Question: Assume the same facts as in Problem

> Several years ago Nicolas, a timber dealer purchased a tract of land with a substantial stand of trees on it. The land cost $8,000, and the timber cost $250,000. On the first day of 2018, the timber was appraised at $325,000. In August 2018, Nicolas cut

> Elizabeth received the following sources of income in the current year: What amount must Elizabeth include in gross income on her Federa1 income tax return? a. $650 b. $1,150 c. $1,350 d. $1,700 U.S. Treasury bond certificates interest Interest on

> In general, the 45-day identification period and the 180-day exchange period for like-kind exchanges cannot be extended. Does this rule change if the like-kind property or the taxpayer involved in the exchange is located in a Presidentially declared disa

> Taylor 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. Taylor renovated the motel three years ago. Taylor's motel is condemned by the city, which is going to use 2 of the

> Charlene and Alton Dutro had lived in their home for two and one-half years when they decided to enlarge and remodel the house. However, their architect advised them that more stringent building and permit restrictions had been imposed since the house wa

> The specific identification method is important when one invests in mutual funds. When taxpayers sell part of their holdings, the basis of the surrendered shares can be difficult to compute. Go to the site of an investment adviser or a mutual fund to fin

> Many see the "step-up in basis at death" rule of 1014 as an expensive tax loophole enjoyed by the wealthy. Find the latest estimates of the revenue loss to the Treasury that is attributable to this rule. a. How does Canada's tax law determine the basis o

> What are the most significant credits claimed by individual taxpayers? How do the credits claimed differ by income class? To answer these questions, go to the IRS Tax Statistics page (www.irs.govjstatistics) and download the Microsoft Excel spreadsheet t

> The IRS provides a web-based tool to help taxpayers determine whether they are eligible for the earned income tax credit. Locate this tool at the IRS website. Then apply the facts related to a hypothetical taxpayer, and determine whether the earned incom

> Find an article or a website that discusses why some policy makers wanted to repeal both the corporate and individual AMT provisions from the Internal Revenue Code. Discuss the justification for elimination as well as any concerns policymakers had about

> On his 2017 Federal income tax return, Walter deducted state income taxes of $8,000 for amount withheld and estimated tax payments made in 2017 When he filed his 2017 state income tax return in April 2018, he discovered that he had overpaid his state inc

> Jiang receives tax-exempt interest of $33,000 on private activity bonds. She properly excludes the $33,000 from her gross income for regular income tax purposes [under ~ 103(a) and (b)(l)]. Jiang asks your advice on the treatment of the interest for AMT

> Shen purchased corporate stock for $20,000 on April 10, 2016. On July 14, 2018, when the stock was worth $12,000, Shen died and his son, Mijo, inherited the stock. Mijo sold the stock for $14,200 on November 12, 2018. What is the amount and character of

> Carol is a successful physician who owns 100% of her incorporated medical practice. She and her spouse, Dick, are considering the purchase of a commercial office building located near the local community hospital. If they purchase the building, Carol wil

> Marcia, a shareholder in a corporation with stores in five states, donated stock with a basis of $10,000 to a qualified charitable organization in 2017 Although the stock of the corporation was not traded on a public stock exchange, many shares had been

> Download IRS Form 8919 (Uncollected Social Security and Medicare Tax on Wages) from the IRS website. According to the instructions, who should file this form?

> Analyze S. 1549 (115th Congress) introduced by Senator John Thune to provide a new approach to provide freelance ("gig") workers independent contractor status. Also see his press release of July 13, 2017, at: www.thune.senate.gov/public/index.cfm/ 2017 /

> Download IRS Form 1099- K and its instructions from the IRS website. What is the purpose of the form, and when is it used? Go to the Square, Inc. website (www.squareup.com) and search for information about this form. Summarize what you discover in an e-m

> Prepare a blog post for the "Online Tutor Match Company" to explain to its freelancers the tax implications of their work. Topics should include (1) what records to keep (both for income and expenses), (2) unique situations facing freelancers (e.g., home

> Your client, a large construction firm organized as a C corporation, allows certain employees (including the president of the corporation) to use in company-owned airplane for nonbusiness flights. The employees include the value of the flights in their i

> Locate a financial calculator program that assesses the wisdom of buying versus leasing a new car. Install the program on your computer, and become familiar with it. Use the program to work through Problem 50 in this chapter Data from Problem 50: Denni

> Your client, Dave's Sport Shop, sells sports equipment and clothing in three retail outlets in New York City. During 2018, the CFO decided that keeping track of inventory using a combination of QuickBooks and spreadsheet was not an efficient way to manag

> The $1 million maximum compensation deduction does not seem to have deterred large corporations from remunerating their executives at very high levels. What techniques are being used to work around the millionaires' provision? Are executives taking pay c

> On August 31, 2017, Harvey and Margaret 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 a

> Sarah was contemplating making a contribution to her traditional IRA in 2017. She determined that she would contribute $5,000 in December 2017, but forgot about making the contribution until she was preparing her 2017 tax return in February 2018. Use the

> Mona viewed herself as a creative individual who had chosen to go to law school for economic reasons. Mona's undergraduate majors were creative writing and American Indian studies. Mona was very successful as an attorney and eventually was admitted to pa

> Rex and Agnes Harrell purchased a beach house at Duck, North Carolina, in early 2018. Although they intended to use the beach house occasionally for recreational purposes, to help pay the mortgage payment, property taxes, and maintenance costs, they also

> Employers often use the internet as a means of attracting applications from potential employees. Locate an internet site offering employment opportunities, ideally one provided by a well-known corporation. How does the employer promote its fringe benefit

> Your client works for a defense contractor and was assigned to work on a military base in Australia. As a condition of his employment, he was required to live in housing that was provided to military personnel. The housing provided was a condominium loca

> Your client, John Butler, is an avid Houston Astros fan. Last March at the Astros' home opener, as a result of a random drawing of those in attendance at the game, John won 300 Shipley Do-Nut coupons. Each coupon entitled him to a cup of coffee and a fre

> The employees of the city of Greenville must make mandatory contributions to the city's postretirement health benefit plan. The employees' contributions are placed in a trust and are used exclusively for the employees' benefits. The employees believe tha

> Go to the web page of a consulting firm that offers counseling services to individuals as they negotiate the terms of a divorce. What specific tax related services do these firms offer? Suggest a new tax-related service the consulting firm could offer.

> Lottery winnings are taxable for Federal income tax purposes What many lottery hopefuls forget to factor into their tax considerations are that lottery winnings are also taxable in many states. Search the internet to see whether you can determine whether

> Your client is a new retailer who often issues store gift (debit) cards to customers in lieu of a cash refund. You recall that the IRS issued a Revenue Procedure that provided that the prepaid income rules in Revenue Procedure 2004- 34 could be applied t

> Arnold, who is sing1e, sold his principa1 residence on April 10, 2018, and excluded the realized gain under 121 (exclusion on the sale of a principal residence). On April 12, 2018, he purchased another principal residence, which he sells on January 12, 2

> On July 1, 2014, Rex purchases a new automobile for $40,000. He uses the car 80% for business and drives the car as follows: 8,000 miles in 2014, 19,000 miles in 2015, 20,000 miles in 2016, and 15,000 miles in 2017. Determine Rex's basis in the business

> Determine the gross income of the beneficiaries in the following cases: a. Justin's employer was downsizing and offered employees an amount equal to one year's salary if the employee would voluntarily retire. b. Trina contracted a disease and was unable

> Ed, an employee of the Natural Color Company, suffered from a rare disease that was very expensive to treat. The local media ran several stories about Ed's problems, and the family created a website that generated more than $10,000 in gifts from individu

> Jackson uses his automobile 90% for business and during 2018 drove a total of 14,000 business miles. Information regarding his car expenses is listed below What is Jackson's deduction in 2018 for the use of his car if he uses: a. The actual cost method

> For calendar year 2018, Jean was a self-employed consultant with no employees. She had $80,000 of net profit from consulting and paid $7,000 in medical insurance premiums on her policy covering 2018. How much of these premiums may Jean deduct as a deduct

> Pebble Securities is a corporation that buys and sells financial assets. It purchases notes receivable from manufacturers that need cash immediately and cannot wait to collect the notes. Pebble pays about 88% of the face value of the receivables and then

> Del Mar Corporation (EIN 33-1234567) was formed and began operations on January 1, 2018. The corporate address is 463 E. Pershing Blvd. Cheyenne, WY 82001. Del Mar uses the accrual basis of accounting. The corporation's trial balance is presented below:

> As of January 1, 2017, Norman has a basis of $85,000 in his 30% capital interest in the Plata Partnership. He and the partnership use the calendar year for tax purposes. The partnership incurs an operating loss of $440,000 for 2017 and a profit of $285,0

> Aiden has a 35% capital interest in the Oro Partnership and is entitled to a yearly guaranteed payment of $40，0∞00. As of January 1, 2018, Aiden's basis in the partnership interest is $87,000. During tax year 2018, Or

> The Pheasant Partnership had the following transactions in the current year: a. What is Pheasant's ordinary income (or loss)? b. What are Pheasant's separately stated items? Operating income Cost of goods sold Capital gains- Long-term Short-term $7

> Gary, who is sing1e, sells his principal residence (owned and occupied by him for seven years) in November 2018 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

> Guy, Alma, and Kara form the Ivory Partnership. In exchange for a 30% capital interest, Guy transfers property (basis of $200,000; fair market value of $400,000) subject to a liability of $100,000. The liability is assumed by the partnership. Alma transf

> Ida owns 30% of the stock in Mockingbird, a ca1endar year S corporation. Her basis in the stock as of January 1, 2018, is $130,000. Mockingbird has an operating loss of $500,000 in 2018 and an operating profit of $600,000 in 2019. Ida withdraws $70,000 i

> Jim Olsen owns all of the stock in Drake, a ca1endar year S corporation. For ca1endar year 2018, Drake anticipates an operating loss of $160,000 and cou1d, if deemed worthwhile, sell a stock investment that wou1d generate a $10,000 long-term capital loss

> During the current year, Thrasher (a calendar year, accrual basis S corporation) has the following transactions: a. Determine Thrasher Corporation's separately stated items for the current year. b. Determine Thrasher's ordinary business income for the

> The stock of Emerald Corporation is held equally by Barney and Faye The shareholders would like to receive, as a dividend, value of $800,000 each. The corporation has the following asset that it can spare: Both assets are held as investments. Emerald C

> Harold, Marcia, and Richard are equal shareholders in Pelican Corporation, a calendar year C corporation. During the current year, Pelican makes a $150,000 distribution to its three shareho1ders. Of the $50,000 that each shareholder receives, the tax res

> Lily is sole shareholder of Crimson Corporation (a C corporation). At a time when Crimson has a deficit in accumulated E & P of $90,000 and current E & P of $65,000, it distributes a cash dividend of $85,000. If Lily's basis in her stock is $15,000, what

> Elton, Neil, Courtney, and Zelma from Ecro Corporation with the following investments: In addition to its stock, Ecru distributes cash as follows: $10,000 to Neil, $20,000 to Courtney, and $100,000 to Zelma. Assume that each share of Ecru stock is wort

> Doris, Walt, and Pat form Swan Corporation with the following investments: In addition to the 500 shares of stock, Pat receives $100,000 in cash from Swan Corporation. Assume that each share of Swan stock is worth $1,000 a. How much loss does Wa1t real

> On February 24, 2018, Allison’s building, with an adjusted basis of $1.3 million (and used in her trade or business), is destroyed by fire. On March 31, 2018, she receives an insurance reimbursement of $1.65 million for the loss. Allison invests $1.55 mi

> Puce, a calendar year C corporation, had the following Schedule M-1 transactions on its Form 1120 for the current year: What is Puce Corporation's net income per books for the current year? Taxable income $100,000 Federal income tax 21,000 Excess c

> In each of the following independent situations determine the C corporation’s Federal income tax liability for calendar year 2018. Corporation Taxable Income $ 45,000* 68,000** Sparrow Warbler Scaup 80,000

> Puffin Corporation was formed on July 1 of the current tax year and incurred qualifying organizational expenditures. It uses a calendar year and wants to accelerate any deductions that are available. Based on this assumption, what is Puffin Corporation's

> Determine the dividends received deduction for each of the following independent situations. Assume that the percentage of stock owned in the corporation paying the dividend is 30% for Green Corporation and less than 20% for Red Corporation and Blue Corp

> Auburn Company manufactures and sells furnishing for hospitals (e.g., special needs bathroom fixtures). In the current year, it donates some of its inventory to a newly constructed hospice. The hospice is adjacent to a cancer treatment center and is inte

> During 2018, Siskin Corporation (a Corporation) had the following transactions: In June 2018, Siskin made a contribution to a qualified charitable organization of $10,500 in cash (not included in any of the items listed above). a. How much, if any, of

> On December 6, 2018, Kestrel Company (a calendar year taxpayer) authorizes a cash donation of $50,000 to the Memphis Public Library. The pledge is carried out as follows: $15,000 on December 12, 2018; $25,000 on February 13, 2019; and $10,000 on May 10,

> Robin had the following transactions in 2018: Robin also had a net long-term capital loss in 2017 of $2,000, which it could not use, and ordinary income of $13,000. What are the tax consequences in 2018 if: a. Robin is an individual. b. Robin is a C co

> Taupe, a calendar year taxpayer, has a long term capital loss of $4,000 and a short-term capital loss of $4,000. How are these items handled for tax purposes if Taupe is: a. An individual? b. A C corporation?

> Citron, a calendar year taxpayer, began business in January 2017. It had a long-term capital gain of $5,000 in 2017 and a long-term capital loss of $10,000 in 2018. For both years, Citron had an operating profit in excess of $100,000 How are these capita

> On June 5, 2018, 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 postpo

> Garnet has the following capital asset transactions during 2018: Further, Garnet has an excess capital loss carryforward of $6,000 from 2017. a. What are the tax consequences of these transactions if the 6,000 loss is long term and Garnet is an individ

> Using the legend provided below, classify each statement under 2018 tax law a. A foreign tax credit is available. b. The deduction of charitable contributions is subject to percentage limitation(s). c. Excess charitable contributions can be carried for

> 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 Traditional

> Lou’s employer provides a qualified cafeteria plan under which he can choose cash of $9,000 or health and accident insurance premiums worth approximately $7,000. Assuming that Lou is in the 35% tax bracket, advise him of his tax alternatives.

> Sara Reid, age 35, is the owner of a small business. She is trying to decide whether to go with a 401(k) plan or a simplified employee pension plan. She is not interested in a SIMPLE 401(k) plan. Her salary will be approximately $45,000, and she will hav

> On November 19, 2016, Rex is granted a nonqualified stock option to purchase 100 shares of Tan Company. On that date, the stock is selling for $8 per share, and the option price is $9 per share. Rex exercises the option on August 21, 2017, when the stock

> Rosa exercises ISOs for 100 shares of Copper Corporation common stock at the option price of $100 per share on May 21, 2018, when the fair market value is $120 per share. She sells the 100 shares of common stock three and one half years later for $140. a

> On July 2, 2015, Black Corporation sold 1,000 of its common shares (worth $14 per share) to Earl, an employee, for $5 per share. The sale was subject to Earl's agreement to resell the shares to the corporation for $5 per share if his employment is termin

> On February 20, 2013, Tom (an executive of Hawk Corporation; a calendar year corporation) purchased 100 shares of Hawk stock (selling at $20 a share) for $10. A condition of the transaction was that Tom must resell the stock to Hawk at cost if he volunta

> Grace is an officer of a local bank that merges with a national bank, resulting in a change of ownership. She loses her job as a result of the merger, but she receives a cash settlement of $590,000 from her employer under her golden parachute. Her averag

> Mandy and Timothy exchange real property in a like-kind exchange. Mandy receives real property with a fair market value of $78,000 and transfers real property worth $70,000 (adjusted basis of $28,000) and cash of $8,000. What is Mandy's realized and reco

> Dan, a professional basketball player, is to receive a bonus of $2 million for signing an employment contract. An NQDC plan is established to postpone the income beyond Dan's peak income years. In 2018, his employer transfers the bonus to an escrow agent

> Samuel, age 32, loses his job in a corporate downsizing. As a result of his termination, he receives a distribution of the balance in his 401(k) account of $20,000 ($25,000 一 $5,000 Federal income tax withholding) on May 1, 2018. Samuel's marginal tax ra

> Gene, age 34, and Beth, age 32, have been married for nine years. Gene, 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. Their AGI is $37,000. a. What is the maximum amount Gene can

> Louis is a participant in a SIMPLE IRA of his employer Brown, Inc. During 2018， 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 2018?

> Dana, age 54, has a traditional deductible IRA with an account balance of $107,600, of which $77,300 represents contributions and $30,300 represents earnings. In 2018, she converts her traditional IRA into a Roth IRA. What amount must Dana include in her

> Jimmy establishes a Roth IRA at age 47 and contributes a total of $89,600 over 18 years. The account is now worth $112,000. How much of these funds may Jimmy withdraw tax-free?

> Answer the following independent questions with respect to traditional IRA contributions for 2018: a. Juan, age 41, earns a salary of $28,000 and is not an active participant in any other qualified plan. His wife, Agnes, has no earned income. What is the

> Answer the following independent questions with respect to a deductible IRA and S 401(k) contributions for 2018: a. Govind, age 31, earns a salary of $26,000 and is not an active participant in any other qualified plan. His wife has $600 of compensation

> Shyam is a participant in a SIMPLES 401(k) plan. He elects to contribute 4% of his $40,000 compensation to the account, while his employer contributes 3%. What amount will not vest immediately, if any?

> Amber's employer, Lavender, Inc., has a S 401(k) plan that permits salary deferral elections by its employees. Amber's salary is $99,000, her marginal tax rate is 24%, and she is 42 years old. a. What is the maximum amount Amber can elect for salary defe

> In June 2018, 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 va1ue of $17,500). Both vehicles are for business use. Sue believes that her basis for the tr

> In 2018, Magenta Corporation paid compensation of $45,300 to the participants in a profit sharing plan. During 2018, Magenta Corporation contributed $13,200 to the plan. a. Calculate Magenta's deductible amount for 2018. b Calculate the amount of any con

> Determine the maximum annual benefits payable to a participant from a defined benefit plan in the following independent situations: a. Frank, age 66, has been a participant for 17 years, and his highest average compensation for 3 years is $127,300. b. El

> Heather has been an active participant in a defined benefit plan for 19 years. During her last 6 years of employment, Heather earned $42,000, $48,000, $56,000, $80,000, $89,000, and $108,000, respectively (representing her highest-income years). a. Calcu

> Sue has worked for Yellow Corporation for four and one half years, but she has an offer to move to Red Corporation for a moderate increase in salary. Her average salary for Yellow has been $210,000, and she receives a 2% benefit for each year of service

> Concept, Inc., has a profit sharing plan with some participants earning $265,000 or more. The company can maximize its participants' annual additions by using what percentage of profit sharing contribution?

> Mauve, Inc., uses a two- to six-year graded vesting approach in its retirement plan. Calculate the non forfeitable percentage for each of the following participants based upon the years of service completed: Participant Years of Service Caleb 3 Dani

> Sparrow, Inc., uses a three- to seven-year graded vesting approach in its retirement plan. Calcu1ate the non forfeitable percentage for each of the following participants based upon the years of service completed: Participant Years of Service Mary 2

> Ben is a 4% owner of a title company. In the following situations, is he a highly compensated employee? Why or why not? a. Ben receives a total salary of $110,000 and is a member of the top-paid group in the company. b. Ben receives a total salary of $19

> Blonde Corporation has a calendar year retirement plan covering its participants. William, age 21, is hired on January 31, 2017, and he meets the service requirement over the next 12 months (completes at least 1,000 hours by January 31, 2018). a. If the

> Ven Company is a retailer. 1n 2018, its before-tax net income for financial reporting purposes was $600,000. This included a $150,000 gain from the sale of land held for several years as a possible plant site. The cost of the land was $100,000, the contr

> Juan owned 200 shares of Circle Corporation stock (adjusted basis of $30,000). He sold 100 shares for $12,000. Twenty days later he purchased 100 shares of the same stock for $8,500. What is Juan's realized and recognized loss? What is his basis in the n