Question: In 2018, the CEO of Crin1son, Inc.,

> Celine has the following capital gain and loss transactions for 2018. After the capital gain and loss netting process, what is the amount and character of Celine's gain or loss? $ 5,000 Short-term capital gain Short-term capital loss (2,100) Long-t

> Michael owns a rental house that generated a $10,000 Joss this year. Michael manages the rental property, but does not meet the standards for n1aterial participation. Michael is a college professor and has wages of $60,000 and $5,000 in dividend income.

> Which of the following statements regarding passive activity losses is true? a. A net passive activity loss may be deducted against wages. b. Losses on rental property are always considered passive. c. A passive activity is one in which the taxpayer doe

> Data, Inc., purchased and placed in service a $5,000 computer on August 24, year 3. This is the only asset purchase during the year. Section 179 expensing was not elected. Using the excerpt of the MACRS half-year convention table below, What is the MACRS

> Stem Corp. bought a machine in February of year 7 for $20,000. Then Stem bought furniture in November of year 7 for $30,000. Both machines were placed in service for business purposes in1mediately after purchase. No other assets were purchased during yea

> Cox Construction, a con1pany in its 10th year of business, purchased a piece of equipment on April I, year 9, for $20,000. Cox has used it for business purposes since the initial purchase date. The con1pany depreciated the equipment using the MACRS half-

> Michael Sima, a sole proprietor craftsman, purchased an amount of equipn1ent in the current year that exceeded the maximum allowable § 179 depreciation election limit by $20,000. Sima's total purchases of property placed in service in the current year di

> Two independent situations are described below. Each situation has future deductible amounts and/or future taxable amount5 produced by temporary differences. The enacted tax rate is 25% for both situations. Determine the income tax expense for the year

> Cavan Company prepared the following reconciliation between book income and taxable income for the current year ended Decen1ber 31, year 1. Cavan's effective Federal and state income tax rate for year 1 is 30%. The depreciation difference will reverse

> Continue with the facts presented in Problem 12. At the end of the first year, SD distributes $100,000 cash to Sam. No distribution is made to Drew. a. How does Sam treat the payment? b. How much income or gain would Sam recognize as a result of the dis

> At the end of year 6, the tax effects of temporary differences reported in Tortoise Company's year-end financial statements were as follows. A valuation allowance was not considered necessary. Tortoise anticipates that $40,000 of the deferred tax liabi

> Two independent situations are described below. Each involves future deductible amounts and/ or future taxable amounts produced by temporary differences. The enacted tax rate is 25% for both situations. Determine the change in the deferred tax asset ba

> Hart's adjusted basis of his interest in a partnership was $30,000. He received a non liquidating distribution of $24,000 cash plus a parcel of land with a fair market value and partnership basis of $9,000. Hart's basis for the land is: a. $9,000 b. $6,0

> After a corporation's status as an S corporation is revoked or tern1inated, how many years is the corporation required to wait before making a new S election, in the absence of IRS consent to an earlier election? a. 1 b. 3 c. 5 d. 10

> The Manhew Corporation, an S corporation, is equally owned by three shareholders Emily, Alejandra, and Kristina. TI1e corporation is on the calendar year basis for tax and financial purposes. On April 1 of the current year, Emily sold her one-third inter

> Zinco Corp. was a calendar year S corporation. Zinco's S status terminated on April 1, year 6, when Case Corp. became a shareholder. During year 6 (365-day calendar year), Zinco had non separately con1puted income of $310,250. If no election was made by

> Which of the following statements is most correct? a. Tax preference items for the alternative minimum tax are always added back to regular taxable income. b. Itemized deductions that are added back to regular taxable income for the alternative minimum

> Carol reports taxable income of $48,000. Included in that calculation are the following items. Carol also had excluded municipal bond interest income of $8,000, $3,000 of which was deen1ed to be private activity bond interest. What are Carol's total al

> How is the alternative minimum tax credit applied in the calculation of the tentative minin1um tax (TMT)? a. It is carried forward indefinitely and applied to regular tax only. b. It is carried back five years and applied to regular tax only. c. It is c

> Anthony entered into a long-tern1 construction contract in year 3. The total profit of the contract is $80,000 and does not change over the life of the contract. The contract will be completed in year 5. The contract is 20%. and 70% complete at the end

> Using the legend provided, indicate which form of business entity each of the following characteristics describes. Some of the characteristics may apply to more than one form of business entity. a. Basis for an ownership interest is increased by an inv

> In 2014, Jed James began planting a vineyard. The costs of the land preparation, labor, rootstock, and planting were capitalized. The land preparation costs do not include any non depreciable land costs. In 2018, when the plants became viable, Jed placed

> For many years, Saul's sole proprietorship and his related Form 1040 have had a number of AMT tax preferences and AMT adjustments. He has made the AMT calculation each year, but the calculated amount always has been SO. Saul's regular taxable income and

> Cooper Partnership, a calendar year partnership, made qualifying rehabilitation expenditures to a building that it has used in its business for eight years. These improvements were placed in service on January 5, 2017. The amount of the rehabilitation ex

> Balm, Inc., has a general business credit for 2018 of $90,000. Balm's regular income tax liability before credits is $140,000, and its tentative AMT is $132,000. Calculate the amount of general business credit Balm can use in 2018, and calculate its gene

> To what extent are the personal assets of a general partner, limited partner, or member of an LLC subject to (a) contractual liability claims, such as trade account5 payable, and (b) malpractice claims against the entity? Answer the question for partne

> Jim Dunn, Amy Lauersen, and Tony Packard have agreed to form a partnership. In return for a 30%. capital interest, Dunn transferred machinery (basis $268,000, fair market value $400,000) subject to a liability of $100,000. The liability was assumed by th

> What type of information-sharing agreements does the IRS have with the revenue agency of the Bahamas? Canada? Germany? Israel? Argentina?

> In a two-page paper, separately evaluate each of the following alternative pro- Digging Deeper posals for taxing the income from property. a. All assets would be valued at the end of the year, any increase in value that occurred during the year would be

> What is the function of a partner's capital account under the rules of generally accepted accounting principles (GAAP)' What is the partner's initial balance in the capital account? How and when does the capital account increase and decrease? What is the

> Identify whether the taxpayer's economic position has changed in the following exchanges such that they are subject to current taxation. That is, identify whether the following qualify as like-kind exchanges under § 1031. a. Improved for unimproved real

> On your review of the books and records of Ridge Corporation, you note the following information pertaining to its tax provision: a. Calculate Ridge's taxable income and Federal income tax liability for the year. b. Calculate Ridge's deferred income ta

> Owl is a closely held corporation owned by eight shareholders (each has 12.5% of the stock). Its taxable income for the most recent year was $6,250,000. Owl's financial records also provides the following information. a. Calculate Owl's Federal income

> Charles is planning to invest $10,000 in a venture whose management is undecided as to whether it should be structured as a regular corporation or as a partnership. Charles will hold a l()OA. interest in the entity. Determine the treatment to Charles if

> Carlson's general business credit for the current year is $84,000. His net income tax is $190,000, tentative minimum tax is $175,000, and net regular tax liability is $185,000. He has no other tax credits. Determine the amount of Carlson's general busine

> In 2018, Robert entertains four key clients and their spouses at a nightclub. Business discussions occurred over dinner and prior to the entertainment beginning. Expenses were $200 (limo charge), $120 (cover charge), $700 (drinks and dinner), and $140 (t

> Vogel Corporation owns two subsidiaries. Song, located in State A, generated $500,000 taxable income this year. Bird, located in State B, generated a $100,000 loss for the period. a. Determine Song's taxable income in States A and B, assuming that the su

> Brenda, who is self employed, travels from Chicago to Barcelona (Spain) on business. She is gone for 10 days (including 2 days of travel), during which time she spends 5 days conducting business and 3 days sightseeing. Her expenses are $1,500 (airfare),

> Filion operates n1anufacturing facilities in States A and B. Filion has neil."us with both states; apportionment factors are .70 for A and .30 for B. Taxable income for the year totaled $150,000, with a $200,000 A profit and a S50,000 Bloss. Calculate ta

> In 2018, Meghann Carlson, a single taxpayer, has QB! of $110,000 and modified taxable income of $78,000 (this is also her taxable income before the QB! deduction). Given this information, what is Meghann's QB! deduction?

> Mio was transferred from New York to Germany. He lived and worked in Germany for 340 days in 2018. Mio's salary for 2018 is $190,000. What is Mio's foreign earned income exclusion? (In your computation, round any division to four decimal places before co

> Cordero, Inc., is a calendar year taxpayer and a CFC for the entire tax year. Yancy Company, a U.S. corporation, owns 75% of Cordero's one class of stock for the entire year. Cordero's Subpart F income for the year is $450,000, and no distributions were

> Franco owns a 600Ai interest in the Dulera LLC. On Decen1ber 31 of the current tax year, his basis in the LLC interest is S 128,000. The fair market value of the interest is $140,000. Dulera then distributes to Franco $30,000 cash and equipment with an a

> J\1abel and Alan, who are in the 32% tax bracket, recently acquired a fast food franchise. Both of them will work in the business and receive a salary of $175,000. They anticipate that the annual profits of the business, after deducting salaries, will be

> Fred, who is self employed, travels from Denver to Miami primarily on business. He spends five days conducting business and two days sightseeing. His expenses are $400 (airfare), $150 per day (meals), and $300 per night (lodging). What are Fred's deducti

> Dion, an S shareholder, owned 20%. of Meadow Brook's stock for 292 days and 25% for the remaining 73 days in the year. Using the per-day allocation method, compute Dion's share of the following S corporation items. Schedule K Totals Dion's Schedule

> Valentino is a patient in a nursing home for 45 days in 2018. While in the nursing home, he incurs total costs of S 13,500. Medicare pays $8,000 of the cost5. Valentino receives $15,000 from his long-term care insurance policy, which pays while he is in

> Samantha recently was employed by an accounting firm. During the year, she spends $2,500 for a CPA exam review course and begins working on a law degree in night school. Her law school expenses were $4,200 for tuition and $450 for books (which are not a

> In 2018, Miranda records net earnings from self-employment of $146,000. She reports no other gross income. Determine the amount of Miranda's self-employment tax and her for AGI income tax deduction.

> On April 5, 2018, Kinsey places in service a new automobile that cost $36,000. He does not elect § 179 expensing, and he elects not to take any available additional first-year depreciation. The car is used 70% for business and 30% for personal use in eac

> In 2018, McKenzie purchased qualifying equipment for his business that cost $212,000. The taxable incon1e of the business for the year is $5,600 before consideration of any§ 179 deduction. a. Calculate McKenzie's § 179 expense deduction for 2018 and any

> Donna donates stock in Chipper Corporation to die American Red Cross on September 10, 2018. She purchased the stock for $18,100 on December 28, 2017, and it had a fair market value of $27,000 when she made the donation. a. What is Donna's charitable cont

> In 2018, Simon, age 12, has interest income of $4,800 and no earned income. He has no investment expenses. Determine Simon's net unearned income and total tax liability.

> Plum Corporation will begin operations on January 1. Earnings for the next five years are projected to be relatively stable at about $80,000 per year. The shareholders of Plum are in the 32% tax bracket. Evaluate whether Plum should operate as a C corpor

> Troy's financial records for the year reflect the following: Calculate Troy's net investment income and his current investment interest deduction. How is any potential excess investment interest deduction treated? Interest income from bank savings

> Pierre, a cash basis, unn1arried taxpayer, had $1,400 of state income tax withheld during 2018. Also in 2018, Pierre paid $455 that was due when he filed his 2017 state incon1e tax return and made estimated payments of $975 toward his 2018 state income t

> Paul and Sonja, who are married, had itemized deductions of $13,200 and Issue ID $400, respectively, during 2018. Paul suggests that they file separately-he will itemize his deductions from AGI, and she will claim the standard deduction. a. Evaluate Paul

> Compute the 2018 standard deduction for the following taxpayers. a. Margie is 15 and claimed as a dependent by her parent5. She has $800 in dividend income and $1,400 in wages from a part-time job. b. Ruby and Woody are married and file a joint tax retur

> Elizabeth makes the following interest-free loans during the year. The relevant Federal interest rate is 5%, and none of the loans are motivated by tax avoidance. All of the loans were outstanding for the last six months of the tax year. Identify the Fed

> In late 2017, Randy and Rachel Erwin paid $7,000 in legal fees, adoption fees, and other expenses directly related to the adoption of an infant son, Jameson. In 2018, the year in which the adoption becon1es final, they pay an additional $8,000. Their AG!

> Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casper purchased the stock for $25,000, and it had a market value of $43,000 on the date of the transfer. Cecile sold the stock for $40,000 a month

> Camilo's property, with an adjusted basis of $155,000, is condemned by the state. Camilo receives property with a fair market value of S 180,000 as compensation for the property taken. a. What is Camilo's realized and recognized gain? b. What is the basi

> Before any debt cancellation, the insolvent KuhnCo holds business equipment, its only asset, with a fair market value of SI million and related liabilities of Sl.25 million. The lender agrees to cancel $400,000 of the liabilities. KuhnCo has no other lia

> Compute the 2018 tax liability and d1e n1arginal and average tax rates for die following taxpayers (use me 2018 tax rate schedules in Appendix A for d1is purpose). a. Chandler, who files as a single taxpayer, has taxable income of $94,800. b. Lazare, who

> Duke and Jacquie Coleman, married filing jointly, will establish a n1anufacturing business. The couple anticipates that the business will be profitable immediately due to a patent that Jacquie holds; prof its for the first year will be about $300,000 and

> Before any debt cancellation, PeppersCo holds business land with a $2.4 million fair market value, a SI million tax basis, and a related mortgage of $3 million. In lieu of foreclosure, the lender reduces the mortgage principal by $1.3 million. What are t

> Last year Aleshia identified $15,000 as a nonbusiness bad debt. In that tax year, before considering the tax implications of the nonbusiness bad debt, Aleshia had $100,000 of taxable income, of which $12,000 consisted of short-term capital gains. This ye

> Hamlet acquires a 7-year class asset on November 23, 2018, for $100,000. Hamlet does not elect immediate expensing under § 179. He does not claim any available additional first-year depreciation. Calculate Hamlet's cost recovery deductions for 2018 and 2

> Arianna's personal residence has an adjusted basis of $230,000 and a fair market value of $210,000. Arianna converts the personal residence to rental property. What is Arianna's gain basis' What is her loss basis?

> On May 9, 2016, Calvin acquired 250 shares of stock in Aero Corporation, a new startup company, for $68, 750. Calvin acquired the stock directly from Aero, and it is classified as§ 1244 stock (at the time Calvin acquired his stock, the corporation had $9

> Shanna, a calendar year and cash basis taxpayer, rents property from Janice. As part of the rental agreement, Shanna pays $8,400 rent on April 1, 2018, for the 12 months ending March 31, 2019. a. How, much is Shanna's deduction for rent expense in 2018?

> Lopez acquired a building on June 1, 2012, for $1 million. Calculate Lopez's cost recovery deduction for 2018 if the building is: a. Classified as residential rental real estate. b. Classified as nonresidential real estate.

> Noelle's diamond ring was stolen in 2017. She originally paid $8,000 for the ring, but it was worth considerably more at the tin1e of the theft. Noelle filed an insurance claim for the stolen ring, but the claim was denied. Because the insurance claim wa

> Sandstorm Corporation decides to develop a new, line of paints. The project begins in 2018. Sandstorm incurs the following expenses in 2018 in connection with the project: The benefits from the project will be realized starting in July 2019. If Sandsto

> Stanford owns and operates two dry cleaning businesses. He travels to Boston to discuss acquiring a restaurant. Later in the month, he travels to New York to discuss acquiring a bakery. Stanford does not acquire the restaurant but does purchase the baker

> Discuss the application of a general sales tax. a. Do all states impose a general sales tax? b. Does the Federal government impose a general sales tax?

> Meredith, who is single, would like to contribute $5,500 to her Roth IRA. What is the maximum amount that Meredith can contribute if her AGI is $121,000?

> Myers, who is single, reports compensation income of $70,000 in 2018. He is an active participant in his employer's qualified retirement plan. Myers contributes $5,500 to a traditional IRA. Of the $5,500 contribution, how much can Myers deduct? Phase out

> Compute the income tax liability for each of the following unrelated calendar year C corporations. a. In 2017, Darter Corporation has taxable income of $68,000. b. In 2017, owl Corporation has taxable income of $10,800,000. c. In 2018, Toucan Corporation

> Cherry Corporation, a calendar year C corporation, is formed and begins business on April 1, 2018. In connection with its formation, Cherry incurs organizational expenditures of $54,000. Determine Cherry Corporation's deduction for organizational expendi

> Pineview Company, a single member LLC, placed a $5,000 asset that is ineligible for full expensing in service on June 1, 2018. The asset has a three-year MACRS class life; no bonus depreciation was taken on this asset. Complete the table below by providi

> Brennen sold a machine used in his sole proprietorship for $180,000. The machine was purchased eight years ago for $340,000. Depreciation up to the date of the sale for regular income tax purposes was $210,000 and $190,000 for AMT purposes. What, if any,

> In March 2018, Serengeti exercised an ISO that had been granted by his employer, Thunder Corporation, in December 2015. 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

> Alison incurs the following research expenditures. a. Determine the amount of qualified research expenditures. b. Assuming that the base amount is $50,000, determine Alison's incremental research activities credit. In-house wages In-house supplies

> During 2018, Lincoln Company hires seven individuals who are certified to be members of a qualifying targeted group. Each employee works in excess of 600 hours and is paid wages of $7,500 during the year. Determine the amount of Lincoln's work opportunit

> Emily spent $135,000 to rehabilitate a certified historic building (adjusted basis of $90,000) that originally had been placed in service in 1935. What is Emily's rehabilitation expenditures tax credit?

> In terms of Adam Smith's canon of economy in collection, how does the Digging Deeper Federal income tax fare?

> Roscoe contributes a personal use asset, adjusted basis $15,000 and fair market value $28,000, to a new business in which he is an owner. Determine Roscoe's recognized gain on the transfer, and the basis of the asset to the business, if the new operation

> The Code contains provisions that are "friendly" to specific groups of taxpayers. Among these are the following. • Senior citizens. • Married taxpayers. • Employed taxpayers. • Taxpayers with children. • Self-employed taxpayers. Provide justification f

> Justin performs services for Partridge, Inc., and receives compensation of $85,000 for the year. Determine the tax consequences of Social Security and Medicare on Justin's take-home pay if: a. Justin is classified as an employee of Partridge. b. Justin i

> Assun1e the san1e facts as in Problem 1, except that George is a C corporation rather than an individual and is in the 25% marginal tax bracket (combined Federal and state rate). Which investment strategy would maxin1ize George, Inc.'s annual return'

> George comes to you asking for your advice. He wants to invest $10,000 either in a debt security or in an equity investment. His choices are shown below. • Redbreast Corporation bond, annual coupon rate of 7.5%. • City of Philadelphia general obligation

> Refer to the facts in the preceding problem. Assume that Blue Corporation disposes of the manufacturing asset at the beginning of year 7 for $40,000. Compute the amount of gain or loss recognized for book and tax purposes. What is the book-tax difference

> Using an on line research service, find the audited financial staten1ents of a major U.S. corporation. a. List son1e of the items that the corporation reports as having different treatment for tax and financial accounting purposes. These items often are

> In April of the current year, Blue Corporation purchased an asset to be used in its manufacturing operations for $100,000. Blue's management expects the asset to ratably provide valuable services in the production process for eight years and have a salva

> Wayside Fruit Company is a sole proprietorship owned by Neil Stephenson. The company's records reflect the following: Compute the net income before tax for book purposes and the amount of taxable income for Wayside Fruit Company. Sales revenue $185

> Lark Corporation is considering the acquisition of an asset for use in its business over the next five years. However, Lark must decide whether it would be better served by leasing the asset or buying it. An appropriate asset could be purchased for $15,0

> With which of the two perspectives to business forms, conduit or entity, is each of the following most consistent' a. Limited liability for the entity's owners. b. Unlimited life for the entity. c. The ability of owners to participate directly in the ma

> Marketplace, Inc., has recognized over time that a certain percentage of its customer accounts receivable will not be collected. To ensure the appropriate matching of revenues and expenditures in its financial reports, Marketplace uses the reserve method

> Sparrow Corporation is considering the acquisition of an asset for use in it5 business over the next five years. However, Sparrow must decide whether it would be better served by leasing the asset or buying it. An appropriate asset could be purchased for