Question: Gabriella, age 34, and Beth, age 32,

> For 2021, Essence Company, a calendar year taxpayer, will change from the cash method for tax purposes to the accrual method. At the end of 2020, Essence showed the following items. Accounts receivable …………………………………$200,000 Accounts payable …………………………………

> In 2021, Chaya Corporation, an accrual basis, calendar year taxpayer, provided services to clients and earned $25,000. The clients signed notes receivable to Chaya that have a fair market value of $22,000 at year-end. In addition, Chaya sold a 36-month s

> In 2021, Aurora received a $25,000 bonus computed as a percentage of profits. In 2022, Aurora’s employer determined that the 2021 profits had been incorrectly computed, and Aurora had to refund the $8,000 in 2022. Assume that Aurora was in the 35% tax br

> Near the end of 2021, Byron realizes that he has a net short-term capital loss of $13,000 for the year. Byron has taxable income (not including the loss) of $123,000 and is single. He owns numerous stocks that could be sold for a long-term capital gain.

> Mina, who is single, would like to contribute $6,000 to her Roth IRA. Her AGI is $131,000. What is the maximum amount that Mina can contribute? Show your answer in Microsoft Excel.

> Myers, who is single, has compensation income of $73,000 in 2021. He is an active participant in his employer’s qualified retirement plan. Myers contributes $6,000 to a traditional IRA. Of the $6,000 contribution, how much can Myers deduct?

> Shannon owns two items of business equipment. Both were purchased in 2017 for $100,000, both have a 7-year MACRS recovery period, and both have an adjusted basis of $37,490. Shannon is considering selling these assets in 2021. One of them is worth $60,00

> On August 31, 2020, Nolan and Lei, 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 anot

> Renata Corporation purchased equipment in 2019 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2021 for $110,000. What is the amount and character of Renata’s gain or loss?

> Omar, who is single, sold his principal residence on April 10, 2021, and excluded the realized gain under § 121 (exclusion on the sale of a principal residence). On April 12, 2021, he purchased another principal residence, which he sells on January 12, 2

> Gary, who is single, sells his principal residence (owned and occupied by him for seven years) in November 2021 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

> On February 24, 2021, Allison’s building, with an adjusted basis of $1,300,000 (and used in her trade or business), is destroyed by fire. On March 31, 2021, she receives an insurance reimbursement of $1,650,000 for the loss. Allison invests $1,550,000 in

> Elliott has the following capital gain and loss transactions for 2021: Short-term capital gain …………………………………………$ 1,500 Short-term capital loss ………………………………………….(3,600) Long-term capital gain (28%) ………………………………..12,000 Long-term capital gain (25%) …………………

> On June 5, 2021, 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 post

> Golf Corporation generates a $40,000 net operating loss in 2021. Leo Trees, the Golf CEO, expects to offset all of the 2022 taxable income with the NOL. Explain to Leo whether that is possible.

> Coline has the following capital gain and loss transactions for 2021: Short-term capital gain …………………………………..$ 5,000 Short-term capital loss …………………………………….(2,100) Long-term capital gain (28%) …………………………….6,000 Long-term capital gain (15%) ……………………………..2

> On May 9, 2021, Glenna purchases 500 shares of Ignaz Company stock for $7,500. On June 30, 2021, she writes a call option on the stock, giving the grantee the right to buy the stock for $9,000 during the following 12-month period. Glenna receives a call

> In June 2021, 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 value of $17,500). Both vehicles are held for business use. Sue believes that her basis for t

> Zack, a sole proprietor, has earned income of $85,000 in 2021 (after the deduction for one-half of self-employment tax). What is the maximum contribution Zack may make to a defined contribution Keogh plan?

> Joanna, age 44, defers $24,000 in a qualified Solo § 401(k) plan in 2021. a. What amount must be returned to Joanna and by what date? b. In what year will the amount be taxed? c. What percent of the tax will be imposed on Joanna if excess contributions a

> Osprey Corporation, an accrual basis taxpayer, reported taxable income for 2021 and paid $40,000 on its estimated state income tax for the year. During 2021, the company received a $4,000 refund upon filing its 2020 state income tax return. The company f

> Determine the percentage of vesting for the following employees. See Exhibits 19.1 and 19.2. a. Jun has five years of service completed as of September 23, 2021, her employment anniversary date. If her defined benefit plan has a five-year cliff vesting s

> Reba, a calendar year taxpayer, owns an office building that she uses in her business. The building is involuntarily converted on November 15, 2021. On January 5, 2022, Reba receives enough proceeds to produce a realized gain. What is the latest date she

> If depreciable equipment used in a business is sold at a recognized gain on July 10, 2021, and it was purchased on August 21, 2020, does $1245 depreciation recapture apply to the asset? Explain.

> Joey, who is single, is not covered by another qualified plan and earns $127,000 at his job in 2021. How much can he contribute to a traditional IRA or to a Roth IRA in 2021?

> 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 $1,700,000 per year. Identify some tax benefits of a nonqualified deferred compensation plan, which

> Review Examples 4 and 6 in the text. In both examples, the taxpayer’s AGI is $129,400 even though in Example 6 there is $700 of nonrecaptured § 1231 loss from 2020. Explain why the two AGI amounts are the same.

> Steven established a sole proprietorship in 2015. He sold $1231 assets at a loss in 2019 and 2020. He had only sold $1231 assets at a gain before 2019. In 2021, he could sell a $1231 asset at a gain and would like to have the gain taxed as a long-term ca

> Fred, a cash basis taxpayer, received a $15,000 bonus from his employer in 2021. The bonus was based on the company’s profits for 2020. In 2022, the company discovered that its 2020 profits were computed incorrectly. As a result, Fred received an additio

> Clyde had worked for many years as the chief executive of Red Industries, Inc., and had been a major shareholder. Clyde and the company had a falling out, and Clyde was terminated. Clyde and Red executed a document under which Clyde’s stock in Red would

> A law practice was incorporated on January 1, 2021, and expects to earn $25,000 per month before deducting attorney Shonda’s salary. Shonda owns 100% of the stock in the practice. The corporation and Shonda both use the cash method of accounting. The cor

> Penny plans to retire in 2022 at age 70. Identify any issues that Penny faces with respect to distributions from her qualified retirement plan.

> Ali owns 100 shares of Brown Corporation stock. He purchased the stock at five different times and at five different prices per share as indicated. / On April 28, 2021, Ali will sell 40 shares of Brown stock for $40 per share. All of Ali’s shares are hel

> Which of the following would be considered a tax benefit or advantage of a qualified retirement plan? a. Certain distributions may be subject to capital gain treatment. b. Employer contributions are deductible by the employer in the year of contribution.

> Determine whether each of the following independent statements best applies to a defined contribution plan (DCP), a defined benefit plan (DBP), both (B), or neither (N). a. The amount to be received at retirement depends on actuarial calculations. b. For

> Would a calendar or fiscal year be more suitable for a ski lodge? Why?

> In 2021, the taxpayer became ineligible to use the cash method of accounting. At the beginning of the year, accounts receivable totaled $240,000, accounts payable for merchandise totaled $80,000, and inventory on hand totaled $320,000. What is the amount

> Susie purchased her primary residence on March 15, year 4, for $550,000. She sold it on October 15, year 7, for $240,000. What amount of loss from the sale is recognized on her year 7 income tax return? a. $0 b. $60,000 c. $250,000 d. $310,000

> Can chatbot technology be used by a CPA firm to help clients and potential clients understand the similarities and differences among business entity types? How would this work, what are the benefits, and what cautions should the firm note for users?

> Send your instructor a graph for tax years 2000 and every five years thereafter that shows the number of tax returns filed by C corporations, S corporations, and partnerships/LLCs. Include in your graph the results for the latest tax year for which infor

> Gray, Inc., a C corporation, has taxable income from operations of $1,452,000 for 2021. It also has a net long-term capital loss of $355,000 from the sale of a subsidiary’s stock. The year 2021 is the first year in the last 10 years that Gray has not had

> 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

> Using the chart below, determine the appropriateness of the type of retirement plan for the four types of entities. Use the following notations: H: highly appropriate, M: moderately appropriate, L: lightly or not appropriate, NA: not applicable. In addit

> Find two stories online about transactions to which you believe the involuntary conversion rules could apply. Do not limit your search to individual taxpayers. In an e-mail to your instructor, describe the transactions and explain whether the §1033 elect

> For 2021, Maddie has gross income of $38,350 and a $5,000 long-term capital loss. She claims the standard deduction. Maddie is 35 years old and unmarried with two dependent children. How much of Maddie’s $5,000 capital loss carries over to 2022?

> Three C corporations reported the following results for the calendar tax year 2021. a. Determine each corporation’s Federal income tax liability. b. Construct a single Microsoft Excel formula that will produce the correct answer for all

> Dan, a professional basketball player, is to receive a bonus of $2,000,000 for signing an employment contract. An NQDC plan is established to postpone the income beyond Dan’s peak income years. In 2021, his employer transfers the bonus to an escrow agent

> In December 2021, Nell, Inc., an accrual basis taxpayer, paid $12,000 for insurance premiums for the 2022 calendar year. How much of the premiums can Nell, Inc., deduct in 2021?

> Locate the most recent data available from the IRS on Form 8824 filings (irs.gov/statistics). In a Microsoft Excel spreadsheet, use this information to provide a summary of these transactions through time [e.g., the number of like-kind exchanges that hav

> Louis is a participant in the SIMPLE IRA of his employer Brown, Inc. During 2021, 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 2021?

> Jacob Patterson is limited from making a fully deductible $6,000 IRA contribution because of his income level. Instead, he makes a $3,500 nondeductible IRA contribution to his traditional IRA. Find out how Jacob reports this on his return, and complete t

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

> Carla was the owner of vacant land that she was holding for investment. She paid $2,000,000 for the land in 2018. Raymond was an investor in vacant land. He thought Carla’s land might be the site of an exit ramp from a new freeway. Raymond gave Carla $83

> Harvey is a self-employed accountant with earned income from the business of $120,000 (after the deduction for one-half of his self-employment tax). He uses a defined contribution Keogh plan. What is the maximum amount Harvey can contribute to his retire

> Quentin’s roadside vegetable stand (adjusted basis of $275,000) is destroyed by a tractor-trailer accident. He receives insurance proceeds of $240,000. Quentin immediately uses the proceeds plus additional cash of $45,000 to build another roadside vegeta

> Consuela was a tenant in a campus apartment. She is a student at State University. Her lease began on August 1, 2021, and was due to expire on July 31, 2022. However, her landlord sold the building, and the new owner wanted to demolish it to build a reta

> Using the legend provided below, classify each statement under 2021 tax law. a. A child care credit is available. b. The deduction of charitable contributions is subject to percentage limitation(s). c. Excess charitable contributions can be carried forwa

> The U.S. tax system allows many businesses to use the cash method of accounting. Find another country that allows some businesses to use the cash method, and explain how that system compares to the U.S. system. E-mail your answer to your instructor, also

> Lee inherits a traditional IRA at the end of 2021. a. If Lee inherits the IRA from her spouse when the value is $231,050, how must the balance be distributed to her? b. If Lee inherits the IRA from her brother, how must the balance be distributed to her?

> Kim is a 40% shareholder in Taupe, a calendar year S corporation. During 2021, Taupe had an operating loss of $200,000. If Kim has a basis of $50,000 in his stock and has made a loan to Taupe of $20,000, how much of the loss can he deduct for 2021?

> Cheng is age 77, and the balance in her traditional IRA account at the end of December of the prior year is $231,000. Using Exhibit 19.3, calculate Cheng’s required minimum distribution for 2022.

> In 2021, Emily receives a distribution of $125,000 from her wholly owned calendar year corporation. As of January 1, 2021, the corporation has accumulated E & P of $15,000 and for 2021 has current E & P of $65,000. Emily’s basis in her stock is $35,000.

> Enzo is a single taxpayer with the following gains and losses for 2021: • $2,100 short-term capital loss. • $24,000 long-term capital gain from sale of stock. • $14,000 § 1231 gain that is all unrecaptured § 1250 gain. What is the amount and character of

> Neal uses the percentage of completion method to report his gross income from long-term contracts that were to begin in 2021. In 2022, he completes a contract for more than the estimate of total costs that was used in the prior year. What are the tax acc

> An apartment building was acquired in 2012. The depreciation taken on the building was $123,000, and the building was sold for a $34,000 gain. What is the maximum amount of 25% gain?

> Tom and Alice Honeycutt, ages 45 and 46, respectively, live at 101 Glass Road, Delton, MI 49046. Tom is a county employee, and Alice is a self-employed accountant. Tom’s Social Security number is 111-11-1111; Alice’s Social Security number is 123-45-6789

> Devon Bishop, age 45, is single. He lives at 1507 Rose Lane, Albuquerque, NM 87131. His Social Security number is 111-11-1117. Devon did not engage in any virtual currency transactions during the year, and he does not want $3 to go to the Presidential El

> Glen and Diane Okumura (both age 48) are married, file a joint return, and live at 39 Kaloa Street, Honolulu, HI 96815. Glen’s Social Security number is 111-11-1111, and Diane’s is 123-45-6789. The Okumuras have two dependent children, Amy (age 15) and J

> Justin Stone was an employee of DataCare Services, Inc. His salary was $45,000 through November 10, 2020, when he was laid off. DataCare Services provided medical insurance for Justin and his family during his employment and agreed to continue this cover

> Anthony Barrone is a graduate student at State University. His 10-year-old son, Jamie, lives with him, and Anthony is Jamie’s sole support. Anthony’s wife died in 2020, and Anthony has not remarried. Anthony received $

> Purple Corporation purchases residential rental property for $1,000,000 (disregarding any allocation to the land) on March 9, 2018. Straight-line cost recovery of $130,295 is taken before the property is sold on October 23, 2021, for $1,000,000. a. What

> Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Bill lives with Ashley, and she fully supports him. Bill

> Wally, Inc., sold the following three personal property assets in year 6: / What is Wally’s § 1245 recapture in year 6? a. $500 loss b. $300 gain c. $800 gain d. $1,600 gain

> Wally, Inc., sold the following three personal property assets in year 6: What is Wally’s net § 1231 gain or loss in year 6? a. $500 loss b. $300 gain c. $800 gain d. $1,600 gain

> Yanling 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. Yanling renovated the motel three years ago. Yanling’s motel is condemned by the city, which is going to use 2 of t

> Randall owns an office building (adjusted basis of $250,000) that he has been renting to a group of physicians. During negotiations over a new seven-year lease, the physicians offer to purchase the building for $900,000. Randall accepts the offer with th

> Does your state impose income tax on an S corporation in addition to imposing tax on the shareholders? Elaborate.

> Scott and Brooke are the sole shareholders of Tananger Company, a calendar year S corporation. After several loss years, in December 2021, Tananger is forced to borrow $300,000 for working capital purposes. Robin State Bank makes the loan to Tananger, bu

> During 2021, Jayden Steele received a distribution of $24,000 on stock he owns in Razorbill Corporation. He had planned to report this amount as dividend income until he talked to his father-in-law, Jim. According to Jim, who had examined Razorbill’s fin

> Prepare an outline of a speech on the topic “Should a Millennial Establish a Roth IRA and Contribute to It?” for your school’s Investment Club.

> Find the full IRS RMD table, and compute the 2022 required minimum distribution in each of the following situations. a. Anya’s IRA balance is $215,000, and she is 76 years old. b. Anya is 78 years old, and her IRA balance is $196,000. c. Anya, age 72, is

> Jacob purchased business equipment for $56,000 in 2018 and has taken $35,000 of regular MACRS depreciation. Jacob sells the equipment in 2021 for $26,000. What is the amount and character of Jacob’s gain or loss?

> Prepare two PowerPoint slides for each of the following items to present to your school’s Accounting Club. a. What is an inherited IRA? b. If you inherit an IRA, can you make additional contributions to it? c. Do an inherited IRA’s funds remain tax defer

> Locate IRS data about taxable IRA distributions, specifically reporting the annual number of returns with distributions and their amounts. Comment about the data for the most recent three years, using $100,000 AGI ranges up to $5,000,000. E-mail your gra

> Pedro comes to your office and indicates that he received $61,000 from a qualified retirement plan in 2021 before he was 59½ years old. He is not disabled or eligible for any of the other statutory exceptions to avoid the additional 10% early withdrawal

> In 2021, your client, Clear Corporation, changed from the cash to the accrual method of accounting for its radio station. The company had a positive § 481 adjustment of $2,400,000 as a result of the change and began amortizing the adjustment in 2021. In

> Your client, Vernon Jones, is a self-employed attorney. Vernon uses the cash method of accounting. In reviewing his accounting records to get ready to prepare his tax return for the current year, you find an entry in December about a lost check. In discu

> Your client, Alternate Fuel, Inc. (a regular corporation), owns three sandwich shops in the Philadelphia area. In 2018, the year Alternate Fuel incorporated, it acquired land on the outskirts of Philadelphia with the hope of someday farming the land to c

> Using information from the IRS Tax Stats website (irs.gov/ statistics), find a statistic for partnerships that indicates how much total noncapital gain there was in the latest year for which data are available.

> Find a state website that has tax forms and instructions for the state. Call that state “X.” Find a discussion in those sources that reveals whether state X taxes gains from the sale of real estate that is located in state Y when the taxpayer is an indiv

> Katie exchanges a building and land (used in her business) for Tyler’s land and building and some equipment (used in his business). a. What are Katie’s recognized gain or loss and basis for the land and building and eq

> Daniela Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value of $92,000) on the East Coast. On January 4, 2021, she exchanges it with Lisa Martin (an unrelated party) for undeveloped land on the West Coast and $3,000 cash. Lisa

> Thomas receives tangible personal property as an inheritance from a decedent who died in 2021. The property was depreciated by the deceased, and Thomas will also depreciate it. At the date of the deceased’s death, the property was worth more than the dec

> An individual taxpayer had a net $1231 loss in 2021. Could any of this loss be treated as a long-term capital loss? Why or why not?

> Maria meets all of the requirements of § 1237 (subdivided realty). In 2021, she begins selling lots and sells four separate lots to four different purchasers. She also sells two contiguous lots to another purchaser. The sales price of each lot is $30,000

> Barbella purchased a wedding ring for $15 at a yard sale in May. She thought the ring was costume jewelry, but it turned out to be a real diamond ring. She is not in the business of buying and selling anything. She researched the ring on the internet and

> George is the owner of numerous classic automobiles. His intention is to hold the automobiles until they increase in value and then sell them. He rents the automobiles for use in various events (e.g., antique automobile shows) while he is holding them. I

> Dennis sells short 100 shares of ARC stock at $20 per share on January 15, 2021. He buys 200 shares of ARC stock on April 1, 2021, at $25 per share. On May 2, 2021, he closes the short sale by delivering 100 of the shares purchased on April 1. a. What ar

> Missy, age 30, has owned her principal residence (adjusted basis of $225,000) for five years. During the first three years of ownership, she occupied it as her principal residence. During the past two years, she was in graduate school and rented the resi

> Cisco, a calendar year taxpayer who is age 63, owns a residence in which he has lived for 21 years. The residence is destroyed by fire on August 8, 2021. The adjusted basis is $190,000, and the fair market value is $320,000. Cisco receives insurance proc