Question: Contrast income taxation of individua1s and C

> In 2018, Kelsey sustained a loss on the theft of a painting. She had paid $20,000 for the painting, but it was worth $40,000 at the time of the theft. Evaluate the tax consequences of treating the painting as investment property or as personal use proper

> Discuss the circumstances under which the cost of repairs to the damaged property can be used to measure the amount of a casualty loss.

> Discuss at what point in time a theft loss generally is recognized.

> Dave uses the second floor of a building for his residence and the first floor for his business. The uninsured building is destroyed by fire. Are the tax consequences the same for each part of the building? Explain.

> In March 2018, Jim asks you to prepare his Federal income tax returns for tax years 2015, 2016, and 2017. 1n discussing this matter with him, you discover that he also has not filed for tax year 2014. When you mention this fact, Jim tells you that the st

> For tax year 2015, the IRS assesses a deficiency against David for 5000,000. Disregarding the interest component, what is David's penalty if the deficiency is attributable to: a. Negligence? b. Fraud?

> In a determination of whether a business expense is deductible the reasonableness requirement applies only to salaries. Evaluate this statement.

> Nanette is a first-grade teacher. Potential deductions are charitable contribution of $800, personal property taxes on her car of $240, and various supplies purchased for use in her classroom of $225 (none reimbursed by her school). How will these items

> Brianna, a calendar year taxpayer, files her income tax return for 2017 on February 3, 2018. Although she makes repeated inquiries, she does not receive her refund from the IRS until May 28, 2018. Is Brianna entitled to interest on the refund? Explain.

> Wally, Inc., sold the following three personal property assets in year 6: What is Wally's net Section 1231 gain or loss in year 6? a. $500 loss b. $700 loss c. $1,200 loss d. $1,200 gain Asset Purchase Date Cost Accumulated Depreciation Selling Pri

> Regarding the statute of limitations on additional assessments of tax by the IRS, determine the applicable period in each of the following situations. Assume a calendar year individual with no fraud or substantial omission involved. a. The income tax ret

> In 2018, Larry and Susan each invest $10,000 in separate investment activities They each incur deductible expenses of $800 associated with their respective investments. Explain why Larry's expenses might not be deductible and Susan's expenses might be ap

> Aldo has just been audited by them He does not agree with the agent's findings but believes that he has only two choices: pay the proposed deficiency or resort to the courts. Do you agree with Aldo's conclusion? Why or why not?

> Classify each of the following expenditures paid in 2018 as a deduction for AGI, a deduction from AGI, or not deductible: a. Roberto gives cash to his father as a birthday gift. b. Sandra gives cash to her church. c. Albert pays Dr. Dafashy for medical s

> What is the primary purpose of effective tax planning? Explain

> Lavinia incurs various legal fees in obtaining a divorce. Which types of expenses associated with the divorce are deductible by Lavinia, and which are not?

> Blaze operates a restaurant in Cleveland. He travels to Columbus to investigate acquiring a business. He incurs expenses as follows: $1,500 for travel, $2,000 for legal advice, and $3,500 for a market analysis. Based on the different tax consequences lis

> Angelo, an agent for an airline manufacturer, is negotiating a sale with a representative of the US government and with a representative of a developing country. Angelo's company has sufficient capacity to handle only one of the orders. Both orders will

> Aubry, a cash basis and calendar year taxpayer, decides to reduce his taxable income for 2018 by buying $65,000 worth of supplies for his business on December 27, 2018. The supplies will be used up in 2019. a. Can Aubry deduct the expenditure for 2018? E

> What is the actually “paid requirement” for the deduction of an expense by a cash basis taxpayer? Does actual payment ensure a deduction? Explain.

> Jerry uses a building for business purposes. The building was purchased on April 1, year 3, for $124,000. It was sold on October 3, year 6, for $200,000. Accumulated depreciation as of the date of sale was $14,000, $4,000 of which was in excess of straig

> Ralph has experienced financial difficulties as a result of his struggling business. He has been behind on his mortgage payment for the last six months. The mortgage holder, who is a friend of Ralph's, has offered to accept $80,000 in full payment of the

> Dolly is a cash basis taxpayer. In 2018, she filed her 2017 South Carolina income tax return and received a $2,200 refund. Dolly took the standard deduction on her 2017 Federal income tax return, but will itemize her deductions in 2018. Molly, a cash bas

> Eagle Life Insurance Company pays its employees $.30 per mile for driving their personal automobiles to and from work. The company reimburses each employee who rides the bus $100 a month for the cost of a pass. Tom collected $100 for his automobile milea

> Wilbur has been offered a job at a salary that would put him in the 24% marginal tax bracket. In addition to his salary, he would receive health insurance coverage. Another potential employer does not offer health insurance but has agreed to match the fi

> Ted works for Azure Motors, an automobile dealership. All employees can buy a car at the company's cost plus 2%. The company does not charge employees the $ 300 dealer preparation fee that nonemployees must pay. Ted purchased an automobile for $29,580 ($

> In May 2018, Hernando a resident of California, has his 2016 Federal income tax return audited by the IRS. An assessment of additional tax is made because he had inadvertently omitted some rental income. In October 2018, California audits his state retur

> What determines the appropriate Circuit Court of Appeals for a particular taxpayer?

> A divorce agreement entered into in 2017 requires Alice to pay her former spouse $50,000 a year for the next ten years. Will the payments qualify as alimony? Why or why not?

> In January 2018, Sonja deposited $20,000 in a bank in the Bahamas. She earned $500 interest income. She closed the account in December 2018. a. Is Sonya subject to the FBAR reporting requirement? b. Is the interest income taxable in the United States?

> During the year, Brandi had the following transactions: a long term capital gain from the sale of land, a short-term capital l0ss from the sale of stock, and a l0ng-term capital gain from the sale of a gun collection. a. How are these transactions treate

> Jerry uses a building for business purposes. The building was purchased on April1, year 3, for $124,000. It was sold on October 3, year 6, for $200,000. Accumu1ated depreciation as of the date of sa1e was $14,000, $4,000 of which was in excess of straigh

> Fred and Wilma were divorced in year 1 (before 2019). Fred is required to pay Wilma $12,000 of alimony each year until their child turns 18. At that time, the payment will be reduced to $10,000 per year. In year 3, in accordance with the divorce agreemen

> An appellate court will often become involved in fact-finding determination. Discuss the validity of this statement.

> Conner purchased an annuity that was to pay him a fixed amount each month for the remainder of his life. He began receiving payments in 2002, when he was 65 years old. In 2018, Connor was killed in an automobile accident. What are the effects of the annu

> In connection with the application of the kiddie tax comment on the following: a. The child has only earned income. b. The child has a modest amount of unearned income. c. The child is age 20, not a student, and not disabled. d. The child is married.

> Mario, who is single, is s US citizen and resident. He provides almost all of the support of his parents and two aunts, who are citizens and residents of Guatemala. Mario's parents and aunt are serious1y considering moving to and becoming residents of Me

> In many cases, a surviving spouse ultimately becomes a head of household for filing status purposes. Explain this statement.

> Comment on the availability of head-of-household filling status for 2018 in each of the following independent situations: a. Taxpayer lives al0ne but maintains the household of his parents. In July 2018, the parent use their savings to purchase a new BMW

> Oliver is a US citizen employed by a multinational corporation at its London office. Oliver is married to Regina a British citizen, and they reside in England. Regina receives substantial rent income from rea1 estate she owns in western Europe. a. Must O

> What are the differences between Technical Advice Memoranda (TAMs) and Technical Expedited Advice Memoranda (TEAMs)?

> Mark and Lisa were divorced in 2017. In 2018 Mark has custody of their children, but Lisa provides nearly all of their support. Who is entitled to claim the children as dependents?

> Sri is considering the IRS to find out whether a possible stock redemption would be a qualified stock redemption. Outline some relevant tax issues Sri faces in determining whether to request a letter ruling.

> Marsha exchanged land in Florida with an FMV of $52,700 and an adjusted basis of $60,000 for land in Iowa with an FMV of $57,700. Marsha also paid $5,000 cash in the transaction. What is Marsha's basis in the land received? a. $55,000 b. $57,700 c. $60,0

> Monique owns a building that she leases to an individual who operates a grocery store. Rent income is $10,000, and rental expenses are $6,000. On what Form 1040 schedule or schedules are the income and expenses reported?

> On December 29, 2018, an employee received a $5,000 check from her emp1oyer's client. The check was payable to the employer. The employee did not remit the funds to the employer until December 30, 2018 The employer deposited the check on December 31, 201

> Magda maintains the household that includes a son (age 30) and a cousin (age 28). She can claim the cousin as a dependent but not her son. Explain.

> In late December 2018, Gray Corporation (a calendar year C corporation) pledges a $ 50,000 donation to a local relief agency formed to fight AIDS in Africa. Although Gray's board of directors authorized the donation in 2018, the payment is not made until

> The taxpayer has excess capital losses (both short -term and long-term) for the current year. Discuss the income tax ramifications of the losses if the taxpayer is: a. An individual. b. A C corporation. c. An S corporation. d. A partnership.

> The Owen brothers have obtained financing to start a new venture. The business will be high-risk as to potential liability and is expected to incur losses before becoming profitable. What type of entity might the Owens consider using?

> What are the primary tax and nontax advantages of limited liability companies?

> What purpose is served by the Check -the-box Regulations?

> Explain why partnerships and S corporations are considered "pass-through" entities, and present an example of how the pass-through works.

> John purchased a primary residence on October 15, year 2, for $240,000. On June 10, year 4, he married Karen, and she moved into the house. Karen was not added to the deed. On October 15, year 6, they moved out of the house. John sold the home on October

> What are guaranteed payments? When might such payments be used?

> Blaine, Cassie, and Kirstin are equal partners in the Maize Partnership. During the year, Maize has qualified dividends and a charitable contribution deduction. Explain the following results: a. Blaine pays less tax than Cassie and Kirstin on his share o

> Indicate whether each of the following will increase (+), decrease (一)， or have no effect (NE) on a partner's basis in a partnership interest: a. Operating loss of the partnership. b. Capital gains of the partnership. c. Tax-exempt income of the partners

> Cynthia and Doug are equal shareho1ders in Penguin, a calendar year S corporation. At the end of the current tax year, Penguin has an operating loss. Although Cynthia and Doug have the same basis in their Penguin stock, Cynthia can deduct all of her shar

> A calendar year corporation has an election under subchapter S. What will be the effect, if any, of the following events on its S status? a. The board of directors of the corporation revokes its S election in March of the current year. b. A shareholder w

> Sy1via and Trang want to enter into business together and are unsure what type of entity to form (if any). They are concerned about the complexity of the paperwork required, the protection of personal asset from business creditors, and flexibility of sha

> When a corporation distributes property as a dividend, what are the tax effects on the corporation and its shareholders under the following assumptions? a. The property has declined in value. b. The property has appreciated in value.

> Cynthia and some associates want to form a corporation develop and operate an industrial park. Cynthia is to contribute the land, which has significantly appreciated in value. She would like to recognize some of this gain to offset losses from other sour

> Small closely held corporations are formed with a minimum of investment. Key assets used in the business are then leased to the corporation by the shareholders. What are the advantages of this approach?

> 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