Describe the limitations on the deduction of transfers to charity.
> What does it mean to say that a married couple filing a joint tax return has joint and several liability for the taxes associated with the return?
> Pierre recently received a tax penalty for failing to file a tax return. He was upset to receive the penalty, but he was comforted by the thought that he will get a tax deduction for paying the penalty. a. Use an available tax research service to determi
> As noted in Example 1-2, tolls, parking meter fees, and annual licensing fees are not considered taxes. Can you identify other fees that are similar?
> Katie recently won a ceramic dalmatian valued at $800 on a television game show. She questions whether this prize is taxable since it was a “gift” she won on the show. a. Use an available tax research service to answer Katie’s question. b. Write a letter
> What are the rewards of tax avoidance? What are the rewards of tax evasion?
> Lindley has become very frustrated in researching a tax issue using keyword searches. What suggestions can you give her?
> Last year Robert transferred a life insurance policy worth $45,000 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson, Danny, upon his graduation from college, or to Danny’s estate upon his death. Robert paid $1
> Terry transferred $500,000 of real estate into an irrevocable trust for her son, Lee. The trustee was directed to retain income until Lee’s 21st birthday and then pay him the corpus of the trust. Terry retained the power to require the trustee to pay inc
> Walter owns a whole-life insurance policy worth $52,000 that directs the insurance company to pay the beneficiary $250,000 on Walter’s death. Walter pays the annual premiums and has the power to designate the beneficiary of the policy (it is currently hi
> This year Jeff earned $850,000 and used it to purchase land in joint tenancy with a right of survivorship with Mary. Has Jeff made a taxable gift to Mary and, if so, in what amount? What is your answer if Jeff and Mary are married?
> Using the Internal Revenue Code, describe two deductions for AGI that are not discussed in this chapter.
> Explain how a transfer of property as a gift may have income tax implications to the donee.
> What limitations are placed on the deductibility of capital losses for individual taxpayers?
> In reviewing the tax rate schedule for married filing jointly, Jorge and Anita note that the tax on $155,000 is $29,517.50 plus 28 percent of the taxable income over $151,900. What does the $29,517.50 represent?
> What tax rate applies to net short-term capital gains?
> Describe how interest income and dividend income are taxed. What are the similarities and differences in their tax treatment?
> In each of the following independent cases, indicate the amount (1) deductible for AGI, (2) deductible from AGI, and (3) neither deductible for nor deductible from AGI before considering income limitations or the standard deduction. a. Ted paid $8 rent
> Hardaway earned $100,000 of compensation this year. He also paid (or had paid for him) $3,000 of health insurance. What is Hardaway’s AGI in each of the following situations (ignore the effects of Social Security and self-employment taxes)? a. Hardaway
> Determine whether a taxpayer can change his or her election to itemize deductions once a return is filed. (Hint: Read about itemization under Reg. §1.63-1.)
> Explain why the cost of commuting from home to work is not deductible as a business expense.
> Dontae’s employer has offered him the following employment package. What is Dontae’s gross income from his employment? Salary………………………………………………………………………..$400,000 Health Insurance……………………………………………………………….10,000 Dental Insurance………………………………………………………
> Duff is really interested in decreasing his tax liability, and by his very nature he is somewhat aggressive. A friend of a friend told him that cash transactions are more difficult for the IRS to identify and, thus, tax. Duff is contemplating using this
> Jerry has a certificate of deposit at the local bank. The interest on this certificate was credited to his account on December 31 of last year but he didn’t withdraw the interest until January of this year. When is the interest income taxed?
> Using the Internet, find a comparison of income tax rates across states. What state currently has the highest income tax rate? In considering individual tax burdens across states, what other taxes should you consider?
> Is a qualifying relative always a qualifying person for purposes of determining head of household filing status?
> Jamareo has found a “favorable” authority directly on point for his tax question. If the authority is an administrative authority, which specific type of authority would he prefer to answer his question? Which administrative authority would he least pref
> Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella fi
> To help pay for the city’s new stadium, the city of Birmingham recently enacted a 1 percent surcharge on hotel rooms. Is this a tax? Why or why not?
> Faith, a resident of Florida (11th Circuit) recently found a circuit court case that is favorable to her research question. Which two circuits would she prefer to have issued the opinion?
> Consider the following tax rate structure. Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not? Total Tax Тахрауer Rodney Salary S10,000 $600 Keisha 10,000 600
> Daniel is considering selling two stocks that have not fared well over recent years. A friend recently informed Daniel that one of his stocks has a special designation, which allows him to treat a loss up to $50,000 on this stock as an ordinary loss rath
> Bob’s Lottery, Inc., has decided to offer winners a choice of $100,000 in ten years or some amount currently. Assume that Bob’s Lottery, Inc., earns a 10 percent after-tax rate of return. What amount should Bob offer lottery winners currently, in order f
> Randy deducted a high level of itemized deductions two years ago relative to his income level. He recently received an IRS notice requesting documentation for his itemized deductions. What audit procedure likely identified his tax return for audit?
> Yong’s tax return was audited because he calculated his tax liability incorrectly. What IRS audit procedure identified his tax return for audit?
> Given the following tax structure, what tax would need to be assessed on Venita to make the tax horizontally equitable? Тахраyer Salary Total Tax Мае $10,000 $ 600 Pedro 20,000 1,500 Venita 10,000 ???
> True or False. For purposes of determining head of household filing status, the taxpayer’s mother or father is considered to be a qualifying person of the taxpayer (even if the mother or father does not qualify as the taxpayer’s dependent) as long as the
> Sophia recently won a tax case litigated in the 7th Circuit. She recently heard that the Supreme Court denied the writ of certiorari. Should she be happy or not, and why?
> Assume Rafael can earn an 8 percent after-tax rate of return. Would he prefer $1,000 today or $1,500 in five years?
> Paula could not reach an agreement with the IRS at her appeals conference and has just received a 90-day letter. If she wants to litigate the issue but does not have sufficient cash to pay the proposed deficiency, what is her best court choice?
> Marlon and Latoya recently started building a house. They had to pay $300 to the county government for a building permit. Is the $300 payment a tax? Why or why not?
> Jonah has the choice of paying Rita $10,000 today or $40,000 in ten years. Assume Jonah can earn a 12 percent after-tax rate of return. Which should he choose?
> Assume Ellina earns a 10 percent after-tax rate of return, and that she owes a friend $1,200. Would she prefer to pay the friend $1,200 today or $1,750 in four years?
> Shane has never filed a tax return despite earning excessive sums of money as a gambler. When does the statute of limitations expire for the years in which Shane has not filed a tax return?
> Jamarcus, a full-time student, earned $2,500 this year from a summer job. He had no other income this year and will have zero federal income tax liability this year. His employer withheld $300 of federal income tax from his summer pay. Is Jamarcus requir
> The estate of Monique Chablis earned $450 of income this year. Is the estate required to file an income tax return?
> Molto Stancha Corporation had zero earnings this fiscal year; in fact, they lost money. Must they file a tax return?
> In reviewing the tax rate schedule for a single taxpayer, Chuck notes that the tax on $75,000 is $5,183.75 plus 25 percent of the taxable income over $37,650. What does the $5,183.75 represent?
> Explain why the gross estate includes the value of certain property transferred by the decedent at death, such as property held in joint tenancy with the right of survivorship, even though this property is not subject to probate.
> Explain the purpose of adding prior taxable gifts to current taxable gifts and show whether these prior gifts could be taxed multiple times over the years.
> Are taxpayers required to include all realized income in gross income? Explain.
> Explain how a purchase of realty could result in a taxable gift.
> Under what circumstances will a deposit of cash to a bank account held in joint tenancy be considered a completed gift?
> Define fair market value for transfer tax purposes.
> Explain why Congress felt it necessary to enact a gift tax to complement the estate tax.
> Identify the “per se” companies for which a check-the-box election cannot be made for U.S. tax purposes in the countries listed below. Consult the Instructions to Form 8832, which can be found on the “Forms & Pubs” site on the IRS website, www.irs.gov. a
> Colleen is a citizen and bona fide resident of Ireland. During the current year, she received the following income: o Cash dividends of $2,000 from a U.S. corporation stock. o Interest of $1,000 on a U.S. corporation bond. o Royalty of $100,000 from
> Petoskey Stone, Inc., a U.S. corporation, received the following sources of income during the current year. Identify the source of each item as either U.S. or foreign. a. Interest income from a loan to its German subsidiary. b. Dividend income from Gran
> Camille, a citizen and resident of Country A, received a $1,000 dividend from a corporation organized in Country B. Which statement best describes the taxation of this income under the two different approaches to taxing foreign income? a. Country B will
> True or False: Non-subpart F income always qualifies for tax deferral until it is repatriated back to the United States. Explain.
> True or False: All foreign taxes are creditable for U.S. tax purposes. Explain.
> Do after-tax rates of return for investments in either interest or dividend paying securities increase with the length of the investment? Why or why not?
> Why does the United States use a “basket” approach in the foreign tax credit limitation computation?
> Why is a treaty important to a nonresident investor in U.S. stocks and bonds?
> Briefly describe the two different methods for apportioning research and experimental expenditures (R&E) to foreign source taxable income in the computation of the foreign tax credit limitation.
> Briefly describe the two different methods for apportioning interest expense to foreign source taxable income in the computation of the foreign tax credit limitation.
> Why are the income source rules important to a U.S. nonresident?
> What role does the foreign tax credit limitation play in U.S. tax policy?
> Henri is a resident of the United States for U.S. tax purposes and earns $10,000 from an investment in a French company. Will Henri be subject to U.S. tax under a residence-based approach to taxation? A source-based approach?
> How does a residence-based approach to taxing worldwide income differ from a source-based approach to taxing the same income.
> Distinguish between an outbound transaction and an inbound transaction from a U.S. tax perspective.
> USCo, a U.S. corporation, has decided to set up a headquarters subsidiary in Europe. Management has narrowed its location choice to either Spain, Ireland, or Switzerland. The company has asked you to research some of the income tax implications of sett
> What is needed to implement the conversion strategy?
> Euro Corporation, a U.S. corporation, operates through a branch in Germany. During 2016 the branch reported taxable income of $1,000,000 and paid German income taxes of $300,000. In addition, Euro received $50,000 of dividends from its 5% investment in
> Cuyahoga County, Ohio has a sales tax rate of 7.75 percent. Determine the state, local, and transit (a local transportation district) portions of the rate. You can find resources on the State of Ohio website, including the following link: http://www.tax.
> Brad Carlton operates Carlton Collectibles, a rare coin shop in Washington, D.C., that ships coins to collectors in all 50 states. Carlton also provides appraisal service upon request. During the last several years the appraisal work has been done in eit
> Lars operates Keep Flying, Incorporated, a used airplane parts business, in Laramie, Wyoming. Lars employs sales agents that visit mechanics in all 50 states to solicit orders. All orders are sent to Wyoming for approval, and all parts are shipped via co
> Describe the administrative burden that businesses face in collecting sales taxes.
> Discuss possible reasons why the Commerce Clause was included in the U.S. Constitution.
> Why do states and local jurisdictions assess taxes?
> Oak Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, Glover, and has always operated as a C corporation. However, at the beginning of this year, Glover made a qualifying Selection for Oak Corp., effective January 1.
> Harry, Hermione, and Ron formed an S corporation called Bumblebore. Harry and Hermione both contributed cash of $25,000 to get things started. Ron was a bit short on cash but had a parcel of land valued at $60,000 (basis of $50,000) that he decided to co
> When must an S corporation make estimated tax payments?
> What two factors increase the difference between present and future values?
> What role does debt basis play in determining the taxability of operating distributions to shareholders?
> If a corporation has been an S corporation since inception, describe how its operating distributions to its shareholders are taxed to the shareholders.
> Why is a shareholder’s basis in an S corporate stock adjusted annually?
> Apple Union (AU), a C corporation with a March 31 year-end, uses the accrual method of accounting. If AU elects to be taxed as an S corporation, what will its year-end and method of accounting be (assuming no special elections)?
> Theodore, Alvin, and Simon are equal shareholders of Timeless Corp. (an S corporation). Simon wants to terminate the S election, but Theodore and Alvin disagree. Can Simon unilaterally elect to have the S election terminated? If not, what would Simon nee
> JB Corporation is a C corporation owned 80 percent by Jacob and 20 percent by Bauer. Jacob would like JB to make an S election but Bauer is opposed to the idea. Can JB elect to be taxed as an S corporation without Bauer’s consent? Explain.
> How do the tax laws treat family members for purposes of limiting the number of owners an S corporation may have?
> Why can’t large, publicly traded corporations be treated as S corporations?
> What are the limitations on the number and type of shareholders an S corporation may have? How are these limitations different from restrictions on the number and type of shareholders C corporations or partnerships may have?
> Joy is a 30% partner in the JOM Partnership when she sells her entire interest to Hope for $72,000 cash. At the time of the sale, Joy’s basis in JOM is $44,000 (which includes her $6,000 share of JOM liabilities). JOM does not have any hot assets
> The concept of the time value of money suggests that $1 today is not equal to $1 in the future. Explain why this is true.
> Jerry is a 30% partner in the JJM Partnership when he sells his entire interest to Lucia for $56,000 cash. At the time of the sale, Jerry’s basis in JJM is $32,000. JJM does not have any debt or hot assets. What is Jerry’s gain or loss on t
> List two common situations that will cause a partner’s inside and outside basis to differ.
> In general, what effect does an operating distribution have on the partnership?
> Under what circumstances will a partner recognize a loss from an operating distribution?
> What distinguishes operating from liquidating distributions?
> Absent any special elections, what effect does a sale of partnership interest have on the partnership?
