Arlene is a lawyer. She begins the current year with $12,000 in accounts receivable from customers. During the year, she bills customers $210,000 in fees and receives $180,000 in payments on account. She writes off $8,000 of the receivables as uncollectible, leaving her a year-end receivable balance of $34,000. What is Arlene's gross income if a. She uses the cash basis of accounting? b. She uses the accrual basis of accounting?
> Several years ago, Steve gave his nephew Rashan his coin collection valued at $12,000 with a basis of $3,000. Steve’s intent was to ensure that Rashan has money for college. Rashan is now a senior in high school, and the coins are worth $16,000. Rasha
> The basis of inherited property is generally the fair market value at the date of death. This enables the person who inherits the property to receive a “step-up” in basis. Use the Internet to find discussions related to this “stepped-up” basis.
> In the United States, gifts of property are subject to the gift tax. To avoid double taxation, the income tax excludes the receipt of a gift from taxable income. To ensure that a subsequent sale of gift property does not tax the gift, a basis is assign
> Blair and Britain divorce in the current year. Blair agrees to transfer her interest in their principal residence to Britain. They had purchased the home for $80,000 four years before the divorce. At the time of the divorce, the house is worth $120,00
> Determine the proper year(s) for reporting the income in each of the following cases: a. Lagoon Inc., an accrual basis taxpayer, owns an amusement park. The park is open April through September. In October, Lagoon begins selling discounted season passes
> Are Social Security benefits taxable? Explain.
> Use the RIA Checkpoint database to answer the following questions. Cut and paste the relevant Internal Revenue Code and Treasury Regulation section(s) into your solution and explain how the authority answers the tax issue in question. Give the most spec
> Use the RIA Checkpoint database to answer the following questions. Cut and paste the relevant Internal Revenue Code and Treasury Regulation section(s) into your solution and explain how the authority answers the tax issue in question. Give the most spec
> Monica owns 1,400 shares of Northeast Utilities common stock. In August of this year, when its stock was selling for $10 per share, Northeast announced a 20% stock dividend. In lieu of receiving the dividend shares, stockholders have the option of rece
> On September 14 of last year, Wenona purchases 100 shares of Campbell Corporation common stock at a total cost of $8,000. In December of the current year, Campbell pays a nontaxable stock dividend of 1 share of preferred stock for every 10 shares of com
> Tommi inherits Dierhopf Corporation common stock from her uncle, Norvel. Norvel's adjusted basis in the stock is $200,000, and the fair market value is $380,000. Six months after Norvel's death, the stock's value is $420,000. Nine months after his dea
> For each of the following, explain whether the rate structure is progressive, proportional, or regressive: a. Plymouth County imposes a 5% tax on all retail sales in the county. Taxpayers with incomes less than $12,000 receive a refund of the tax they
> For his 18th birthday, Kevin gave his son, Gabe, 5 gold coins which he paid $500 each for 2 years earlier. On Gabe's birthday, coins were selling for $450. One month after his birthday, Gabe sells 2 of the coins for $525 each and uses the money to buy a
> Carter wants to retire from his florist business, and his long-time employee, Howard, would like to take over the business. Identify the tax issues posed by the facts presented. Determine the possible tax consequences of each issue that you identify.
> The Lester Partnership wants to develop a shopping mall on a former farm. The farmer wanted $260,000 for the land, $80,000 for the farm buildings, and $130,000 for the farmhouse. Although it wanted only the land, Lester agreed to the farmer's terms. It
> Kendrick pays a construction company $20,000 to remodel a house. Determine the possible tax consequences of each issue that you identify.
> Lorene Inc., owns an apartment complex. The terms of Lorene's lease agreement require new tenants to pay the first and last month's rent as well as a cleaning deposit at the inception of the lease. The cleaning deposit is returned when tenants move out
> Charles buys a car for $15,000 that has a fair market value of $10,000. Determine the possible tax consequences of each issue that you identify.
> Emelio and Charita are married taxpayers with 2 dependent children. Emelio starts a computer consulting business in 2017. Charita works as a real estate broker. During 2017, they have the following property transactions: a. Emelio purchases an office
> Assume you are a CPA. A new client, Mark, a local chiropractor, has brought you the financial information for his business at the close of the past year. Previously, Mark prepared his own tax returns and had them reviewed by Blacke & Co. You find the
> What is the general rule for determining the basis of gift property?
> Are commissions paid to acquire securities a deductible expense? If not, are they ever deductible?
> When is the primary valuation date for valuing inherited property? Does the executor of the estate have to do anything to use the primary valuation date?
> Rory earns $70,000 per year as a college professor. Latesia is a marketing executive with a salary of $140,000. With respect to the Social Security tax, what are Rory and Latesia's a. Total taxes? b. Marginal tax rates? c. Average tax rates? d. Effecti
> Larry is interested in acquiring a business owned by Jane. If Jane's business is organized as a corporation, what options are available to Larry in acquiring the business? Explain to Larry the difference in the options.
> Explain the difference between a property's initial basis and its adjusted basis.
> Explain the role an asset's initial basis plays in determining the income to be recognized upon disposal of the asset.
> In January 2017, Conan, a cash basis taxpayer, purchases for $4,000 a Series EE savings bond with a maturity value of $4,800 (a 6% annual yield). At the same time, he also purchases for $5,000 a 3-year bank certificate of deposit with a maturity value o
> How is personal property different from personal use property?
> Explain the difference between tangible property and intangible property
> What is the difference between a property's use and its type?
> What effect does a property's use have on the cost recovery allowable on the property?
> When is the alternate valuation date for valuing inherited property? When elected, are all assets valued on the alternate date? Explain.
> What type(s) of asset acquisitions do not follow the general rule for determining when the holding period of the asset begins?
> What is the general rule for determining when the holding period of an asset begins?
> A taxpayer has $95,000 of taxable income for the current year. Determine the total tax, the marginal tax rate, and the average tax rate if the taxpayer is a a. Single individual b. Married couple c. Corporation
> Janine is planning to make a gift of 50 shares of Acran, Inc., stock to her nephew to help with his college tuition. The stock cost Janine $5,000, and its current value is $4,000. Explain to Janine why the gift might not be the best way to achieve her
> A person who receives property as a gift makes no investment to receive the property. Why is a basis assignment to the gift property necessary even though the donee has no investment in the property?
> Determine how much interest income Later Federal Loan Company, a cash basis taxpayer, must recognize on each of the following loans in 2017: a. A $10,000, 8.5%, 6-month loan made on October 1, 2017. The principal and interest are due on April 1, 2018. b
> Why are gifts of property not income to the person receiving the gift?
> List some costs that are normally expensed that must be capitalized when a taxpayer self-constructs an asset for use in a trade or business.
> What are the tax implications of a taxpayer's self-construction of assets for use in the taxpayer's trade or business?
> What tax problems does a taxpayer encounter when purchasing more than one asset for a single price? Explain.
> Monica is planning to start her own accounting, tax, and financial planning business. Her uncle Gus has given her file cabinets, a desk, computer equipment, and bookcases that were in his den until he sold his house. Gus recently moved to a lakefront c
> Terry purchased stock in Yippee Corporation for $10,000 in May 1983. He bought stock in Zapper Corporation for $20,000 in June 1986. The Yippee Corporation stock is currently worth $90,000, and the Zapper Corporation stock is worth $15,000. Terry is i
> Lauren owns stock for which she paid $70,000 several years ago. She is considering donating the stock to the United Way. The fair market value of the stock is $80,000. Her adjusted gross income is $90,000. Lauren has $5,000 worth of other itemized de
> Beverly and Charlie are married and have one child, Carla, who is 8 years old. With all the changes in the tax law concerning higher education expenses, Beverly and Charlie realize they need to plan for their daughter’s college education. They intend t
> Susan is single with a gross income of $120,000 and a taxable income of $98,000. In calculating taxable income, she properly excluded $10,000 of tax-exempt interest income. Using the tax rate schedules in the chapter, calculate Susan's a. Total tax
> Reg and Rhonda are married and have 2 children, ages 5 and 3. Rhonda has not worked outside the home since the birth of their first child. Now that the children are older, she would like to return to work and has a job offer that would pay her $27,000
> Arthur and Cora are married and have 2 dependent children. They have a gross income of $95,000. Their allowable deductions for adjusted gross income total $4,000, and they have total allowable itemized deductions of $14,250. a. What is Arthur and Cora'
> Hongtao is single and has a gross income of $89,000. His allowable deductions for adjusted gross income are $4,200 and his itemized deductions are $12,900. a. What is Hongtao’s taxable income and tax liability for 2017? b. If Hongtao has $13,500 withhel
> Determine the maximum deduction from AGI in 2017 for each of the following taxpayers: a. Selen is single and has itemized deductions for the year of $6,500. In addition, Selen's mother lives with her, but she does not claim her mother as a dependent. b.
> Determine the maximum deduction from AGI in 2017 for each of the following taxpayers: a. Pedro is single and maintains a household for his father. His father is not a dependent of Pedro’s. Pedro’s itemized deductions are $6,400, of which $800 are for r
> Determine the 2017 filing status in each of the following situations: a. Michaela and Harrison decide to separate on October 12, 2017. Before filing their 2017 tax return on February 18, 2018, Michaela files for and is granted a formal separation agreeme
> Determine the filing status in each of the following situations: a. Angela is single for most of the year. She marries Tim on December 30. b. Earl is divorced during the current year. Their son lives with Earl's former spouse. Earl lives alone. c. Rita
> Determine whether each of the following individuals can be claimed as a dependent in the current year. Assume that any tests not mentioned have been satisfied. a. Victor gives his mother, Maria, $10,000 a year to help pay for her food, rent, and other h
> Determine whether each of the following individuals can be claimed as a dependent in the current year. Assume that any tests not mentioned have been satisfied. a. Nico is 20 and a full-time college student who receives a scholarship for $11,000. Tuitio
> Determine whether each of the following taxpayers must file a return in 2017: a. Felicia is a dependent who has wages of $6,200 and interest income of $225. b. Jason is a dependent who has interest income of $800. c. Jerry is self-employed. His gross bu
> Explain why each of the following payments does or does not meet the IRS definition of a tax: a. Jack is a licensed beautician. He pays the state $45 each year to renew his license to practice as a beautician. b. Polly Corporation pays state income taxe
> Bonnie opens a computer sales and repair service during the current year. Her records show the following for the year: Sales Cash Liability Cash Made Received Incurred Pa
> Determine whether each of the following taxpayers must file a return in 2017: a. Jamie is a dependent who has wages of $4,050. b. Joel is a dependent who has interest income of $1,200 c. Martin is self-employed. His gross business receipts are $24,050,
> Brendan and Theresa are married and have three children in college. Their twin daughters, Christine and Katlyn, are freshmen and attend the same university. Their son, Kevin, is a graduate student. Brendan and Theresa pay $12,000 in tuition and fees (
> Martina is single and has two children in college. Matthew is a sophomore and Christine is in her fifth year of college. Martina pays $3,600 in tuition and fees for Matthew, $700 for textbooks, and $2,000 for his room and board. Christine's tuition an
> Determine the amount of the child-and-dependent care credit to which each of the following taxpayers is entitled: a. Caryle and Philip are married and have a 4-year-old daughter. Their adjusted gross income is $48,000, and they pay $2,100 in qualified c
> Determine the amount of the child and dependent care credit to which each of the following taxpayers is entitled: a. Michael and Gladys are married and have a 7-year-old child. Their adjusted gross income is $44,050, and they pay $3,300 in qualified chi
> Determine the total allowable 2016 earned income credit in each of the following situations: a. Rina is single and earns $6,800 in salary for the year. In addition, she receives $2,200 in unemployment compensation during the year. b. Lachlan is single wi
> Determine the total allowable 2016 earned income credit in each of the following situations: a. Judy is single and earns $6,500 in salary for the year. In addition, she receives $3,500 in unemployment compensation during the year. b. Monica is a single
> Miguel and Katrina have 2 children under age 17, have earned income of $16,000, and pay $1,836 in Social Security tax. Their tax liability is $1,050 before the child credit. a. What amount can they claim as a child credit, and what portion of the cred
> Neville and Julie are married and have two children ages 19 and 14. Their adjusted gross income for the year is $85,000. a. What amount can they claim for the child credit? b. What amount can they claim for the child credit if their children are ages
> Anika and Jespar are married and have two children ages 16 and 14. Their adjusted gross income for the year is $98,000. a. What amount can they claim for the child credit? b. What amount can they claim for the child credit if their adjusted gross inco
> During the last five months of the year, Dwana opens a new internet telecommunications business called Dwan-Com. Dwan-Com bills $50,000 of revenues, but only receives $40,000 cash. Dwan-Com incurs $3,000 of supply expenses and $41,000 of labor costs.
> State whether each of the following payments is a tax. Explain your answers. a. To incorporate his business, Alex pays the state of Texas a $2,000 incorporation fee. b. The city paves a road and assesses each property owner on the road $4,000 for his or
> Calculate the 2017 tax liability and the tax or refund due for each situation: a. Mark is single with no dependents and has a taxable income of $60,000. He has $10,700 withheld from his salary for the year. b. Harry and Linda are married and have taxab
> For each of the dependents in problem 63, calculate the income tax on their taxable income. In each case, assume that their parents' taxable income is $128,000. Data from Problem 63: Determine the taxable income of each of the following dependents in
> Determine the taxable income of each of the following dependents in 2017: a. Louis is 12 and receives $1,250 in interest income. b. Jackson is 16. He earns $2,050 from his newspaper route and receives $700 in dividends on GCM stock. c. Loretta is 18 an
> Jeff and Marion are married with 3 dependents. Their adjusted gross income in 2017 is $338,300. Their itemized deductions total $34,600, including $4,900 in investment interest. a. What is their 2017 taxable income? b. Assume that their adjusted gross i
> Orley is a single individual with no dependents who has an adjusted gross income of $279,000 in 2017. Orley's itemized deductions total $19,400, which includes $1,200 in deductible medical costs and $5,700 in investment interest. a. What is Orley's 2017
> Michael owns a hair salon. During the current year, a tornado severely damages the salon and destroys his personal automobile, which is parked outside. It costs Michael $12,000 to make the necessary repairs to the salon. He had paid $21,500 for the au
> Lee is a college professor with an adjusted gross income of $32,000. Lee has a lot of bad luck this year. First, a tornado blows the roof off of his house, causing $4,900 in damage. His insurance company reimburses him only $1,200 for the roof damage.
> Edna works as a marketing consultant. In her spare time, she enjoys painting. Although she sells some of her work at local craft shows, she either displays most of her paintings at home or gives them to family and friends. During the year, she receive
> Trevor is an English professor at Clayton College. His adjusted gross income for the year is $58,000 including $5,000 he won at the racetrack. Trevor incurs the following during the year: Investment advice……………………………………………………..$ 550 Subscriptions to a
> Chloe and Emma start a new business, Cement Sidewalks and Accessories (CSA), during the current year. CSA is organized as a partnership. Chloe owns 40% of CSA; Emma owns the remaining 60%. Chloe and Emma come to your firm for advice on the tax conseque
> Kweisi incurs the following employment-related expenses during the year: Airfare …………………………………$2,000 Lodging………………………………..1,500 Meals……………………………………1,200 Entertainment ………………………….800 Incidentals………………………………500 His employer maintains an accountable reimb
> In each of the following situations, explain why the taxpayer's action is or is not tax evasion: a. Jamal owns an electrical appliance repair service. When a client pays him in cash, he gives the cash to his daughter, Tasha. Jamal does not report the c
> Miguel is a successful businessman who has been approached by St. Kilda University to make a donation to its capital campaign. He agrees to contribute $75,000, but he is unsure which of the following assets he should contribute: Write a letter to Migu
> Determine the allowable charitable contribution in each of the following situations: a. Karen attends a charity auction where she pays $250 for two tickets to a Broadway show. The tickets have a face value of $150. b. State University holds a raffle to
> Jana gives property worth $54,000 to her alma mater during the current year. She purchased the property several years ago for $32,000. a. What is Jana's maximum deduction if the property is ordinary income property? b. What is Jana's maximum deduction i
> Liang pays $12,000 in interest on debt which was used to purchase portfolio investments. He receives $6,000 in interest from a certificate of deposit, $4,200 in royalties, and $2,000 in interest on municipal bonds during the year. His investment-relate
> Stoycho and Selen are married. Their marginal tax rate is 28%. They have the following investment income for 2016 and 2017: Their adjusted gross income before considering the investment income is $84,050 in 2016 and $73,500 in 2017. Stoycho and Sele
> Marjorie is single and has the following investment income: Interest on savings…………………………………$2,900 Municipal bond interest…………………………….1,500 Dividends………………………………………………..7,600 She pays investment interest expense of $15,000. The interest expense relate
> Mandy is interested in purchasing a new automobile for personal use. The dealer is offering a special 1.9% interest rate on new cars. Last fall, she opened a home equity line of credit with her bank. If she uses the line of credit to purchase the car,
> Astrid originally borrowed $600,000 to acquire her home. When the balance on the original mortgage is $540,000, she purchases a ski chalet by borrowing $500,000, which is secured by a mortgage on the chalet. Astrid pays $45,000 in interest on her home
> What is the difference between an expense and a loss?
> Keith bought his home several years ago for $110,000. He paid $10,000 down on the purchase and borrowed the remaining $100,000. When the home is worth $230,000 and the balance on his mortgage is $40,000, Keith borrows $120,000 using a home equity loan.
> On March 1, Roxanne acquires a house for $160,000. She pays $20,000 down and borrows the remaining $140,000 by obtaining a 15-year mortgage. Roxanne pays $3,500 in closing costs and $2,500 in points in purchasing the house. During the year, she pays $
> For each of the following situations, state whether the taxpayer's action is tax evasion or tax avoidance: a. Tom knows that farm rent received in cash or farm produce is income subject to tax. To avoid showing a cash receipt on his records, he rented 50
> Robin purchases a new home costing $80,000 in 2016. She pays $8,000 down and borrows the remaining $72,000 by securing a mortgage on the home. She also pays $1,750 in closing costs, $1,600 in points to obtain the mortgage, $900 in qualified mortgage ins
> Rocco owns a piece of land as investment property. He acquired the land in 1994 for $18,000. On June 1, 2017, he sells the land for $80,000. As part of the sale, the buyer agrees to pay all of the property taxes ($3,600) for the year. a. What is Rocco’
> Frank and Liz are married. During 2017, Frank has $2,800 in state income taxes withheld from his paycheck, and Liz makes estimated tax payments totaling $2,200. In May 2018, they receive a state tax refund of $465. What is the proper tax treatment of
> Simon is single and a stockbroker for a large investment bank. During 2017, he has withheld from his paycheck $2,250 for state taxes and $400 for city taxes. In June 2018, Simon receives a state tax refund of $145. What is the proper tax treatment of
