Collin pledged a $5,000 gift to his church’s building fund. He has 125 shares of stock that he purchased six years ago for $100 per share. They are currently worth $40 per share. Collin plans to give the stock to the church to satisfy his pledge. What advice do you have for Collin?
> The Warner Corporation has gross income of $560,000. It has business expenses of $325,000, a capital loss of $20,000, and $2,500 of interest income on temporary investments. What is the corporation’s taxable income?
> Determine a corporation’s taxable income if it has $450,000 of gross receipts, $145,000 cost of goods sold, $276,000 of deductible business expenses, $20,000 of gain on the sale of machinery, and $500 of interest income from State of New York bonds.
> Marlee, a single parent of one child for whom she claims the exemption, has $15,000 in itemized deductions and files as head of household for 2017. Determine her taxable income if she has a salary of $71,000 and interest income of $1,500.
> Determine Amy’s taxable income for 2017 if she has $40,000 of salary income, is single, and claims the standard deduction.
> If a taxpayer has $140,000 of employee salary, how much will be withheld for the Social Security and Medicare taxes in 2017?
> If a taxpayer has $40,000 of employee salary in 2017, how much will be withheld for the Social Security and Medicare taxes?
> Dane City’s total assessed valuation for all of the property in its jurisdiction is $4,000,000,000. It needs $20,000,000 in revenue for the services it provides its citizens. Joe owns property that is assessed at $150,000. How much will he pay in propert
> Gaudy Gift Gallery Corporation (owned 100 percent by Barbara) operates a gift shop. Barbara employs her daughter, Jenny, after school and on weekends. Other employees with similar responsibilities are paid $7 per hour while Jenny earns $15 per hour. Jenn
> Melissa is an employee of Largo Corporation. In 2017 Melissa’s salary was $105,000 and she earned a bonus of $24,000. How much in Social Security and Medicare taxes must be paid by Largo Corporation and how much of these taxes can it deduct? How much Soc
> Explain the differences between the rules governing travel within the United States and those governing travel outside the United States.
> Diane owns and manages a successful clothing store in Dallas. She and her brother, Cameron, investigated the possibility of opening another store in Atlanta for Cameron to manage. Diane and Cameron each paid $1,600 in travel costs while looking for sites
> What records should a taxpayer be able to provide the IRS to substantiate a tax deduction?
> What is an investment activity and how are its expenses deducted?
> Explain the advantages and disadvantages of a publicly held company using LIFO for inventory valuation.
> What are the UNICAP rules, and which businesses do they affect?
> Explain the two-step evaluation process of FIN 48.
> Which corporations are required to file Schedule M-3? What is the purpose of this schedule?
> Differentiate permanent differences and temporary differences. Provide examples of each.
> What is a statute of limitations? What is its significance to taxpayers?
> What factors differentiate a hobby from an active business?
> What are the requirements for a self-employed person to claim a deduction for an office in the home? What are the additional requirements for an employee to take a home office deduction?
> What are the passive activity loss rules and how do they affect the deductibility of losses from rental property?
> How are deductions for expenses of rental property limited if the taxpayer also uses the property as a vacation home?
> What are the characteristics of a qualified trade or business?
> When would a taxpayer claim the standard deduction rather than itemizing deductions?
> Differentiate between an abandoned spouse and a surviving spouse.
> What is the purpose of the abandoned spouse provision?
> What are the requirements to file as head of household?
> What are the filing statuses available to unmarried taxpayers? Which statuses are available only to married taxpayers?
> Are there any restrictions on business use of the cash method of accounting? Explain.
> Describe the two types of Medicare surtaxes and explain how they are computed.
> What is the kiddie tax and when does it apply?
> Explain how a taxpayer determines if he or she is required to file a tax return?
> If an individual has a negative taxable income does that mean that he or she has an NOL? Explain.
> Explain why Congress allows taxpayers to deduct the penalty for a premature withdrawal from a certificate of deposit?
> What is the purpose of the alternative minimum tax for an individual?
> Compare similarities and differences of the American opportunity tax credit and the lifetime learning credit.
> Explain the difference between a refundable and a nonrefundable credit? Provide examples of each.
> Explain the difference between a tax credit and a tax deduction?
> Explain how exemptions are phased out. Can a taxpayer lose the benefit of all of his or her personal and dependency exemptions?
> Your client, Teresa, claimed a dependency exemption for her elderly father. Upon audit, the IRS agent disallowed the dependency exemption. Teresa received a 30-day letter notifying her of the proposed additional tax liability of $1,050. Teresa is very up
> Explain the gross income test for the dependency deduction.
> What is the purpose of a multiple support agreement?
> Compare the requirements for claiming a dependency exemption for a qualifying child and a qualifying relative.
> Which relatives qualify for purposes of claiming a dependency exemption? Which relatives do not qualify?
> Distinguish the personal exemption from the dependency exemption.
> What is the purpose of adjusted gross income?
> Explain how itemized deductions are phased out. Can a taxpayer lose the benefit of all of his or her itemized deductions?
> Describe the types of expenses allowed as miscellaneous itemized deductions. What limitation is imposed on these expenses?
> What are “points” paid on a home mortgage and when are they deductible?
> What are the three courts in which a taxpayer initiates tax litigation to settle a dispute with the IRS? To which courts can adverse decisions from these courts be appealed?
> What is qualified residence interest?
> Lynn paid $12,000 of investment interest expense in a year in which she has the following investment income: $3,000 taxable dividend income, $4,000 taxable interest income, $1,000 from a short-term capital gain, and $4,000 from a long-term capital gain.
> Why is investment interest expense limited to net investment income?
> Which types of taxes qualify as itemized deductions?
> Contrast ceiling and floor limitations for itemized deductions. Provide an example of each.
> Briefly explain two deductions that an individual has for adjusted gross income.
> What are the advantages of a qualified retirement plan?
> High-Tec Corporation offers a stock option plan as an incentive to its employees. Few employees participate in the plan because they do not have the cash necessary to exercise the options. What alternative type of incentive plan can High-Tec offer these
> What is the difference between an NQSO and an ISO?
> A taxpayer moves from Atlanta to Chicago on December 3, year 1, to accept a new job. She wants to deduct her $3,000 in unreimbursed direct moving expenses, but she will not meet the time test by the due date for her year 1 tax return, what are her option
> Provide three reasons why generally accepted accounting principles are not allowed for tax purposes.
> What is the difference between a qualified employee discount and a bargain purchase by an employee?
> Anne is an employee of Marvel Corporation that has an educational assistance plan that pays for up to $5,000 in tuition for any work-related courses. Marvel Corporation also provides free on-premises parking (valued at $50 per month) and free child care
> Explain the difference between a tax protection plan and a tax equalization plan. Which one is usually less costly to the employer?
> James and Dean plan to start a new business but have not decided whether to organize as a partnership, an S corporation, or a C corporation. They are interested in taking advantage of any tax-free fringe benefits that may be available to them. Discuss th
> Identify the type of IRA (Roth or traditional) that would be best for a taxpayer in each of the following circumstances: a. Sharon believes she will be in a higher tax bracket when she withdraws the money in retirement. b. Ken believes he will be in th
> Your friend Mark suggested that you should open an Individual Retirement Account. He said that an IRA is a great way to save because you do not have to pay tax on the income from the investment and you get a tax deduction for your contribution. Is Mark c
> Ricardo is a professional football player. In negotiating his contract for the upcoming season, Ricardo is given two options. He can receive: (1) 12 monthly checks of $325,000 with no deferred payments or (2) $250,000 monthly with the $900,000 balance
> Discuss why corporations frequently offer both qualified and nonqualified retirement plans to their employees.
> Explain why accrual-method taxpayers treat prepaid income differently for GAAP and tax purposes.
> What is the purpose of the foreign tax credit?
> What alternatives are available when a taxpayer receives a 90-day letter?
> AAA Airlines, an accrual-basis taxpayer, frequently issues travel vouchers to customers who voluntarily surrender their reserved seats on overbooked flights. The vouchers are for a specific dollar amount that customers can use to reduce the purchase pric
> What type of penalty or incentive provision do you think would significantly improve compliance with the Internal Revenue Code? Do you think such a provision could be passed?
> What subheadings appear under the “Statistics of Income”?
> How do you make a comment or ask a question about the tax statistics provided by the IRS?
> Go to www.ustaxcourt.gov (the Tax Court site). What is the fee to file a small tax case?
> Go to www.legalbitstream.com (or www.irs.gov/irb/and start with IRB 2011–37) and locate Notice 2011–64. Read the appendix of Notice 2011–64 and determine if dividend income received from foreign corporations located in the following four jurisdictions is
> U.S. citizens residing in certain countries are exempt from U.S. tax on their Social Security benefits. Go to the IRS Web site (www.irs.gov) and locate Publication 915: Social Security and Equivalent Railroad Retirement Benefits to determine which countr
> Go to www.irs.gov (the IRS Web site) and locate Publication 971: Innocent Spouse Relief. What form must be filed to request innocent spouse relief?
> Go to the IRS Web site (www.irs.gov) and locate the publication on travel, entertainment, and gifts. Julie plans to attend a business convention in Costa Rica. Her friend told her that she cannot deduct expenses for attending a convention outside of Nort
> Ace Builders begins construction on a building in January. Its contract specifies that the building must be completed by July 1 or it must pay a penalty of $100 for each day the building is delayed. Ace Builders completes the building on July 31 and pays
> Compare how the United States taxes a U.S. citizen and a nonresident alien.
> Last year, the IRS disallowed a deduction on a client’s tax return when it was audited. The client wants you to deduct a similar item on this year’s tax return.
> Jim was reviewing several of a client’s prior tax returns in preparation for completing the current year’s return. Jim discovered a serious error on the return filed almost three years earlier that would subject the client to $40,000 in additional taxes.
> Clifford owns 75 percent of AFK, a C corporation. He spends little time in the business, but takes a salary of $750,000.
> DEE is an S corporation with 100 shareholders. John, one of these shareholders, gives half of his shares of stock to his new wife as a wedding gift.
> John and Mary filed for divorce in November of the current year. The divorce will not become final until May of the following year.
> In preparing the client’s tax return, Verne must use a number of estimates supplied by his client because the client’s computer records were corrupted and the client has not been able to retrieve the correct numbers in time to file the return by its due
> Bert has developed a position for a client on a potential tax transaction that he believes has approximately a 25 percent chance of surviving in a judicial proceeding.
> Georgia researched a major tax plan for a client. She discovered a case in a circuit that is not in the client’s circuit that is unfavorable to the client. She has also found a revenue ruling that appears to have facts similar to her client’s that sancti
> On his 2012 tax return, Stewart inadvertently overstates deductions in excess of 25 percent of the adjusted gross income on his return. In 2017, the IRS audits Stewart and the agent proposes a deficiency of $1,000.
> Jennifer did not file a tax return for 2006 because she honestly believed that no tax was due. In 2017, the IRS audits Jennifer and the agent proposes a deficiency of $500.
> What is a buy–sell agreement, and how does life insurance facilitate it?
> Two months before the due date for his tax return, Simon provides his accountant with all the information necessary for filing his return. The accountant was overworked during tax season and filed the return after its due date.
> Your client, Barry Backache, suffers from a pain in the neck caused by arthritis. He installed a hot tub in his backyard. His doctor advised him that daily periods in the hot tub would relieve his pain in the neck.
> Ken is single and earns a salary of $60,000 per year. He also receives $4,000 a year in taxable interest and dividend income. Ken would like to contribute the maximum allowable to his company’s qualified pension plan.
> Sarah is single and earns $60,000 in salary. She wants to invest $2,500 per year in an IRA but is not sure which type she qualifies for and whether this would be a better investment than putting her money in preferred stock paying a 6 percent annual divi
> In February, Margaret’s employer asked her to move from the Miami office to the Atlanta office. In March, Margaret spent $900 on a house-hunting trip to Atlanta. She located a home and moved into it in April. Margaret’s employer reimbursed her for all di
