David is the sole proprietor of a real estate construction business. The business uses the completed contract method on a particular contract that requires 16 months to complete. The contract is for $500,000, with estimated costs of $300,000. At the end of 2020, $180,000 of costs had been incurred. The contract is completed in 2021, with the total cost being $295,000. Determine the amount of adjustments for AMT purposes for 2020 and 2021.
> Calculate the exemption amount for the following cases in 2021 for a married taxpayer filing jointly and for a married taxpayer filing separately. In addition, use Microsoft Excel to express your solutions for the taxpayer who is married filing jointly.
> Ichiro, age 93, has accumulated substantial assets during his life. Among his many assets are the following, which he is considering giving to Koji, his grandson. Ichiro has been in ill health for the past five years. His physician has informed him that
> On December 28, 2021, Kramer sells 150 shares of Lavender, Inc. stock for $77,000. On January 10, 2022, he purchases 100 shares of the same stock for $82,000. a. Assuming that Kramer’s adjusted basis for the stock sold is $65,000, what is his recognized
> Thania inherited 1,000 shares of Aqua, Inc. stock from Joe. Joe’s basis in the stock was $35,000, and the fair market value of the stock on July 1, 2021 (the date of Joe’s death) was $45,000. The shares were distributed to Thania on July 15, 2021. Thania
> Ella and Emma are twin sisters who live in Louisiana and Mississippi, respectively. Ella is married to Frank, and Emma is married to Richard. Frank and Richard are killed in an auto accident in 2021 while returning from a sporting event. Ella and Frank j
> Dan bought a hotel for $2,600,000 in January 2017. In May 2021, he died and left the hotel to Ed. While Dan owned the hotel, he deducted $289,000 of cost recovery. The fair market value in May 2021 was $2,800,000. The fair market value six months later w
> Tyler Meade is planning to make a charitable contribution to the Girl Scouts. He will contribute Crystal, Inc. stock worth $20,000. The stock has an adjusted basis of $15,000. A friend has suggested that Tyler sell the stock and contribute the $20,000 in
> On September 18, 2021, Gerald received land and a building from Lei as a gift. No gift tax was paid on the transfer. Lei’s records show the following. a. Determine Gerald’s adjusted basis for the land and building. b.
> Roberto has received various gifts over the years and has decided to dispose of several of these assets. What is the recognized gain or loss from each of the following transactions, assuming that no Federal gift tax was paid when the gifts were made? a.
> Tim recently was called into the partner’s office and offered a two-year assignment in his public accounting firm’s Shanghai office. Realizing that Tim will face incremental expenses while in Shanghai, such as foreign income taxes and rent, the firm will
> Donna owns 800 shares of common stock in Macaw Corporation (adjusted basis of $40,000). She receives a 5% stock dividend when the stock is selling for $60 per share. a. How much gross income must Donna recognize because of the stock dividend? b. What is
> Rod Clooney purchases Kayla Mitchell’s sole proprietorship for $990,000 Communications on August 15, 2021. The assets of the business are: a. Calculate Kayla’s realized and recognized gain. b. Determine Rodâ€
> Mahan purchases 1,000 shares of Bluebird Corporation stock on October 3, 2021, for $300,000. On December 12, 2021, Mahan purchases an additional 750 shares of Bluebird stock for $210,000. According to market quotations, Bluebird stock is selling for $285
> Karen Samuels (Social Security number 123-45-6789) makes the following purchases and sales of stock. Assuming that Karen is unable to identify the specific lots that are sold with the original purchase, determine the recognized gain or loss on each type
> Brent Morgan is a real estate agent for Coastal Estates, a residential real estate development. Because of his outstanding sales performance, Brent is permitted to buy a lot for $300,000 that normally would sell for $500,000. Brent is the only real estat
> Zoe purchases Tan, Inc. bonds for $108,000 on January 2, 2021. The face value of the bonds is $100,000; the maturity date is December 31, 2025; and the annual interest rate is 5%. Zoe will amortize the premium only if she is required to do so. Zoe sells
> Liam owns a personal use boat that has a fair market value of $35,000 and an adjusted basis of $45,000. Liam’s AGI is $100,000. Calculate the realized and recognized gain or loss if: a. Liam sells the boat for $35,000. b. Liam exchanges the boat for anot
> Nissa owns a building (adjusted basis of $600,000 on January 1, 2021) that she rents to Len, who operates a restaurant in the building. The city closed the restaurant for three months during 2021 because of COVID-19. Under MACRS, the cost recovery deduct
> Kareem bought a rental house in March 2016 for $300,000, of which $50,000 is allocated to the land and $250,000 to the building. Early in 2018, he had a tennis court built in the backyard at a cost of $7,500. Kareem has deducted $30,900 for depreciation
> Anne sold her home for $290,000 in 2021. Selling expenses were $17,400. She purchased it in 2015 for $200,000. During the period of ownership, Anne did the following. • Deducted $50,500 office-in-home expenses, which included $4,500 in depreciation. (Re
> Michaela owns a principal residence in Georgia, a townhouse in San Francisco, and a yacht in Cape Cod. All of the properties have mortgages on which Michaela pays interest. What are the limitations on Michaela’s mortgage interest deduction? What strategy
> a. In 2021, Maria records self-employed earnings of $135,000. Using the format illustrated in the text, compute Maria’s self-employment tax liability and the allowable income tax deduction for the self-employment tax paid. b. Express the calculation of
> Julie, a self-employed individual, is required to make estimated payments of her tax liability for the year. Her tax liability for 2020 was $25,000, and her AGI was less than $150,000. For 2021, Julie ultimately determines that her income tax liability i
> During 2021, Greg Cruz (1401 Orangedale Road, Troy, MI 48084) works for Maple Corporation and Gray Company. He earns $96,000 at Maple Corporation, where he is a full-time employee. Greg also works part-time for Gray Company for wages of $54,000. a. Did G
> In each of the following independent situations, determine the amount of FICA that should be withheld from the employee’s 2021 salary by the employer. a. Harry earns a $50,000 salary and files a joint return. b. Hazel earns a $115,000 salary and files a
> Jenna, a longtime client of yours, is employed as an architect and is the president of the local Rotary chapter. To keep up to date with developments in her profession, she attends continuing education seminars offered by the architecture school at State
> Jim and Mary Jean are married and have two dependent children under the age of 13. Both parents are gainfully employed and during 2021 earn salaries as follows: $130,000 (Jim) and $5,200 (Mary Jean). To care for their children while they work, they pay E
> Paul and Karen Kent are married, and both are employed (Paul earns $44,000 and Karen earns $9,000 during 2021). Paul and Karen have two dependent children, both under the age of 13 (Samuel and Joy). So that they can work, Paul and Karen pay $3,800 ($1,90
> In 2021, Joshua and Ellen are married and file a joint return. Three individuals qualify as their dependents: their two children, ages 5 years and 6 months, and Ellen’s son from a previous marriage, age 19. All parties are U.S. citizens. Joshua and Ellen
> Kim, a U.S. citizen and resident, owns and operates a novelty goods business. During 2021, Kim reports taxable income of $115,000: $50,000 from foreign sources and $65,000 from U.S. sources. In calculating taxable income, the standard deduction is used.
> Joyce, a single parent, lives in an apartment with her two minor children (ages 8 and 10), whom she supports. Joyce earns $33,000 during 2021. She uses the standard deduction and files as a head of household. a. Calculate the amount, if any, of Joyce’s e
> In a popular press article about the AMT, the author of the article indicated that he was not going to distinguish between preferences and adjustments because “… irrespective of the label, both items increase AMTI.” What does the author’s statement overl
> Which of the following individuals qualifies for the earned income credit for 2021? a. Thomas is single, is 21 years of age, and has no qualifying children. His income consists of $9,000 in wages. b. Shannon, who is 27 years old, maintains a household fo
> Tom, a calendar year taxpayer, informs you that during the year, he incurs expenditures of $40,000 that qualify for the incremental research activities credit. In addition, it is determined that his base amount for the year is $32,800. a. Determine Tom’s
> Oak Corporation has the following general business credit carryovers. 2017 ……………………………………..$ 5,000 2018 ………………………………………15,000 2019 ………………………………………..6,000 2020 ………………………………………19,000 Total carryovers …………………….$45,000 If the general business credit generate
> Adelyn has a tentative general business credit of $42,000 for the current year. Adelyn’s net regular tax liability before the general business credit is $107,000, and her tentative minimum tax is $88,000. Compute Adelyn’s allowable general business credi
> Bonnie, who is single and itemizes deductions, reports a zero taxable income for 2021. She incurs positive timing adjustments of $200,000 and AMT exclusion items of $100,000 for the year. What is Bonnie’s AMT credit carryover to 2022?
> Farr is single, has no dependents, and does not itemize her deductions. She reports the following items on her 2021 tax return. Bargain element from the exercise of an ISO (no restrictions apply to the stock) ………………………………………………………………….$ 45,000 MACRS depr
> In 2021, Kathleen Tweardy incurs $30,000 of interest expense related to her investments. Her investment income includes $7,500 of interest, $6,000 of qualified dividends, and a $12,000 net capital gain on the sale of securities. Kathleen asks you to comp
> Jane and Robert Brown are married and have eight children, all of whom are considered dependents for Federal income tax purposes. Robert earns $196,000 working as senior manager in a public accounting firm, and Jane earns $78,000 as a second-grade teache
> Anh is single, has no dependents, and itemizes deductions. In the current year for regular tax purposes, she records $60,000 of income and $105,000 of deductions and losses, primarily from business activities. Included in the losses are $30,000 of AMT pr
> Gabriel, age 40, and Emma, age 33, are married with two dependents. They recorded AGI of $250,000 in 2021 that included net investment income of $3,000 and gambling winnings of $2,500. In itemizing deductions for regular tax purposes, the couple incurred
> Jayden, a calendar year taxpayer, paid $16,000 in medical expenses and sustained a $20,000 casualty loss in 2021 (the loss occurred in a Federally declared disaster area). He expects $12,000 of the medical expenses and $14,000 of the casualty loss to be
> During the current year, Yoon earned $10,000 in interest on corporate bonds and incurred $13,000 of investment interest expense related to the bond holdings. Yoon also earned $5,000 interest on private activity bonds that were issued in 2016 and incurred
> Mandy, who has AGI of $80,000 before considering rental activities, is active in three separate real estate rental activities and is in the 22% tax bracket. She has $12,000 of losses from Activity A, $18,000 of losses from Activity B, and income of $10,0
> Wolfgang, who is age 33, records AGI of $125,000. He incurs the following itemized deductions for 2021. Medical expenses [$11,875 2 (7.5% 3 $125,000)] …………………………….$2,500 State income taxes ………………………………………………………………………….4,200 Charitable contributions ……………
> Christopher regularly invests in technology company stocks, hoping to become wealthy by making an early investment in the next high-tech phenomenon. In 2013, Christopher purchased 3,000 shares of FlicksNet, a film rental company, for $15 per share shortl
> Bonnie and Jake (ages 35 and 36, respectively) are married with no dependents and live in Montana (not a community property state). Because Jake has large medical expenses, they seek your advice about filing separately to save taxes. Their income and exp
> In 2021, Reya exercised an incentive stock option that had been granted to her in 2018 by her employer, Weather Corporation. Reya acquired 100 shares of Weather stock for the option price of $190 per share. The fair market value of the stock at the date
> Five years ago Gerald invested $150,000 in a passive activity, his sole investment venture. On January 1, 2020, his amount at risk in the activity was $30,000. His shares of the income and losses were as follows: Gerald holds no suspended at-risk or pass
> Archie runs a small mineral exploration business (as a sole proprietorship). In 2019, he purchased land (for $68,000) where he suspected a magnesium deposit was located. He incurred $18,000 of exploration costs related to the development of the magnesium
> In the current year, Dylan earned interest from the following investments. Investment ……………………………………………………………………………..Interest Income 10-year municipal bond (issued in 2009) ……………………………………………….$1,300 10-year private activity bond (issued in 2010) ……………………
> Alfred is single, and his AMTI of $1,850,000 consists of the following amounts. What tax rates are applicable in calculating Alfred’s TMT? Ordinary income………………………………………………. $1,750,000 Long-term capital gains ……………………………………………70,000 Qualified dividends
> A number of years ago, Lee acquired a 20% interest in the BlueSky Partnership for $60,000. The partnership was profitable through 2020, and Lee’s amount at risk in the partnership interest was $120,000 at the beginning of 2021. BlueSky incurred a loss of
> Lynn, age 45, is single and has no dependents. Her income and expenses for 2021 are reported as follows. Income— Salary ……………………………………………………………………………….$233,000 Taxable interest on corporate bonds…………………………………………13,700 Business income …………………………………………………
> Kristin Graf (123 Baskerville Mill Road, Jamison, PA 18929) is trying to decide how to invest a $10,000 inheritance. One option is to make an additional investment in Rocky Road Excursions in which she has an at-risk basis of $0, suspended losses under t
> Renee and Sanjeev Patel, who are married, reported taxable income of $1,008,000 for 2021. They incurred positive AMT adjustments of $75,000 and tax preference items of $67,500. The couple itemizes their deductions. a. Compute the Patels’ AMTI for 2021. b
> Pat is 40, is single, and has no dependents. She received a salary of $390,000 in 2021. She earned interest income of $11,000, dividend income of $15,000, gambling winnings of $14,000, and interest income from private activity bonds (issued in 2017) of $
> Emily has $100,000 that she wants to invest and is considering the following two options: • Option A: Investment in Redbird Mutual Fund, which is expected to produce interest income of $8,000 per year. • Option B: In
> A number of years ago, Kayla acquired an interest in a partnership in which she is not a material participant. Kayla’s basis in her partnership interest at the beginning of 2020 is $40,000. Kayla’s share of the partnership loss is $35,000 in 2020, and he
> Dorothy acquired a 100% interest in two passive activities: Activity A in January 2016 and Activity B in 2017. Through 2019, Activity A was profitable, but it produced losses of $200,000 in 2020 and $100,000 in 2021. Dorothy has passive activity income f
> In 2020, Fred invested $50,000 in a general partnership. Fred’s interest is not considered to be a passive activity. If his share of the partnership losses is $35,000 in 2020 and $25,000 in 2021, how much can he deduct in each year?
> For calendar year 2021, Stuart and Pamela Gibson file a joint return reflecting AGI of $350,000. Their itemized deductions are as follows: Casualty loss in a Federally declared disaster area (not covered by insurance; before the 10%-of-AGI limitation but
> Cheryl incurred $8,700 of medical expenses in November 2021. On December 5, the clinic where she was treated mailed her the insurance claim form it had prepared for her with a suggestion that she sign and return the form immediately to receive her reimbu
> Bailey owns a small rental townhouse complex that generates a loss during the year. Under what circumstances can Bailey deduct a loss from the rental activity? What limitations apply?
> On July 16, 2021, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2021 for the
> Lee owns land and a building (held for investment) with an adjusted basis of $75,000 and a fair market value of $250,000. The property is subject to a mortgage of $400,000. Because Lee is in arrears on the mortgage payments, the creditor is willing to ac
> Isabelle invests in land, and Grace invests in taxable bonds. The land appreciates by $8,000 each year, and the bonds earn interest of $8,000 each year. After holding the land and bonds for five years, Isabelle and Grace sell them. There is a $40,000 rea
> Comment on the following transactions. a. Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July 28, 2021, he sells 100 shares for $3,000. On August 16, 2021, he purchases another 100 shares for $3,400. Explain why Mort’s rea
> Thelma inherited land from Sadie on June 7, 2021. The land appreciated in value by 100% during the six months Sadie owned it. The value has remained stable during the three months Thelma has owned it, and she expects it to continue to do so in the near f
> During the year, Rachel earned $18,000 of interest income on private activity bonds that she had purchased in 2016. She also incurred interest expense of $7,000 in connection with amounts borrowed to purchase the bonds. How do these amounts affect Rachel
> Amee moved to the San Francisco Bay Area to work for a technology startup 25 years ago. The startup eventually went public, and Amee is now one of the company’s most senior and successful employees. Amee has owned a house in Nob Hill for the past 20 year
> Noah Yobs, who has $62,000 of AGI (solely from wages) before considering rental activities, has $70,000 of losses from a real estate rental activity in which he actively participates. He also actively participates in another real estate rental activity f
> Peyton sells an office building and the associated land on May 1 of the current year. Under the terms of the sales contract, Peyton is to receive $1,600,000 in cash. The purchaser is to assume Peyton’s mortgage of $950,000 on the property. To enable the
> Suki and Dave each purchase 100 shares of stock of Burgundy, Inc., a publicly owned corporation, in July for $10,000 each. Suki sells her stock on December 31 for $8,000. Because Burgundy’s stock is listed on a national exchange, Dave can ascertain that
> On July 1, 2021, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature in five years, and the annual interest rate is 3%. a. How much interest income and/or interest expense must Katrina report in 2021, assuming that st
> Ava and her husband, Leo, file a joint return and are in the 24% tax bracket in 2021. 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
> In 2021, Ivanna, who has three children under age 13, worked full-time while her spouse, Sergio, was attending college for nine months during the year. Ivanna earned $47,000 and incurred $6,400 of child care expenses. Determine Ivanna and Sergio’s child
> In 2021, Santiago and Amy are married and file a joint tax return. They have three dependent children, ages 12, 14, and 19. All parties are U.S. citizens. The couple’s AGI is $140,000. Determine any available child tax credit and dependent tax credit.
> Determine the additional Medicare taxes for these individuals. a. Mario, who is single, earns wages of $440,000. b. George and Shirley are married and file a joint return. During the year, George earns wages of $138,000, and Shirley earns wages of $210,0
> In 2021, Miranda records net earnings from self-employment of $158,500. She has no other income. Determine the amount of Miranda’s self-employment tax and her for AGI income tax deduction.
> Elijah is single. He has a $12,000 AMT credit from 2020. In 2021, his regular tax liability is $28,000 and his tentative minimum tax is $24,000. Does Elijah owe AMT in 2021? How much (if any) of the AMT credit can Elijah use in 2021?
> Yanni, who is single, provides you with the following information for 2021. Salary ……………………………………………………………………………………………..$250,000 State income taxes ………………………………………………………………………………..25,000 Mortgage interest expense on principal residence ($480,000 mortgage
> In 2021, Henri, a U.S. citizen and calendar year taxpayer, reports $30,000 of income from France, which imposes a 10% income tax, and $50,000 from Italy, which imposes a 40% tax. In addition, Henri reports taxable income of $90,000 from within the United
> Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2021. She purchased the stock for $18,100 on December 28, 2020, and it had a fair market value of $27,000 when she made the donation. a. What is Donna’s charitable cont
> Ángel was in an accident and required cosmetic surgery for injuries to his nose. He also had the doctor do additional surgery to reshape his chin, which had not been injured. Will the cosmetic surgery to Ángel’s nose qualify as a medical expense? Will th
> Compute the 2021 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.
> In March 2021, Serengeti exercised an ISO that had been granted by his employer, Thunder Corporation, in December 2018. Serengeti acquired 5,000 shares of Thunder stock for the exercise price of $65 per share. The fair market value of the stock at the da
> Pierre, a cash basis, unmarried taxpayer, had $1,400 of state income tax withheld during 2021. Also in 2021, Pierre paid $455 that was due when he filed his 2020 state income tax return and made estimated payments of $975 toward his 2021 state income tax
> Jason, a single parent, lives in an apartment with his three minor children, whom he supports. Jason earned $27,400 during 2021 and uses the standard deduction. Calculate the amount, if any, of Jason’s earned income credit.
> This year, Amy purchased a personal residence at a cost of $1,000,000. She borrowed $800,000 secured by the home to make the purchase. This year, she paid interest expense on this mortgage of $12,000. How much may she deduct?
> Green Corporation hires six individuals on January 4, 2021, all of whom qualify for the work opportunity credit. Three of these individuals receive wages of $8,500 during 2021, and each individual works more than 400 hours during the year. The other thre
> Reba is a single taxpayer. Lawrence, Reba’s 84-year-old dependent grandfather, lived with Reba until this year, when he moved to Lakeside Nursing Home because he needs specialized medical and nursing care. During the year, Reba made the following payment
> For calendar year 2021, Giana 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 2021. How much of these premiums may Giana deduct as a dedu
> Use the following data to calculate Chiara’s AMT base in 2021. Chiara will itemize deductions and will file as a single taxpayer. Taxable income ………………………………………………………….$248,000 Positive AMT adjustments ………………………………………………73,000 Negative AMT adjustments ……
> In 2021, Bianca earned a salary of $164,000 from her employer. Determine the amount of FICA taxes and Medicare taxes withheld from her salary.
> Sally owns real property for which the annual property taxes are $9,000. She sells the property to Kate on March 9, 2021, for $550,000. Kate pays the real property taxes for the entire year on October 1, 2021. a. How much of the property taxes can be ded
> Rafael and Lucy, married taxpayers, each contribute $2,900 to their respective § 401(k) plans offered through their employers. The AGI reported on the couple’s joint return is $44,000. Determine their credit for retirement plan contributions (the Saver’s
> Paola and Isidora are married; file a joint tax return; report modified AGI of $148,000; and have one dependent child, Dante. The couple paid $12,000 of tuition and $10,000 for room and board for Dante (a freshman). Dante is a full-time student. Determin
> Derek, a cash basis, unmarried taxpayer, had $610 of state income tax withheld during 2021. Also in 2021, Derek paid $50 that was due when he filed his 2020 state income tax return and made estimated payments of $100 toward his 2021 state income tax liab
