. They reside at 210 College Drive, Columbia, SC 29201. Alton, who retired on January 1, 2018, receives benefits from a qualified pension plan of $2,750 a month for life. His total contributions to the plan (none of which were deductible) were $168,250. In January 2018, he received a bonus of $2,000 from his former employer for service performed in 2017. No income taxes were withheld on this bonus by his former employer (Amalgamated Industries, Inc.; EIN 12-3456789; 114 Main Street, Columbia, SC 29201). Although Amalgamated Industries, Inc. accrued the bonus in 2017, it was not paid until 2018. Clair, who retired on December 31, 2017, started receiving benefits of $1,400 a month on January 1, 2018. Her contributions to the qualified pension plan (none of which were deductible) were $74,100 On September 27, 2018, Alton and Clair received a pro rata 10% stock dividend on 600 shares of stock they owned. They had bought the stock on March 5, 2011， for $20 a share. On December 16, 2018, they sold the 60 dividend shares for $55 a share. On October 10, 2018, Clair sold the car she had used in commuting to and from work for $17,000. She had paid $31,000 for the car in 2012. On July 14, 2010, Alton and Clair received a gift of 1,000 shares of stock from their son Thomas. Thomas's basis in the stock was $35 a share (fair market value at the date of gift was $25). No gift tax was paid on the transfer. Alton and Clair sold the stock on October 8, 2018, for $24 a share. On May 1, 2018, Clair's mother died, and Clair inherited her personal residence In February 2018, her mother had paid the property taxes for 2018 of $2,100. The residence had a fair market value of $235,000 and an adjusted basis to the mother of $160,000 on the date of her death. Clair listed the house with a real estate agent, who estimated it was worth $240,000 as of December 31, 2018. Clair received rent income of $6,000 on a beach house she inherited three years ago from her uncle Charles. She had rented the property for one week during the July 4 holiday and one week during the Thanksgiving holiday. Charles's adjusted basis in the beach house was $150,000, and its fair market value on the date of his death was $240,000. Clair and Alton used the beach house for personal purposes for 56 days during the year. Expenses associated with the house were $3,700 for utilities, maintenance, and repairs; $2,200 for property taxes; and $800 for insurance There are no mortgages on the property. Clair and Alton paid estimated Federal income tax of $2,000 and had itemized deductions of $6,800 (excluding any itemized deductions associated with the beach house). If they have overpaid their Federal income tax, they want the amount refunded. Both Clair and Alton want $3 to go to the Presidential Election Campaign Fund. Compute their net tax payable or refund due for 2018, using the appropriate tax rate schedule (not the Tax Tables). If you use tax forms for your computations, you will need at a minimum Form 1040 and Schedule D.
> Beige Corporation has a fiscal year ending April 30. For the year ending April 30, 2018, Beige generated taxable income of $1.2 million. What is Beige Corporation's tax liability for this period?
> Which of the following statements is not correct? a. The basis of an asset that is purchased must be adjusted for depreciation allowable b. The general rule for the basis of property acquired by gift is a carryover of basis from the donor. c. If an asse
> Mallard Corporation was formed in December 2018 and plans to use the cash basis of accounting. Mallard incurred one-half of its organizational expenses in December 2018 and one-half in January 2019. The payment of these expenses also occurred in these tw
> Two small C corporations have invested in the stock of IBM Corporation. Although they own the same number and type of shares, one corporation is able to claim a larger dividends received deduction than the other. Explain why this could be possible.
> The dividends received deduction does not always completely eliminate the effect of taxation of dividend income at the corporate shareholder level Explain this statement.
> Kite, a calendar year C corporation, incurred a net operating loss in 2017 and a net operating loss in 2018. Explain any differences in the treatment of these NOLs.
> Golf Corporation generates a $40,000 net operating l0ss in 2018. Leo Tree’s the Golf CEO expect to offset all of the 2019 taxable income with the NOL. Explain to Leo whether that is possible.
> If a C corporation donates ordinary income property to a qualified charity, the measure of the amount of the deduction is the adjusted basis of the property. Do you agree with this statement? Explain.
> Describe a situation in which a corporation will not be treated as such under state law.
> Scott Henry calls you and asks about a savings incentive match plan for employees (SIMPLE). Prepare a memo for the tax files about your response.
> Joey, who is single, is not covered by another qualified plan and earns $122,000 at his job in 2018. How much can he contribute to a traditional IRA or to a Roth IRA in 2018?
> Should a 31-year-old self-employed single woman establish a traditional deductible IRA, a traditional nondeductible IRA, or a Roth IRA? She has two children, ages 10 and 8.
> Jasmin purchased 100 shares of Pinkstey Corporation (publicly traded company) on January 1 of year 1 for $5,000. The FMV of the shares at the end of year 1 was $6,000. On January 1 of year 4, Pinkstey Corporation declared a 2-for-1 stock split when the f
> Donna is retiring and wants you to explain her alternatives for receiving payments from her qualified retirement plan.
> Which of the following would be considered a tax benefit or advantage of a qualified retirement plan? a. Certain lump-sum distributions may be subject to capital gain treatment. b. Employer contributions are deductible by the employer in the year of cont
> Harvey Pehrson, who is age 71, is going to receive a lump-sum distribution from a qualified plan in 2018. He has asked you to provide him with a Communications description of the alternatives available to him for taxing the lump-sum distribution. Draft a
> Penny plans to retire in 2018 at age 70. Identify any issues that Penny faces with respect to distributions from her qualified retirement plan.
> Indicate whether the following statements apply to a pension plan (P), a profit sharing plan (PS), both (B) or neither (N). a. Forfeited amounts can be used to reduce future contributions by the employer. b. Allocation of forfeitures may discriminate in
> What is the spread with respect to an incentive stock option? How is treated under the tax law?
> What conditions cause the golden parachute arrangement to be penalized?
> 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 $1.7 million per year. Sandy plans to marry his girlfriend before he reports to the Dodger farm tea
> Suppose an individual is 55 years old. How much of an additional catch-up IRA contribution can the person make?
> Osprey Corporation, an accrual basis taxpayer, had taxable income for 2018 and paid $40,000 on its estimated state income tax for the year. During 2018, the company received a $4,000 refund upon filing its 2017 state income tax return The company filed i
> Disregarding any small business exceptions, for the current year, which of the following situations will result in a taxpayer owing a penalty for underpayment of taxes? a. A married filing joint taxpayer had AGI of $160,000 and total tax of $35,000 in th
> In 2018, taxpayer became ineligible to use the cash method of accounting. At the beginning of the year, accounts receivable totaled $240,000, account payable for merchandise totaled $80,000, and the inventory on hand totaled $320,000. What is the amount
> In December 2018, Nell, Inc., an accrual basis taxpayer paid $12,000 for insurance premiums for the 2019 calendar year. How much of the premiums can Nell, Inc., deduct in 2018?
> Fred, a cash basis taxpayer, received a $15,000 bonus from his employer in 2018. The bonus was based on the company's profits for 2017. In 2019, the company discovered that its 2017 profits were computed incorrectly. As a result, Fred received an additio
> Art Funkel started his incorporated medical practice on June 1, 2018. He immediately made an S election for the corporation. Art would like the corporation to adopt a tax year ending May 31 so that a full 12 months of income would be included in the firs
> A law practice was incorporated on January 1, 2018, and expects to earn $25,000 per month before deducting the lawyer's salary. The lawyer owns 100% of the stock. The corporation and the lawyer both use the cash method of accounting. The corporation does
> Blue is a retailer that uses FIFO inventory method. Blue has consistently taken its physical inventory at the end of the on the last day of its tax year December 31. This practice is very unpopular with its employees, who do not 1ike working on New Year'
> Opal, 1nc., is about to make its first attempt to borrow from a local bank. The company uses LIFO for tax purposes, solely to defer taxes, and believes that income computed using the FIFO method would better reflect its income. The company also uses the
> Amber Auto Parts adopted the dollar-va1ue LIFO inventory method. The company has consistently used a retail price index when it should have used a producer's. As a resu1t, its LIFO layers have been consistently undervalued. Why is the company's error exa
> Largo Company is an engineering consu1ting business that uses the accrual method of accounting for its services. Mango Company is a manufacturer of nuts and bo1ts that also uses the accrual method to account for its sales. Each company has a personnel de
> Neal uses the percentage of completion method to report his gross income from long-term contracts that were to begin in 2018. In 2019, he completes a contract for more than the estimate of total costs that was used in the prior year. What are the tax acc
> Which of the following statements regarding the self-employment tax is true? a. Income and expenses from self-employment are reported on Schedule D (Form 1040). b. Self-employment income is subject to both Federal income tax and self employment tax. c. O
> Nathan uses the percentage of completion method to report income from his real estate construction contracts. A contract was begun in 2018 and completed in 2019. In 2018, Nathan reported gross income from the partial completion of the contract. In 2019,
> In December 2018, Carl Corporation sold land it held as an investment. The Corporation received $50,000 in 2018 and a note payable (with adequate interest) for $150,000 to be paid in 2020. Carl Corporation's cost of the land was $80,000. The corporation
> On June 1, 2016, Father sold land to Son for $300,000. Father reported the gain by the installment method, with the gain to be spread over five years. In May 2018, Son received an offer of $400,000 for the land, to be paid over three years. What would be
> Samantha an accrual basis taxpayer, subscribe to a service that updates a database used in her business. In December 2018, Samantha paid the $120,000 subscription for the period January 2018 through December 2019. What is Samantha's deduction for 2018?
> David R. and Ella M. Cole (ages 39 and 弛， respectively) are husband and wife who live at 1820 Elk Avenue, Denver, CO 80202. David is a self-employed consultant specializing in retail management, and Ella is a dental
> Beth R. Jordan lives at 2322 Sky view Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax pract
> Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6789 and 111-11-1112, respectively. Alice's birthday is September 21, 1971, and Bruce's is June 27, 1970. They live at 473 Revere Avenue, L
> 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, 2018, when he was laid off. DataCare Services provided medical insurance for Justin and his family during his employment and agreed to continue this cover
> Paul Barrone is a graduate student at State University. His 10-year-old son, Jamie, lives with him, and Paul is Jamie's sole support. Paul's wife died in 2017, and Paul has not remarried. Paul received $320,000 of life insurance proceeds (related to his
> Which of the following would preclude a taxpayer from deducting student loan interest expense? a. The total amount paid is $1,000 b. The taxpayer is single with AGI of $55,000. c. The taxpayer is married filing jointly with AGI of $120,000 d. The taxpaye
> 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 111-11-1112. Devon does not want $3 to go to the Presidential Election Campaign Fund. Devon's wife, Ariane, passed away in 2014. Devon's son
> John Benson, age 40, is single. His Social Security number is 111-11-1111, and he resides at 150 Highway 51, Tangipahoa, LA 70465. John has a 5-year-old child, Kendra, who lives with her mother, Katy. As a result of his divorce in 2016, John pays alimony
> John Smith, age 31, is single and has no dependents. At the beginning of 2018, John started his own excavation business and named it Earth Movers. John lives at 1045 Center Street, Lindon, UT, and his business is located at 381 State Street, Lindon, UT.
> Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2018, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxp
> John and Mary Jane Diaz are married, filing jointly. Their address is 204 Shoe Lane, Blacksburg, VA 24061. John is age 35, and Mary Jane is age 30. They are expecting their first child in early 2019. John's salary in 2018 was $105,000, from which $20,800
> Roberta Santos, age 41, is single and lives at 120 Sanborne Avenue, Springfield， 1L 60781. Her Social Security number is 123-45-6789. Roberta has been divorced from her former husband, Wayne, for three years. She has a son, Jason, who is 17, and a daught
> Robert A Kliesh, age 417 is single and has no dependents. Robert's Social security number is 111-11-1112. His address is 201 Front Street, Missoul a, MT 59812. He does not contribute to the Presidential Election Campaign fund through the Form 1040. Rober
> Kurstie received a $800 state income tax refund this year. Kurstie deducted $3,000 of state income taxes paid in the prior year as part of her itemized deductions Which of the following statements regarding the taxability of Kurstie's refund is true? a.
> Mason Phillips, age 45, and his wife, Ruth, live at 230 Wood Lane, Salt Lake City, UT 84101. Mason's Social Security number is 111-11-1111. Ruth's Social Security number is 123-45-6789. Mason and Ruth are cash basis taxpayers and had the following items
> Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane is a material partic
> Logan B. Taylor is a widower whose wife, Sara, died on June 6, 2016. He lives at 4680 Dogwood Lane, Springfield， MO 65801. He is employed as a paralegal by a local law firm. During 2018, he had the following receipts: Logan inherited
> Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6789. 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 s
> Tim and Sarah Lawrence are married and file a joint return. Tim's Social Security number is 123-45-6789, and Sarah's Social Security number is 111-11-1111. They reside at 100 Olive Lane, Covington, LA 70434. They have two dependent children, Sean and Deb
> Addison Parker (Social Security number 123-45-6785), single and age 32, lives at 3218 Columbia Drive, Spokane, WA 99210. She is employed as regional sales manager by VITA Corporation, a manufacturer and distributor of vitamins and food supplements. Addis
> Daniel B. Butler and Freida C. Butler, husband and wife, file a joint return. The Butlers live at 625 Oak Street in Corbin, KY 40701. Dan's Social Security number is 111-11-1112, and Freida's is 123-45-6789. Dan was born on January 15, 1967, and Freida w
> Cecil C. Seymour is a 64-year-old widower. He had income for 2018 as follows: The cost of the annuity was $46,800, and Cecil was expected to receive a total of 260 monthly payment of $450. Cecil has received 22 payments through 2018. Cecil's 40-year-ol
> Andre acquired a computer on March 3, 2018, for $2,800. He elects the straight line method for cost recovery Andre does not elect immediate expensing under 179. He does not claim any available additional first -year depreciation. Calculate Andre's cost r
> Bigham Corporation, an accrual basis calendar year taxpayer, sells its services under 12-month and 24-month contracts. The corporation provides services to each customer every month. On July 1, 2018, Bigham sold the following customer contracts: Determ
> Sydney, a single taxpayer, had $80,000 in adjusted gross income in year 2. During the year, she contributed $15,000 to her church. She also had a $17,000 contribution carryover from her year 1 church contributions. What is the maximum amount of charitabl
> Paul and Sonja, who are married, had itemized deductions of $13,200 and $400, respectively during 2018. Paul suggests that they file separately he will itemize his deductions from AGI, and she will claim the standard deduction a. Evaluate Paul's suggesti
> On January 1, 2018, Kunto a cash basis taxpayer, pays $46,228 for a 24-month certificate. The certificate is priced to yield 4% (the effective interest rate) with interest compounded annually. No interest is paid until maturity, when Kunto receives $50,0
> Ava and her husband, Leo, file a joint return and are in the 24% tax bracket in 2018. Ava's employer offers a child and dependent care reimbursement plan that allows up to $5,000 of qualifying expenses to be reimbursed in exchange for a $5,000 reduction
> Compute the 2018 AMT exemption for the following taxpayers. a. Bristol, who is single, reports AMTI of $650,000. b. Marley and Naila are married and file a joint tax return. Their AMTI is $1,528,000.
> Derek, a cash basis, unmarried taxpayer, had $610 of state income tax withheld during 2018. Also in 2018, Derek paid $50 that was due when he filed his 2017 state income tax return and made estimated payments of $100 toward his 2018 state income tax liab
> Samuel and Annamaria are married, file a joint return, and have three qualifying children. In 2018, they earn wages of $34,000 and no other income Determine the amount of their earned income credit for 2018.
> Lara uses the standard mi1eage method for determining auto expenses. During 2018, she used her car as follows: 9,000 miles for business, 2,000 miles for personal use, 2,500 miles for a move to a new job, 1,000 miles for charitable purposes, and 500 mi1es
> On May 9, 2018, Glenna purchases 500 shares of Ignaz Company stock for $7,500. On June 30, 2018, 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 p
> Emily, who is single, sustains an NOL of $7,800 in 2018. The loss is carried forward to 2019. For 2019, Emily's income tax information before taking into account the 2018 NOL is as fo11ows: How much of the NOL carryforward can Emily use in 2019, and wh
> Phillis and Trey are married and file a joint tax return. For 2018, they have $4,800 of nonbusiness capital gains, $2,300 of nonbusiness capital losses, $500 of interest income, and no itemized deductions. The standard deduction for married filing jointl
> Jordan Johnson is single and has adjusted gross income of $50,000 in the current year. Additional information is as follows: What amount may Jordan claim as itemized deductions on her current-year income tax return? a. $12,000 b. $12,900 c. $13,300 d.
> Which of the following statements is true regarding the taxation of Social Security benefits? a. 85% is the maximum amount of taxable Social Security benefits. b. 50% is the maximum amount of taxable Social Security benefits. c. If a taxpayer's only sou
> A low-handicap golfer who uses Titleist brand golf balls observed that his average drive is 230 yards and the standard deviation is 10 yards. Nike has just introduced a new ball, which has been endorsed by Tiger Woods. Nike claims that the ball will trav
> The survey asked respondents to report the number of persons in the household who are related to the respondent and who earned any money from any job or employment (EARNRS). a. Estimate the mean number of earners per household in the United States. b. Wh
> Last year 24 million Canadians made donations to charitable or nonprofit organizations. A random sample of donors was drawn and the amount of each respondent’s donation was recorded. Estimate with 95% confidence the total donated by all Canadian donors.
> In the United States as well as most other countries, the income tax is progressive in that richer people pay not only more in absolute terms but more in percentage as well. Other taxes are regressive. One such tax is the tax on beer, wine, and liquor. T
> It is a long-running joke that Britons have bad and missing teeth. However, Americans’ dental problems may be worse. In a study reported in the British Medical Journal a random sample of Americans was drawn and the number of missing teeth was recorded. E
> Each year the Internal Revenue Service of the United States issues a migration report that shows how many tax filers moved from one state to another. In an effort to answer the question of why so many people are moving from states that usually vote for D
> In the next 10 years, there will be the largest intergenerational wealth transfer in Canadian history, and the amount will likely grow over the next decade. There are 2.5 million Canadians 75 and older and when they pass on their sons, daughters, and gra
> A tax preparation company compiled the taxable income of a random sample of waiters and waitresses. The taxable income was based on their pay stubs from the restaurant where each worked. a. Estimate with 95% confidence the mean taxable income of waiters
> In another study on student loan indebtedness, a random sample of graduates 20–30 years old were asked the amount they paid monthly on their loans. Estimate with 99% confidence the mean monthly payment.
> Approximately 70% of students graduating from a 4-year program have student loan debt. To examine the problem, a random sample of graduates of 4-year colleges was taken and the amount of indebtedness was recorded. There are 43.3 million Americans with st
> Refer to Exercise 12.44. In addition to household debt, the survey asked each household to report the debt-to-income ratio. Estimate with 90% confidence the mean debt-to-income ratio. Data from Exercise 12.44: In 2010, most Canadian cities were experien
> In 2010, most Canadian cities were experiencing a housing boom. As a consequence, home buyers were required to borrow more on their mortgages. To determine the extent of this problem, a survey of Canadian households was undertaken wherein household heads
> During the last decade, many institutions dedicated to improving the quality of products and services in the United States have been formed. Many of these groups annually give awards to companies that produce high-quality goods and services. An investor
> Companies that sell groceries over the Internet are called e-grocers. Customers enter their orders, pay by credit card, and receive delivery by truck. A potential e-grocer analyzed the market and determined that the average order would have to exceed $85
> On a per capita basis, the United States spends far more on health than any other country. To help assess the costs, annual surveys are undertaken. One such survey asks a sample of Americans to report the number of times they visited a health care profes
> Because of the enormity of the viewing audience, firms that advertise during the Super Bowl create special commercials that tend to be quite entertaining. Thirty-second commercials cost several million dollars during the Super Bowl game. A random sample
> To help estimate the size of the disposable razor market, a random sample of men was asked to count the number of shaves they used each razor for. Assume that each razor is used once per day. Estimate with 95% confidence the number of days a pack of 10 r
> Traffic congestion seems to worsen each year. This raises the question, how much does roadway congestion cost the United States annually? The Federal Highway Administration’s Highway Performance Monitoring System conducts an analysis to produce an estima
> Generic drug sales make up about half of all prescriptions sold in the United States. The marketing manager for a pharmaceutical company wanted to acquire more information about the sales of generic prescription drugs. To do so, she randomly sampled 475
> An increasing number of North Americans regularly take vitamins or herbal remedies daily. To gauge this phenomenon, a random sample of Americans was asked to report the number of vitamin and herbal supplements they take daily. Estimate with 95% confidenc
> OfficeMax, a chain that sells a wide variety of office equipment often features sales of products whose prices are reduced because of rebates. Some rebates are so large that the effective price becomes $0. The goal is to lure customers into the store to
> Bankers and economists watch for signs that the economy is slowing. One statistic they monitor is consumer debt, particularly credit card debt. The Federal Reserve conducts surveys of consumer finances every 3 years. The last survey determined that 23.8%
