Question: In 2016, Gale and Cathy Alexander hosted

> Big Bull restaurant employs twenty-three employees who receive tips. During the current year, Big Bull has $410,000 in gross revenues, and its employees do not report any tip income. In what ways may the restaurant allocate the tip income to the employee

> Sophie is a single taxpayer. For the first payroll period in October 2016, she is paid wages of $3,280.50 monthly. Sophie claims three allowances on her Form W-4. a. Use the percentage method to calculate the amount of Sophie’s withholding for a monthly

> Is land allowed to be depreciated? Why or why not?

> Ralph and Kathy Gump are married with one 20-year-old dependent child. Ralph earns a total of $39,000 and estimates their itemized deductions to be $16,000 for the year. Kathy is not employed. Use Form W-4 to determine the number of withholding allowance

> Phan Mai is single with two dependent children under age 17. Phan estimates her wages for the year will be $36,000, will have $5,700 of dependent care expenses, and her itemized deductions will be $11,000. Assuming Phan files as head of household, use Fo

> Go to the IRS website (www.irs.gov) and redo Problem 7 using the most recent Form 6252, Installment Sale Income. Print out the completed Form 6252.

> On July 1, 2016, Ted, age 73 and single, sells his personal residence of the last 30 years for $368,000. Ted’s basis in his residence is $42,000. The expenses associated with the sale of his home total $22,000. On December 15, 2016, Ted purchases and occ

> Larry Gaines, a single taxpayer, age 42, sells his personal residence on November 12, 2016, for $148,000. He lived in the house for 7 years. The expenses of the sale are $9,000, and he has made capital improvements of $7,000. Larry’s cost basis in his re

> Teresa’s manufacturing plant is destroyed by fire. The plant has an adjusted basis of $270,000, and Teresa receives insurance proceeds of $410,000 for the loss. Teresa reinvests $420,000 in a replacement plant. a. Calculate Teresa’s recognized gain if sh

> Carey exchanges real estate for other real estate in a qualifying like-kind exchange. Carey’s basis in the real estate given up is $120,000, and the property has a fair market value of $165,000. In exchange for her property, Carey receives real estate wi

> Rebecca has a $6,400 casualty loss, before any limitations, as a result of the complete destruction of personal-use property. She also receives $1,200 of insurance proceeds for the destruction of a second item of personal-use property which was damaged i

> An office machine used by Josie in her accounting business was completely destroyed by fire. The adjusted basis of the machine was $8,000 (original basis of $14,000 less accumulated depreciation of $6,000). The machine was not insured. Calculate the amou

> William sold Section 1245 property for $25,000 in 2016. The property cost $37,000 when it was purchased 5 years ago. The depreciation claimed on the property was $17,000. a. Calculate the adjusted basis of the property. b. Calculate the recomputed basis

> Amy is a calendar-year taxpayer reporting on the cash basis. Please indicate how she should treat the following items for 2016: a. She makes a deductible contribution to an IRA on April 15, 2017. b. She has made an election to accrue the increase in va

> In 2016, Michael has net short-term capital losses of $1,500, a net long-term capital loss of $27,000, and other ordinary taxable income of $45,000. a. Calculate the amount of Michael’s deduction for capital losses for 2016. b. Calculate the amount and n

> 8. Elvin, a single taxpayer 45 years of age, sells his residence in 2016. He receives $35,000 in cash, and the buyer assumes his $100,000 mortgage. Elvin also pays $8,100 in commissions and transfer costs. a. Calculate the amount realized on the sale. b.

> Steve Drake sells a rental house on January 1, 2016, and receives $120,000 cash and a note for $45,000 at 10 percent interest. The purchaser also assumes the mortgage on the property of $35,000. Steve’s original cost for the house was $

> Nadia Shalom has the following transactions during the year: Sale of office equipment on March 15 that cost $19,000 when purchased on July 1, 2014. Nadia has claimed $3,000 in depreciation and sells the asset for $13,000 with no selling costs. Sale of la

> Chrissy receives 200 shares of Chevron stock as a gift from her father. The stock cost her father $9,000 10 years ago and is worth $10,500 at the date of the gift. a. If the stock is sold for $12,500, calculate the amount of the gain or loss on the sale.

> Jocasta owns an apartment complex that she purchased 6 years ago for $750,000. Jocasta has made $60,000 of capital improvements on the complex, and her depreciation claimed on the building to date is $137,500. Calculate Jocasta’s adjusted basis in the bu

> Charu Khanna received a Form 1099-B showing the following stock transactions and basis during 2016 None of the stock is qualified small business stock. The stock basis was reported to the IRS. Calculate Charu’s net capital gain or loss

> During 2016, Tom sold Sears stock for $10,000. The stock was purchased 4 years ago for $13,000. Tom also sold Ford Motor Company bonds for $35,000. The bonds were purchased 2 months ago for $30,000. Home Depot stock, purchased 2 years ago for $1,000, was

> 1. Martin sells a stock investment for $26,000 on August 2, 2016. Martin’s adjusted basis in the stock is $15,000. a. If Martin acquired the stock on November 15, 2015, calculate the amount and the nature of the gain or loss. b. If Martin had acquired th

> JBC Corporation is owned 20 percent by John, 30 percent by Brian, 30 percent by Charlie, and 20 percent by Z Corporation. Z Corporation is owned 80 percent by John and 20 percent by an unrelated party. Brian and Charlie are brothers. Answer each of the f

> Geraldine is an accrual basis taxpayer who has the following transactions during the current calendar tax year: Accrued business income (except rent) …………………………………...$220,000 Accrued business expenses (except rent) …………………………………. 170,000 Rental income on

> Annie develops a successful tax practice. She sells the practice to her friend Carol for $54,000 and moves to Florida to retire. The tax practice has no assets except intangible benefits such as the goodwill and going-concern value Annie has developed ov

> Derek purchases a small business from Art on July 1, 2016. He paid the following amounts for the business: Fixed assets ………………………………. $220,000 Goodwill …………………………………... 50,000 Covenant not to compete …………... 55,000 Total ………………………………………. $325,00

> Deborah purchases a new $32,000 car in 2016 to use exclusively in her business. If Deborah does not elect to expense but does take bonus depreciation in 2016 and holds the car until it is fully depreciated, how many years will this take? Please show your

> Tom has a successful business with $100,000 of taxable income before the election to expense in 2016. He purchases one new asset in 2016, a new machine which is 7-year MACRS property and costs $25,000. If you are Tom’s tax advisor, how would you advise T

> Go to the IRS website (www.irs.gov) and assuming bonus depreciation is used, redo Problem 15, using the most recent interactive Form 4562, Depreciation and Amortization. Print out the completed Form 4562.

> During 2016, Palo Fiero purchases the following property for use in his calendar year-end manufacturing business: Palo uses the accelerated depreciation method under MACRS, if available, and does not make the election to expense or take bonus depreciat

> On September 14, 2016, Jay purchased a passenger automobile that is used 75 percent in his accounting business. The automobile has a basis for depreciation purposes of $43,000, and Jay uses the accelerated method under MACRS. Jay does not elect to expens

> On February 2, 2016, Alexandra purchases a personal computer for her home. The computer cost $2,800. Alexandra uses the computer 80 percent of the time in her accounting business, and the remaining 20 percent of the time for various personal uses. Calcul

> During 2016, William purchases the following capital assets for use in his catering business: New passenger automobile (September 30) ………. $21,500 Baking equipment (June 30) …………………………………6,500 Assume that William decides to use the election to expense

> The Au Natural Clothing Factory has changed its year-end from a calendar year-end to March 31, with permission from the IRS. The income for its short period from January 1 to March 31 is $24,000. Calculate the tax for this short period.

> Rocky Jackson, a friend of yours, just started a new job. He is attempting to fill out Form W-4 and has asked for your help. He would like to receive a large refund when he files his return and would therefore like to claim as few allowances as possible.

> Charlie’s Green Lawn Care is a cash basis taxpayer. Charlie Adame, the sole proprietor, is considering delaying some of his December 2016 customer billings for lawn care into the next year. In addition, he is thinking about paying some of the bills in la

> 1. Jim has a house payment of $2,000 per month of which $1,700 is deductible interest and real estate taxes with the remaining $300 representing a repayment of the principal balance of the note. Jim’s marginal tax rate is 30 percent. What is Jim’s after-

> 1. Which of the following have privileged communication with a client in a noncriminal tax matter? a. CPAs b. Enrolled agents c. Attorneys d. a and c e. a, b, and c 2. The burden of proof remains on the taxpayer for corporations, trusts, and partnership

> 1. Which of the following is a responsibility of a local office of the IRS? a. Advising the Treasury Department on legislation b. Intelligence operations c. Appellate procedures d. Developing IRS rules and regulations e. None of the above 2. Which of th

> 1. Carl transfers land with a fair market value of $120,000 and basis of $30,000, to a new corporation in exchange for 85 percent of the corporation’s stock. The land is subject to a $40,000 liability, which the corporation assumes. What amount of gain m

> 1. Ironwood Corporation has ordinary taxable income of $40,000 in the current tax year, and a long-term capital loss of $20,000. What is the corporation’s tax liability for the current year? a. $4,500 d. $10,000 b. $6,000 e. None of the above c. $7,500

> 1. A loss from the sale or exchange of property will be disallowed in which of the following situations? a. A transaction between a partnership and a partner who owns 40 percent of the partnership capital b. A transaction between a partnership and a part

> 1. Which of the following is not a partnership for tax purposes? a. Willis and James purchase and operate a shoe store. b. Sharon and Gary operate an accounting practice together. c. Lillian and Don purchase real estate together as an investment, not as

> Calculate the following: a. The first year of depreciation on a residential rental building costing $200,000purchased June 2, 2016. b. The second year of depreciation on a computer costing $1,500 purchased in May 2015, using the half-year convention and

> Yolanda is a cash basis taxpayer with the following transactions during the year: Cash received from sales of products……………………………………. $66,000 Cash paid for expenses (except rent and interest) …………………...40,000 Rent prepaid on a leased building for 18 mon

> Calculate the amount of the child and dependent care credit allowed for 2016 in each of the following cases, assuming the taxpayers had no income other than the stated amounts. a. William and Carla file a joint tax return. Carla earned $26,000 during the

> What is the maximum investment income a taxpayer is allowed to have and still be allowed to claim the earned income credit? Please speculate as to why there is an investment income limit in the tax law.

> While preparing Massie Miller’s 2016 Schedule A, you review the following list of possible charitable deductions provided by Massie: Cash contribution to a family whose house burned down ………………………………. $1,000 Time while working as a volunteer at Food Ban

> Margaret and David Simmons are married and file a joint income tax return. They have two dependent children, Margo, 5 years old (Social Security number 316-31-4890), and Daniel, who was born during the year (Social Security number 316-31-7894). Margaret’

> Your supervisor has asked you to research the following situation concerning Scott and Heather Moore. Scott and Heather are married and file a joint return. Scott works full-time as a wildlife biologist, and Heather is a full-time student enrolled at Onl

> 1.Which of the following is correct for Qualified Tuition Programs? a. Contributions are deductible, and qualified educational expense distributions are tax free. b. Contributions are not deductible, and qualified educational expense distributions are ta

> 1. Which of the following donations are not deductible as a charitable contribution? a. A donation of clothing to Goodwill Industries b. A cash contribution to a church c. A contribution of stock to a public university d. A contribution of a taxpayer’s t

> 1. The cost of which of the following expenses is not deductible as a medical expense on Schedule A, before the 10 percent of adjusted gross income limitation? a. A psychiatrist b. Botox treatment to reduce wrinkles around eyes c. Acupuncture d. Expense

> 1. In 2016, Irene, an unmarried individual, pays $6,500 in qualified adoption expenses to an adoption agency for the final adoption of an eligible child who is not a child with special needs. In the same year, the individual’s employer, under a qualified

> 1. The American Opportunity tax credit is 100 percent of the first of tuition and fees paid and 25 percent of the next . a. $600; $1,200 b. $1,100; $550 c. $2,000; $2,000 d. $1,100; $5,500 e. None of the above 2. Jane graduates from high school in June

> 1. Russ and Linda are married and file a joint tax return claiming their three children, ages 4, 7, and 18, as dependents. Their adjusted gross income for 2016 is $105,300. What is Russ and Linda’s total child credit for 2016? a. $600 b. $1,000 c. $2,000

> Steve and Sue are married with three dependent children. Their 2016 joint income tax return shows $389,000 of AGI and $60,000 of itemized deductions made up of $30,000 of state income taxes and $30,000 of charitable contributions. Calculate the following

> In 2016, Van receives $20,000 (of which $4,000 is earnings) from a qualified tuition program. He uses the funds to pay for his college tuition and other qualified higher education expenses. How much of the $20,000 is taxable to Van?

> Jose paid the following amounts for his son to attend Big State University in 2016: Tuition ……………………………………. $6,400 Room and board………………………. 4,900 Books………………………………………….967 A car to use at school…………………1,932 Student football tickets………………...237 Spending

> Diane is a single taxpayer who qualifies for the earned income credit. Diane has two qualifying children who are 3 and 5 years old. During 2016, Diane’s wages are $17,700 and she receives dividend income of $700. Calculate Diane’s earned income credit us

> Josh is a judge employed by the county. He must purchase and maintain his judicial robes. The total cost of purchasing a new robe and dry cleaning for the current year is $750, which is not reimbursed by his employer. How much may he deduct on his tax re

> George is employed as a sales manager for a computer manufacturer. His employer does not have an accountable expense reimbursement plan. George is reimbursed by his employer for $3,000 of travel expenses. How will the travel expenses and reimbursement be

> During the 2016 tax year, Irma incurred the following expenses: Union dues……………………â&#12

> Jim is fired from his job as a waiter and decides to take an extended trip to Europe. After touring Europe for 3 months, Jim returns to look for a new job as a waiter. Are his job-hunting expenses deductible for 2016? Please explain:

> Dan has a 20-year-old vintage car behind his residence. He has rarely used it. This year he discovers that it has been completely destroyed by rust. The car originally cost $5,000 and had a fair market value of that amount before the rust destroyed it. D

> Kerry’s car is totaled in an auto accident. The car originally cost $18,000, but is worth $7,500 at the time of the accident. Kerry’s insurance company gives her a check for $7,500. Kerry has $30,000 of adjusted gross income. How much can Kerry claim as

> Go to the IRS website (www.irs.gov) and print out a copy of the most recent Instructions for Form 4684, Casualties and Thefts.

> Wilbur DuVal has an apartment full of antique furniture. A fire in the apartment destroys a large part of his furnishings. The destroyed furnishings had a fair market value of $40,000, and Wilbur’s original basis in the furnishings was $33,100. He recove

> On January 3, 2016, Carey discovers his diamond bracelet has been stolen. The bracelet had a fair market value and adjusted basis of $7,000. Assuming Carey had no insurance coverage on the bracelet and his adjusted gross income for 2016 is $50,000, calcu

> In June of 2016, Maureen’s house is vandalized during a long-term power failure after a hurricane hit the city. The president of the United States declares Maureen’s city a disaster area as a result of the wide-scale vandalism. In which tax year may Maur

> List the rules that apply to taxpayers with a qualifying child in order to claim the EIC.

> Richard donates publicly traded Gold Company stock with a basis of $1,000 and a fair market value of $15,000 to the college he attended, which is considered a public charity. Richard has owned the shares for 10 years. How is this contribution treated on

> Jerry made the following contributions during 2016: His synagogue (by check) ……………………â&#

> Three years ago, Barbara donates a painting that cost $8,000, to a university for display in the president’s office. The fair market value of the painting on the date of the gift is $14,000. If Barbara had sold the painting, the difference between the sa

> Mark owns his home and has a $250,000 mortgage related to his purchase of the residence. When his daughter went to college in the fall of 2016, he borrowed $20,000 through a home equity loan on his house to help pay for her education. The interest expens

> Helen paid the following amounts of interest during the 2016 tax year: Mortgage interest on Dallas residence (loan balance $50,000) ……………$1,585 Automobile loan interest (personal use only) ………………………………………….440 Mortgage interest on Vail residence (loan b

> Janet and James purchased their personal residence 15 years ago for $300,000. For the current year, they have an $80,000 first mortgage on their home, on which they paid $5,750 in interest. They also have a home equity loan secured by their home with a b

> Ken paid the following amounts for interest during 2016: Qualified interest on home mortgage…………………â€&

> Matthew borrows $250,000 to invest in bonds. During the current year, his interest on the loan is $30,000. Matthew’s interest income from the bonds is $10,000. This is Matthew’s only investment income. a. Calculate Matthew’s itemized deduction for invest

> Mary’s mother defaults on a home loan and Mary pays $600 in loan payments, including $175 in interest. Mary is not legally obligated on the loan and has no ownership interest in her mother’s home. a. What amount, if any, may Mary claim as an itemized ded

> Mary paid $2,000 of state income taxes in 2016. The total sales tax she paid during 2016 was $4,500, which included $3,000 for the cost of a new car. How should Mary treat the taxes paid on her 2016 tax return?

> List the rules that apply to taxpayers without a qualifying child in order to claim the EIC.

> Laura is a single taxpayer living in New Jersey with adjusted gross income for the 2016 tax year of $35,550. Laura’s employer withheld $3,300 in state income tax from her salary. In April of 2016, she pays $700 in additional state taxes

> Mike sells his home to Jane on April 2, 2016. Jane pays the property taxes covering the full calendar year in October, which amount to $2,500. How much may Mike and Jane each deduct for property taxes in 2016? Mike’s deduction Jane’s deduction

> Lyndon’s employer withheld $1,800 in state income taxes from Lyndon’s wages. Lyndon obtained a refund of $200 this year for overpayment of state income taxes for last year. State income taxes were an itemized deduction on his prior year return. His liabi

> Cindy and Paul are married and live together in Arizona. During the year, Paul receives a salary of $45,000 and $4,000 of dividends from stock that is his separate property. Cindy receives a salary of $27,000. Cindy and Paul receive $1,500 in interest in

> Janet needs an elevator seat attached to her stairs since she has a medical condition that makes her unable to climb the stairs in her house. The $10,000 spent on the elevator seat does not increase the value of her house according to a local appraiser.

> In 2016, Margaret and John Murphy (both over age 65) are married taxpayers who file a joint tax return with AGl of $26,500. During the year they incurred the following expenses: Medical insurance premiums ……&acirc

> Does the tax on unearned income of minor children, or “kiddie tax,” apply to wages earned by minors in summer and other jobs?

> Linda installed a special pool for the hydrotherapeutic treatment of severe arthritis, as prescribed by her doctor. The cost of installing the pool was $20,000, and her insurance company paid $5,000 toward its cost. The pool increased the value of Linda’

> Explain the two different ways that the tax on unearned income of minor children, or “kiddie tax,” can be reported.

> Nikkie and Jean have two children, Richard (age 4) and Roberta (age 3). For purposes of the tax on a child’s unearned income, Richard has net unearned income of $6,000 and Roberta has net unearned income of $4,000. Assuming that their total tax on a chil

> Brian and Kim have a 12-year-old child, Stan. For 2016, Brian and Kim have taxable income of $52,000, and Stan has nonqualifying dividend income of $4,500 and investment expenses of $250. No election is made to include Stan’s income on Brian and Kim’s re

> Explain the purpose of the provision in the tax law that taxes unearned income of certain minor children at their parents’ tax rates.

> Show the simplified formula for calculating AMT. Do not show tax rates or an exemption amount.

> List the 7 rules that all taxpayers must meet in order to claim the EIC.

> What are the two tax rates which are used to calculate AMT, ignoring the special treatment of dividends and capital gains?

> Although the AMT is meant to prevent high-income taxpayers from using tax shelters to avoid paying tax, why might married taxpayers with several children living in a state with high state income taxes and property taxes (e.g., California or New York) fi

> List two common deductions which are allowed for regular tax purposes but are not deductible for AMT purposes.