Hortencia is employed as an accountant for a large firm in San Diego. For relaxation she likes to go to a nearby casino and play in blackjack tournaments. During 2019, she incurred $6,475 in gambling losses and $5,250 in gambling winnings. Hortencia plans to itemize her deductions in 2019 because she purchased a home this year and has mortgage interest expense; what amount could she claim on her return for other itemized deductions for the year?
> Eric, who is single, has income from his Schedule C of $150,000. His taxable income is $120,000 after his other deductions. What is Eric’s QBI deduction for 2019?
> Jose purchased a vehicle for business and personal use. In 2019, he used the vehicle 18,000 miles (80% of total) for business and calculated his vehicle expenses using the standard mileage rate (mileage was incurred ratably throughout the year). He paid
> In 2017, Gerald loaned Main Street Bakery $55,000. In 2018, he learned that he would probably receive only $6,400 of the loan. In 2019, Gerald received $3,000 in final settlement of the loan. Calculate Gerald’s possible deductions with respect to the loa
> In 2019 Arturo’s pleasure boat that he purchased in 2013 for $48,500 was destroyed by a hurricane in a part of Florida that was declared a federal disaster area. His loss was not totally covered by his insurance. On what form(s) will Arturo report this l
> Jaylen made a charitable contribution to his church in the current year. He donated common stock valued at $33,000 (acquired as an investment in 2005 for $13,000). Jaylen’s AGI in the current year is $75,000. What is his allowable charitable contribution
> Tyrone and Akira, who are married, incurred and paid the following amounts of interest during 2019: Home acquisition debt interest ……………………………... $15,000 Credit card interest …………………………………………………. 5,000 Home equity loan interest …………………………………………………. (used
> In 2018, Tomas, a single taxpayer, had $3,750 in state tax withheld from his paycheck. He properly deducted that amount on his 2018 tax return as an itemized deduction that he qualified for, thus reducing his tax liability. After filing his 2018 tax retu
> LMNO Corporation was formed in 2011. It reported net income (loss) over the 2011 through 2017 tax years, before accounting for any net operating losses, as follows: 2011……………………….$ (4,000) 2012……………………….19,000 2013……………………….23,000 2014………………………. (31,000
> Determine taxable income in each of the following independent cases. In all cases, the company was very profitable in all years prior to 2017 and it had retained earnings of $1,000,000 at the end of 2017. a. In 2018, Company A has taxable income of $60,
> Calvin purchased a 40% partnership interest for $43,000 in February 2017. His share of partnership income in 2017 was $22,000, in 2018 was $25,000, and in 2019 was $12,000. He made no additional contributions to or withdrawals from the partnership. On De
> Alcott invested $20,000 for a 25% interest in a partnership (not a passive activity) on January 1, 2019. The partnership borrowed $100,000 (with full recourse to the partners) on January 15, 2019, to cover short-term cash flow requirements. During the ye
> Zach contributed land with an FMV of $25,000 and a basis of $14,000 to a partnership on April 5, 2013. On June 6, 2019, the partnership distributed the land to Art, a partner in the same partnership. At distribution, the land had an FMV of $29,000. a. W
> Kerry is a partner in the Kerry, Davis, Smith & Jones Partnership. Kerry owned 25% from January 1, 2019, to June 30, 2019, when he bought Jones’s 25% interest. He owned 50% or the rest of the year. The partnership had ordinary income of $146,000 and $15,
> Barbara is single and owns a home in the city, which is her primary residence. She also owns a cottage at the beach, which she treats as a vacation home. In April 2019, she borrowed $50,000 on a home equity loan and used the proceeds to pay off credit ca
> Arnold exercised an incentive stock option in 2016, acquiring 1,500 shares of stock at an option price of $80 per share. The FMV of the stock at the date of exercise was $110 per share. In 2018, the rights became freely transferable and were not subject
> Herbie is the owner of two apartment buildings. Following is information related to the two buildings: Herbie elected the maximum depreciation available for each asset. What is the effect of depreciation on AMTI for 2019?
> William is not married, nor does he have any dependents. He does not itemize deductions. His taxable income for 2019 was $87,000 and his regular tax was $15,061. His AMT adjustments totaled $125,000. What is William’s AMT for 2019?
> William is not married, nor does he have any dependents. He does not itemize deductions. His taxable income for 2019 was $87,000 and his regular tax was $15,061. His AMT adjustments totaled $125,000. What is William’s AMT for 2019?
> Carson had the following itemized deductions in 2019: State income taxes………………..………………..………………..$ 1,500 Charitable contributions………………..………………..…………..9,900 Mortgage interest (personal residence) ………………..……….12,000 Medical expenses ($9,875 − [10.0% × $75,
> Virginia is an accountant for a global CPA firm. She is being temporarily transferred from the Raleigh, North Carolina, office to Tokyo. She will leave Raleigh on October 7, 2019, and will be out of the country for four years. She sells her personal resi
> Pedro sells investment land on September 1, 2019. Information pertaining to the sale follows: Adjusted basis $25,000 Selling price 90,000 Selling expenses 1,500 Down payment 12,000 Four installment payments 15,000 Mortgage assum
> Myer owns a 20% interest in a partnership (not involved in real estate) in which his at-risk amount was $50,000 at the beginning of the year. During the year, he receives a $40,000 distribution from the partnership. The partnership produces a $160,000 lo
> Jessica’s office building is destroyed by fire on November 15, 2019. The adjusted basis of the building is $410,000. She receives insurance proceeds of $550,000 on December 12, 2019. a. Calculate her realized and recognized gain or loss for the replacem
> Lewis owns 200 shares of stock in Modlin Corporation. His adjusted basis for the stock is $180,000. On December 15, 2019, he sells the stock for $170,000. He purchases 200 shares of Modlin Corporation stock on January 8, 2020 for $170,000. a. What are
> Harold owns 130 shares of stock in Becker Corporation. His adjusted basis for the stock is $210,000. On December 15, 2019, he sells the stock for $180,000. He purchases 200 shares of Becker Corporation stock on January 12, 2020, for $195,000. a. What a
> On January 1, 2019, Myron sells stock that has a $50,000 FMV on the date of the sale (basis $75,000) to his son Vernon. On October 21, 2019, Vernon sells the stock to an unrelated party. In each of the following, determine the tax consequences of these t
> Crystal owns 150 shares of Carson Inc. stock that has an adjusted basis of $100,000. On December 18, 2019, she sells the 150 shares for FMV ($88,000). On January 7, 2020, she purchases 200 shares of Carson stock for $127,500. a. What are Crystal’s reali
> Dominique is a manager for a regional bank. He is being relocated several states away to act as a temporary manager while a new branch is interviewing for a permanent manager. He will leave on May 1, 2019, and will be at the new location for less than on
> On February 1, 2019, a 39-year-old widow buys a new residence for $150,000. Three months later, she sells her old residence for $310,000 (adjusted basis of $120,000). Selling expenses totaled $21,000. She lived in the old house for 15 years. a. What ar
> Lauprechta Inc. has the following employees on payroll: Complete the table for taxes to be withheld for each pay period.
> Jacob Turner hired Jen Hatcher as a housekeeper starting on January 2 at $750 monthly. Jacob does not withhold any federal taxes. Assume that Jen is not a housekeeper for anyone else. Assume that Jacob paid $2,250 in wages for the fourth quarter of 2019.
> Reid’s personal residence is condemned on September 12, 2019, as part of a plan to add two lanes to the existing highway. His adjusted basis is $300,000. He receives condemnation proceeds of $340,000 on September 30, 2019. He purchases another personal r
> Leonard invests $10,000 cash in an equipment-leasing activity for a 15% share in the business. The 85% owner is Rebecca, who contributes $10,000 and borrows $75,000 to put in the business. Only Rebecca is liable for repayment of the loan. The partnership
> Why is it important to determine if the taxpayer has dependents to be claimed on the income tax return?
> Baker Company is trying to determine how often it needs to deposit payroll taxes for calendar year 2019. The company made the following quarterly payroll tax deposits during the last two years: Quarter beginning January 1, 2017 $10,000 Quarter beginni
> Roberto’s salary is $133,200 in 2019. Roberto is paid on a semimonthly basis, is single, and claims one allowance. Use the percentage method table in the Appendix to this chapter. a. What is Roberto’s federal tax withholding per pay period? b. What is
> Henry, who earned $115,920 during 2019, is paid on a monthly basis, is married, and claims four allowances. Use the percentage method table in the Appendix to this chapter. a. What is Henry’s federal tax withholding for each pay period? b. What is Henry’
> For each of the following cases, determine the amount of capital gain or loss to report in each year (after taking into account any applicable carrybacks) and the capital loss carryforward to 2019, if any. Assume that 2013 is the first year of operation
> In 2017, Jerry acquired an interest in a partnership in which he is not a material participant. The partnership was profitable until 2018. Jerry’s basis in the partnership interest at the beginning of 2018 was $55,000. In 2018, his share of the partnersh
> On April 1, 2019, Paul sold a house to Amy. The property tax on the house, which is based on a calendar year, was due September 1, 2019. Amy paid the full amount of property tax of $2,500. Calculate both Paul’s and Amy’s allowable deductions for the prop
> Denise contributes the following assets to a partnership in exchange for a 25% partnership interest: What is Denise’s beginning basis in her partnership interest?
> Jackson invested $190,000 in a passive activity five years ago. On January 1, 2017, his at risk amount in the activity was $45,000. His share of the income and losses in the activity were $52,000 loss in 2017, $20,000 loss in 2018, and $80,000 gain in 20
> Julia acquired passive Activity A in January 2015 and passive Activity B in July 2017. Until 2018 Activity A was profitable. Activity A produced a loss of $150,000 in 2018 and a loss of $150,000 in 2019. She had passive income from Activity B of $50,000
> Carlton holds undeveloped land for investment. His adjusted basis in the land is $200,000, and the FMV is $325,000. On November 1, 2019, he exchanges this land for land owned by his son, who is 31 years old. The appraised value of his son’s land is $320,
> In 2019, Kirsten invested $20,000 for a 10% partnership interest (not a passive activity). The partnership has losses of $150,000 in 2019 and $250,000 in 2020. Kirsten’s share of the partnership’s losses is $15,000 in 2019 and $25,000 in 2020. How much o
> Leslie and Jason, who are married, paid the following expenses during 2019: Interest on a car loan ……………………………………………………………………………… $ 100 Interest on lending institution loan …………………………………………………………………… (used to purchase municipal bonds) …………………………..………………
> Judy acquired passive Activity A in January 2014 and Activity B in July 2015. Until 2019 Activity A was profitable. Activity A produced a loss of $50,000 in 2019 and a loss of $75,000 in 2020. She has $45,000 passive income from Activity B in 2019 and $3
> Dante and Rosa, both under 65 and married, have a combined AGI of $45,000 in year 2019. Due to certain heart issues, Dante has been prescribed Lipitor® by a physician. For year 2019, Dante spent a total of $3,100 on the medication and $1,750 on doctor’s
> Reggie, who is 55, had AGI of $32,000 in 2019. During the year, he paid the following medical expenses: Drugs (prescribed by physicians) ………………………………….…. $ 500 Marijuana (prescribed by physicians) ………………………………. 1,400 Health insurance premiums–after taxes
> During the year 2019, Ricki, who is not self-employed and does not receive employer reimbursement for business expenses, drove her car 5,000 miles to visit clients, 10,000 miles to get to her office, and 500 miles to attend business-related seminars. All
> Reynaldo and Sonya, a married couple, had flood damage in their home due to a dam break near their home in 2019, which was declared a federally designated disaster area. The flood damage ruined the furniture that was stored in their garage. The following
> Mickey is a 12-year-old dialysis patient. Three times a week for the entire year, he and his mother, Sue, drive 20 miles one way to Mickey’s dialysis clinic. On the way home, they go 10 miles out of their way to stop at Mickey’s favorite restaurant. Thei
> In 2019, Andrew contributed equipment with an adjusted basis of $20,000 and an FMV of $18,000 to Construction Limited Partnership (CLP) in return for a 3% limited partnership interest. Andrew’s share of CLP income and losses for the year was as follows:
> Indicate whether each of the following items is considered a for AGI, (above-the line) deduction for the 2019 tax year. a. Student loan interest. b. Gambling losses. c. Early withdrawal penalty. d. Child support payments. e. Charitable contributions. f.
> Explain the business interest expense limitation rules for 2019.
> Under the alimony recapture rules, what amounts are designated for recapture reclassification, and what are the tax consequences for those agreements executed before 2019 and remain unchanged post 2018?
> Under the terms of a divorce decree executed May 1, 2018, Ahmed transferred a house worth $650,000 to his ex-wife, Farah, and was to make alimony payments of $3,000 per month. The property has a tax basis to Ahmed of $300,000. a. How much of this must b
> Chantel has received a 1099-INT from her financial institution showing $75 in box 2 of the form. How should she handle this on her 2019 tax return and why?
> In May 2019, Regina graduated from the Naval Academy with a degree in engineering and was assigned to San Diego as a permanent duty station. In her move to San Diego, Regina incurred the following costs: $450 in gasoline. $250 for renting a truck from UP
> Fabian, a single member of the military, was stationed at White Sands, New Mexico. On July 1, 2019, his army company transferred him to Florida as a permanent duty station. Fabian worked full time for the entire year. During 2019, he incurred and paid th
> Zach attended Champion University during 2014–2018. He lived at home and was claimed by his parents as a dependent during his entire education. He incurred education expenses of $10,000 during college, of which $2,000 was paid for by scholarships. To fin
> In 2019, Joseph and Patricia Jefferson redeemed $8,000 of Series EE U.S. savings bonds (principal of $5,500 and interest of $2,500), the proceeds from which were used to pay for qualified higher education expenses of their dependent daughter who is atten
> On July 1, 2019, Rene, a cash-basis taxpayer, purchased $500,000 of the newly issued bonds of Acce Corporation for $452,260. The 10-year bonds carry an interest rate of 8% and were sold to yield 9.5%. What amount of interest income must Rene report in
> Sean, who is single, received social security benefits of $8,000, dividend income of $13,000, and interest income of $2,000. Except as noted, those income items are reasonably consistent from year to year. At the end of 2019, Sean is considering selling
> Each of the following taxpayers received a state income tax refund in 2019. In all cases, the taxpayer has a filing status of married filing jointly. What amount of the refund is properly included in 2019 income? a. Refund of $729; taxpayer did not itemi
> Which of the following increases a taxpayer’s at-risk amount? a. Cash and the adjusted basis of property contributed to the activity. b. Borrowed amounts used in the activity for which the taxpayer is personally liable. c. Income from the activity. d. A
> Determine the amount of taxable income that should be reported by a cash-basis taxpayer in 2019 in each of the following independent cases: a. A taxpayer completes $500 of accounting services in December 2019 for a client who pays for the accounting work
> In 2014 Marie borrowed $10,000. In 2019, the debt was forgiven. Marie does not believe she should report the forgiveness of debt as income because she received nothing at the time the debt was forgiven in 2019. Do you agree or disagree? Support your posi
> Charles and Joan Thompson file a joint return. In 2018, they had taxable income of $92,370 and paid tax of $12,202. Charles is an advertising executive, and Joan is a college professor. During the fall 2019 semester, Joan is planning to take a leave of a
> Paul has the following information: AGI for 2019 ……………………….……. $155,000 Withholding for 2019 ……………………. 24,000 Total tax for 2018 ……………….………... 29,000 Total tax for 2019 ……………….……….... 28,447 a. How much must Paul pay in estimated taxes to avoid a penalt
> Victoria’s 2019 tax return was due on April 15, 2020, but she did not file it until June 12, 2020. Victoria did not file an extension. The tax due on the tax return when filed was $8,500. In 2019, Victoria paid in $12,000 through withholding. Her 2018 ta
> Using the appropriate tax tables or tax rate schedules, determine the tax liability for tax year 2019 in each of the following instances. In each case, assume the taxpayer can take only the standard deduction. a. A single taxpayer, not head of household,
> Determine the average tax rate and the marginal tax rate for each instance in question 40. a. Average = __________ Marginal = __________ b. Average = __________ Marginal = __________ c. Average = __________ Marginal = __________ d. Average = __________ M
> Determine the amount of the standard deduction for each of the following taxpayers for tax year 2019: a. Christina, who is single. b. Adrian and Carol, who are filing a joint return. Their son is blind. c. Peter and Elizabeth, who are married and file se
> Raphael and Martina are engaged and are planning to travel to Las Vegas during the 2019 Christmas season and get married around the end of the year. In 2019 Raphael expects to earn $45,000 and Martina expects to earn $15,000. Their employers have deducte
> Donald is a 21-year-old full-time college student. During 2019 he earned $2,550 from a part time job and $1,150 in interest income. If Donald is a dependent of his parents, what is his standard deduction amount? If Donald supports himself and is not a de
> On May 5, 2014, Jill purchased equipment for $40,000 to be used in her business. She did not elect to expense the equipment under § 179 or bonus depreciation. On January 1, 2019, she sells the equipment to a scrap metal dealer. What is the cost recovery
> Xavier and his wife Maria have total W-2 income of $93,102. They will file their tax return as married filing jointly. They had a total of $7,910 withheld from their paychecks for federal income tax. Using the tax tables, determine the amount of refund o
> Sheniqua, a single taxpayer, had taxable income of $93,678. Her employer withheld $16,509 in federal income tax from her paychecks throughout the year. Using the tax tables, would Sheniqua receive a refund or would she be required to pay additional tax?
> The W-2 incomes of Betty and her husband Ronald were $43,688 and $41,539, respectively. If Betty and Ronald use a filing status of married filing jointly, determine their tax liability using the tax tables
> The W-2 income of Sandra, a single taxpayer, was $88,793. Using the tax tables, determine Sandra’s tax liability.
> Use the tax rate schedules to determine the tax liability for each of the cases in Problems 43, 44, and 45. a. Liability for 43a = ____________ 43b = ____________ b. Liability for 44a = ____________ 44b = ____________ c. Liability for 45a = ____________
> Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the following cases. Use the tax tables to determine tax liability. a. Married taxpayers, taxable income of $38,862: Liability = __________
> Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the following cases. Use the tax tables to determine tax liability. a. Married taxpayers, taxable income of $89,889: Liability = ________ Marg
> Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the following cases. Use the tax tables to determine tax liability. a. Single taxpayer, taxable income of $38,862: Liability = __________
> Havel and Petra are married and will file a joint tax return. Havel has W-2 income of $45,588, and Petra has W-2 income of $47,229. What is their tax liability? Determine their tax liability using both the tax tables and the tax rate schedule.
> Cameron is single and has taxable income of $88,806. Determine his tax liability using the tax tables and using the tax rate schedule. Why is there a difference between the two amounts?
> Cindy Byrd donated stock (capital gain property) to a public charity that she has long sup-ported. She purchased the stock 4 years ago for $100,000, and on the date of the gift, it had a fair market value of $300,000. What is her maximum charitable contr
> What are the five filing statuses that are permitted on a Form 1040?
> Use the information in Problem 51. What education tax credits are available if Walt and Deloris report modified AGI of $119,700? Does your answer change if Tiffany is taking one class a semester (is less than a half-time student) and not taking classes i
> Niles and Marsha adopted an infant boy (a U.S. citizen). They paid $15,500 in 2018 for adoption-related expenses. The adoption was finalized in early 2019. Marsha received $3,000 of employer-provided adoption benefits. For question (a), assume that any a
> In 2019, Jeremy and Celeste, who file a joint return, paid the following amounts for their daughter, Alyssa, to attend the University of Colorado during academic year 2019–2020. Alyssa was in her first year of college and attended full-time. Tuition an
> In 2015 through 2018, Korey, who is single, borrowed a total of $25,000 for higher education expenses on qualified education loans. In 2019, while still living at home and being claimed by his parents as a dependent, he began making payments on the loan.
> When an individual who is single has taxable income of $60,000, the tax rate on qualified dividends is a. 0%. b. 25%. c. 15%. d. 5%. 26. Graciela, who is single, reported itemized deductions of $12,100 on her 2018 tax return. Her itemized deductions inc
> A single taxpayer is 26 years old and has wages of $18,000 and interest income of $450. Which Form 1040 Schedule must the taxpayer use? a. Schedule 1. b. Schedule 2. c. Schedule 3. d. The taxpayer does not need to use a Schedule. 17. Which Schedule must
> Jennifer and Paul, who file a joint return, have taxable income of $82,825 and the following tax liability: Their marginal tax rate is: a. 10%. b. 12%. c. 13% d. 22%. 2. Jennifer and Paul, who file a joint return, have taxable income of $82,825 and the
> Eric exchanged land used in his business with Geoff for another lot of land. Eric exchanged the land with a $75,000 FMV and $45,000 basis along with $15,000 cash. Geoff’s basis in his land is $60,000, and the FMV is $90,000. Which of the following statem
> Allie and Buddy are married, file a joint return, and have one son, Zack, age 5. Buddy has earned income of $47,000, and Allie was a full-time student for eight months (with no income). They paid a qualified child care center $3,450. How much is Allie an
> During 2019, Raul incurred and paid the following expenses: Prescription drugs ……………………………………………………….……… $ 470 Vitamins and over-the-counter cold remedies …………………………… 130 Doctor and dentist visits …………………………………………………………. 700 Health club fee ………………………………
> Jamison is a single dad with two dependent children: Zoey, age 7, and Conner, age 3. He has an AGI of $39,000 and paid $4,300 to a qualified day care center for the two children. What amount can Jamison receive for the child and dependent care credit? a.
